Construction Quality and The Economy A Study at The Firm Level (PDFDrive) PDF

Management in the Built Environment
Series Editor: Low Sui Pheng
Low Sui Pheng

Lau Shing Hou
Construction
Quality and the
Economy
A Study at the Firm Level
Series editor
Low Sui Pheng, National University of Singapore, Singapore, Singapore
The aim of this book series is to provide a platform to build and consolidate a
rigorous and significant repository of academic, practice and research publications
that contribute to further knowledge relating to management in the built environ-
ment. Its objectives are to:
(1) Disseminate new and contemporary knowledge relating to research and practice
in the built environment
(2) Promote synergy across different research and practice domains in the built
environment and
(3) Advance cutting-edge research and best practice in the built environment
The scope of this book series is not limited to “management” issues per se because
this then begs the question of what exactly are we managing in the built environment.
While the primary focus is on management issues in the building and construction
industry, its scope has been extended upstream to the design management phase and
downstream to the post-occupancy facilities management phase. Management in the
builtenvironmentalsoinvolvesothercloselyallieddisciplinesintheareasofeconomics,
environment, legal and technology. Hence, the starting point of this book series lies with
project management, extends into construction and ends with facilities management. In
between this spectrum, there are also other management-related issues that are allied
with or relevant to the built environment. These can include, for example cost manage-
ment, disaster management, contract management and management of technology.
This book series serves to engage and encourage the generation of new knowledge
in these areas and to offer a publishing platform within which different strands of
management in the built environment can be positioned to promote synergistic col-
laboration at their interfaces. This book series also provides a platform for other authors
to benchmark their thoughts to identify innovative ideas that they can further build on
to further advance cutting-edge research and best practice in the built environment.
Editorial Advisory Board:
Abdul Rashid Bin Abdul Aziz (University Science Malaysia, Malaysia)
An Min (Salford University, UK)
Azlan Shah Ali (University of Malaya, Malaysia)
Faisal M. Arain (Niagara College, Canada)
Fang Dongping (Tsinghua University, China)
Gao Shang (University of Melbourne, Australia)
George Ofori (London South Bank University, UK)
Hamzah A. Rahman (University of Malaya, Malaysia)
Javier Cuervo (University of Macau, China)
Liu Junying (Tianjin University, China)
Oluwayomi Babatunde (University of the Witwatersrand, South Africa)
Oswald Chong (Arizona State University, US)
If you are interested in submitting a proposal for this series, please kindly contact
the Series Editor or the Publishing Editor at Springer:
Low Sui Pheng ([email protected]) or
Ramesh Premnath ([email protected])
More information about this series at http://www.springer.com/series/15765

Low Sui Pheng Lau Shing Hou
•
Construction Quality
and the Economy
A Study at the Firm Level
123
Low Sui Pheng Lau Shing Hou
Department of Building Department of Building
National University of Singapore National University of Singapore
Singapore, Singapore Singapore, Singapore
ISSN 2522-0047 ISSN 2522-0055 (electronic)

ISBN 978-981-13-5846-3 ISBN 978-981-13-5847-0 (eBook)
https://doi.org/10.1007/978-981-13-5847-0
Library of Congress Control Number: 2018965898
© Springer Nature Singapore Pte Ltd. 2019

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Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1.1 Quality and Value for Money . . . . . . . . . . . . . . . . . . . 2
1.1.2 Problems with Interpreting Quality . . . . . . . . . . . . . . . 4
1.1.3 Construction Quality in Singapore . . . . . . . . . . . . . . . . 15
1.2 Research Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.3 Research Aim and Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.4 Research Hypotheses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.5 Research Significance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.6 Book Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2 The Economy and the Construction Industry . . . . . . . . . . . . . . . . . 21
2.1 Some Basic Concepts of the Construction Industry . . . . . . . . . . 21
2.1.1 Construction as an Economic Activity . . . . . . . . . . . . . 21
2.1.2 Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.1.3 Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.1.4 Structure of the Construction Industry . . . . . . . . . . . . . 24
2.2 Major Economic Factors Influencing Construction Activity . . . . 25
2.2.1 Instability of Demand . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.2.2 Main Construction Inputs . . . . . . . . . . . . . . . . . . . . . . 26
2.2.3 Sources of Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.3 Construction and Aggregate Output . . . . . . . . . . . . . . . . . . . . . 30
2.3.1 Capital Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.3.2 National Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.3.3 Other Observations . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.4 Construction and Sectoral Output . . . . . . . . . . . . . . . . . . . . . . . 36
2.4.1 Backward Linkages . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.4.2 Forward Linkages . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.5 Construction and Macro-economic Stabilization . . . . . . . . . . . . 38
2.6 Government Institutions for Construction Industry
Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 40
v
vi Contents
2.7 Key Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... 41

2.8 Economic Recessions in Singapore . . . . . . . . . . . . . . ....... 42
2.9 Economic Recessions and the Impact on Construction
Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... 43
2.10 Economic Recessions and the Effects on Construction
Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
2.10.1 What Is Quality? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
2.10.2 The Yardstick . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
2.10.3 The Trend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
2.11 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
3 Government’s Role in a High Quality Built Environment . . . . . . .. 55
3.1 Major Construction Quality Schemes in Singapore . . . . . . . . .. 55
3.1.1 National Productivity and Quality Specifications
(NPQS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
3.1.2 ISO Specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3.1.3 Buildable Designs and Higher Productivity . . . . . . . . . 56
3.1.4 BCA Awards for Construction Excellence . . . . . . . . . . 56
3.1.5 Procurement Frameworks for Public Sector Projects . . . 57
3.1.6 Higher Skilled Construction Workforce . . . . . . . . . . . . 57
3.1.7 BCA Contractor Registration System (CRS) . . . . . . . . 58
3.1.8 Tapping the Overseas Market . . . . . . . . . . . . . . . . . . . 59
3.1.9 The Quality Mark Scheme . . . . . . . . . . . . . . . . . . . . . 59
3.1.10 BCA Construction Quality Assessment System
(CONQUAS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
3.1.11 Bonus Scheme for Construction Quality (BSCQ) . . . . . 60
3.1.12 Better Quality Home Choices for Consumers . . . . . . . . 60
3.2 Government Pump-Priming on the Construction Industry . . . . . 61
3.2.1 Government Pump-Priming in the Singapore
Construction Industry . . . . . . . . . . . . . . . . . . . . . . . .. 61
3.2.2 Keynesian’s Theory and the Impact of Government
Pump-Priming . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 62
3.3 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 63
4 Firm Characteristics and Strategies . . . . . . . . . . . . . . . . . . . . . . . . 65
4.1 Firm Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
4.2 Firm Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
4.3 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5 Firm’s Time-Cost-Quality (TCQ) Tradeoff Decisions
and the Theory of Firm Behavior . . . . . . . . . . . . . . . . . . . . . . . . . . 71
5.1 Firms’ Time-Cost-Quality Tradeoff Decisions . . . . . . . . . . . . . . 72
5.2 Theory of Firm Behavior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Contents vii
5.2.1 Auction Theory for the Conceptual Framework . . . ... 76

5.2.2 Profit Maximization Theory for the Conceptual
Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 77
5.2.3 Institutional Theory for the Conceptual Framework ... 80
5.3 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 83
6 The Conceptual Frameworks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
6.1 Developing the Conceptual Framework . . . . . . . . . . . . . . . . . . 85
6.2 The Conceptual Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
6.3 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7 Research Design and Methodology . . . . . . . . . . . . . . . . . . . . . . . . . 89
7.1 Overview of Research Process . . . . . . . . . . . . . . . . . . . . . . . . . 89
7.2 Survey Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.2.1 Sample Identification . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.2.2 Sample Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
7.2.3 Method of Reaching Out to Survey Respondents . . . . . 92
7.2.4 Survey Questionnaire Design . . . . . . . . . . . . . . . . . . . 92
7.2.5 Survey Results Analysis . . . . . . . . . . . . . . . . . . . . . . . 93
7.3 Case Study Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
7.3.1 The Selection Between Single and Multiple
Case Study Design . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
7.3.2 The Selection of Cases and Sample Size . . . . . . . . . . . 102
7.3.3 Case Study Design for Generalization, Validity
and Reliability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
7.3.4 Case Study Data Collection Protocol . . . . . . . . . . . . . . 103
7.3.5 Case Study Analysis Protocol . . . . . . . . . . . . . . . . . . . 105
7.4 Expert Interviews for Validation of Research Findings . . . . . . . 110
7.4.1 Interview Approach . . . . . . . . . . . . . . . . . . . . . . . . . . 110
7.4.2 Method of Expert Interview Results Analysis . . . . . . . . 110
7.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
8 Survey Results Analysis and Discussion . . . . . . . . . . . . . . . . . . . . . 113
8.1 Descriptive Statistical Analysis . . . . . . . . . . . . . . . . . . . . . . . . 113
8.1.1 Indicators Measuring the Effects of Governmental
Efforts (GPP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
8.1.2 Indicators Measuring the Impacts of Economic
Recessions (F) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
8.1.3 Indicators Measuring Bid Price Decisions (BID) . . . . . 117
8.1.4 Indicators Measuring Quality Tradeoff Decisions
(QTO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
8.1.5 Indicators Measuring the Extent of Firm
Characteristics in a Firm (FC) . . . . . . . . . . . . . . . . . . . 119
8.1.6 Indicators Measuring the Extent of Firm Strategies
in a Firm (FS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
viii Contents
8.2 Inferential Statistical Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 120

8.2.1 Evaluation of (SEM) Reflective Measurement
Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
8.2.2 Evaluation of (SEM) Structural Model . . . . . . . . . . . . . 136
8.2.3 One-Sample t-test for the Sixteen Impacts
of Economic Recessions . . . . . . . . . . . . . . . . . . . . . . . 147
8.3 Summary of Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
8.4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
9 Case Study Results Analysis and Discussion . . . . . . . . . . . . . . . . . . 153
9.1 Proposition 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
9.2 Proposition 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
9.3 Proposition 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
9.4 Proposition 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
9.5 Proposition 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
9.6 Proposition 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
9.7 Proposition 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
9.8 Summary of Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
10 Expert Interviews on Triangulated and Non-triangulated
Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
10.1 Triangulated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
10.1.1 Hypothesis 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
10.1.2 Hypothesis 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
10.1.3 Hypothesis 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
10.1.4 New Relationship 1 and 2 . . . . . . . . . . . . . . . . . . . . . . 174
10.1.5 New Relationship 3 . . . . . . . . . . . . . . . . . . . . . . . . . . 175
10.1.6 Hypothesis 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
10.1.7 Hypothesis 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
10.2 Non-triangulated Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
10.2.1 New Relationship 4 and 5 . . . . . . . . . . . . . . . . . . . . . . 178
10.2.2 New Relationship 6 . . . . . . . . . . . . . . . . . . . . . . . . . . 179
10.3 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
11 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
11.1 Summary of Main Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
11.2 Significance of Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
11.3 Limitations of Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
11.4 Future Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
11.5 Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
Appendix A: Survey Questionnaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
Appendix B: Path Relationships Significant at the 1% Significance
Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203
Contents ix
Appendix C: Path Relationships Significant at the 5% Significance

Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
Appendix D: Path Relationships Significant at the 10% Significance
Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
Appendix E: Path Relationships Significant at the 25% Significance
Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Appendix F: Path Relationships Significant at the 50% Significance
Level. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
Appendix G: Case Study Interview with Mr. A . . . . . . . . . . . . . . . . . . . . 213
Appendix H: Case Study Interview with Mr. B . . . . . . . . . . . . . . . . . . . . 219
Appendix I: Case Study Interview with Mr. C . . . . . . . . . . . . . . . . . . . . . 225
Appendix J: Expert Interview with Mr. D . . . . . . . . . . . . . . . . . . . . . . . . 235
Appendix K: Expert Interview with Mr. E . . . . . . . . . . . . . . . . . . . . . . . . 239
Appendix L: Expert Interview with Mr. F . . . . . . . . . . . . . . . . . . . . . . . . 243
Appendix M: Expert Interview with Mr. G . . . . . . . . . . . . . . . . . . . . . . . 247
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
Abbreviations
AR Aggregate Revenue
BCA Building and Construction Authority
BID_PRICE Bid Price
BSCQ Bonus Scheme for Construction Quality
CIDB Construction Industry Development Board
CONQUAS Construction Quality Assessment Scheme
CPCF Construction Productivity and Capability Fund
CRS Contractor Registration System
eNPQS Electronic National Productivity and Quality Specifications
ER Economic Recession Impacts
FC Firm Characteristic
FS Firm Strategy
GDP Gross Domestic Product
GPE Government Procuring Entities
GPP Government Pump-priming (or other government efforts)
HDB Housing and Development Board
HTMT Heterotrait-Monotrait Ratio
IQUAS Information on Construction Quality
ISO International Organization for Standardization
JQA Japan Quality Assurance Organization
LTA Land Transport Authority
M&E Mechanical and Electrical
MC Marginal Cost
MOM Ministry of Manpower
MOU Memorandum of Understanding
MR Marginal Revenue
MRT Mass Rapid Transport
MYE Man Year Entitlement
NAS North Asian Sources
NPQS National Productivity and Quality Specifications
xi
xii Abbreviations
NR New Relationship
NTS Non-Traditional Sources
PQM Price Quality Method
PRC People’s Republic of China
QA/QC Quality Assurance and Quality Control
QFM Quality Fee Method
QMs Quality Mark Scheme
QTO Quality Tradeoff
R&D Research and Development
SISV Singapore Institute of Surveyors and Valuers
TCQ Time-Cost-Quality
TQM Total Quality Management
List of Figures
Fig. 1.1 First school of thought: fitness for purpose . . . . . . . . . . . . . . . .. 4

Fig. 1.2 Second school of thought: conformance to specifications . . . . .. 6
Fig. 1.3 Third school of thought: fitness for purpose and conformance
to specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 7
Fig. 1.4 Fourth school of thought: system approach—technical
rationality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 9
Fig. 1.5 Fifth school of thought: system approach—socio-technical
rationality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 11
Fig. 1.6 Traditional compromise in relation to construction quality . . . .. 13
Fig. 1.7 Conceptual summary of the level of detail in existing
literature studying the effects of economic performance
on the construction industry (Source author) . . . . . . . . . . . . . . .. 17
Fig. 1.8 Book structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 19
Fig. 2.1 Effect of increases in capital stock on the production
possibility frontier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 31
Fig. 2.2 Share of construction in GNP and per capita GNP . . . . . . . . . .. 34
Fig. 2.3 Quarterly GDP of Singapore (Source SingStat, 2018) . . . . . . . .. 43
Fig. 2.4 Construction contracts awarded annually in Singapore
(Source BCA, 2018b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 45
Fig. 2.5 Singapore residential property price index (Source Trading
Economics, 2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 48
Fig. 2.6 Singapore office space in central region price index
(Source Trading Economics, 2018) . . . . . . . . . . . . . . . . . . . . . .. 48
Fig. 2.7 Tender price index in Singapore (Source BCA, 2018b) . . . . . .. 49
Fig. 2.8 Price of concrete and steel in Singapore
(Source BCA, 2018b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 49
Fig. 2.9 Singapore’s construction industry basic wage change
(Source BCA, 2018b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 50
xiii
xiv List of Figures
Fig. 2.10 Singapore’s wholesale trade index (Source BCA, 2018b) . . . . .. 51

Fig. 2.11 CONQUAS trends (Source IQUAS, 2018) . . . . . . . . . . . . . . . .. 53
Fig. 3.1 Construction contracts awarded annually in Singapore
(Source BCA, 2018b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 61
Fig. 4.1 Breakdown and formation structure of time-cost-quality
in a construction project (Source Hu & He, 2014) . . . . . . . . . .. 66
Fig. 5.1 Profit maximization model . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 78
Fig. 5.2 Decrease in quality output to maximize profits when
marginal cost rises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 79
Fig. 5.3 Increase in quality output to maximize profits when
marginal cost falls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 80
Fig. 6.1 Conceptual framework depicting the effects of economic
recessions on construction quality at the firm level . . . . . . . . . . . 86
Fig. 7.1 Overview of research methodology . . . . . . . . . . . . . . . . . . . . . . . 91
Fig. 7.2 SEM model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Fig. 8.1 Outer loading relevance testing (Hair, 2017) . . . . . . . . . . . . . . . . 125
Fig. 8.2 SEM model revision 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Fig. 8.3 Using VIF to assess collinearity (Source Hair, 2017) . . . . . . . . . 137
Fig. 8.4 Selecting significance level for testing of hypothesis for
exploratory studies complex in nature (Source author) . . . . . . . . 139
Fig. 8.5 Outer loadings, path coefficients and R2 values
of the latent variables for SEM model revision 1 . . . . . . . . . . . . 143
Fig. 11.1 Conceptual framework depicting the effects of economic
recessions on construction quality at the firm level . . . . . . . . . . . 184
List of Tables
Table 2.1 Timeline of recessionary periods in Singapore post-1965 . . . .. 43

Table 2.2 A review of existing literature on the impacts of economic
recessions on the construction industry . . . . . . . . . . . . . . . . .. 44
Table 3.1 Levy rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 58
Table 4.1 Firm characteristics that uphold quality works and/or assist
firms in weathering economic recessions . . . . . . . . . . . . . . . .. 67
Table 4.2 Firm strategies that seek to weather recessionary impacts . . .. 68
Table 5.1 Proposed effects of economic recessions on construction
quality for the conceptual framework and the respective
theoretical support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 71
Table 5.2 Compilation of major theories under each broad level
theory in firm behavior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 73
Table 7.1 Path of methods used in strategic management research
(1960–2010s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 90
Table 7.2 Indicators for each latent variable . . . . . . . . . . . . . . . . . . . . . .. 97
Table 7.3 Table of summary of PLS-SEM results analysis methods . . . . 101
Table 7.4 Aspects of case study design to attain validity
and reliability for findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Table 7.5 Field procedures for data collection . . . . . . . . . . . . . . . . . . . . . 104
Table 7.6 Rival explanations analysis template upon the completion
of data collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Table 7.7 Template for case study analysis using pattern matching
and replication logic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Table 8.1 Descriptive statistics for indicators with prefix gpp . . . . . . . . . 114
Table 8.2 Descriptive statistics for indicators with prefix F . . . . . . . . . . . 116
Table 8.3 Descriptive statistical measures for indicators
with prefix BID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
with prefix QTO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
with prefix FC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
xv
xvi List of Tables

with prefix FS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Table 8.7 Measures of internal consistency reliability of indicators . . . . . 122
Table 8.8 Summary of outer loading, indicator reliability
and AVE results for convergent validity . . . . . . . . . . . . . . . . . 126
Table 8.9 SmartPLS 3 software output for HTMT values
in establishing discriminant validity . . . . . . . . . . . . . . . . . . . . . 130
Table 8.10 Summary of PLS-SEM measurement model results
from SmartPLS 3 after modification . . . . . . . . . . . . . . . . . . . . . 131
Table 8.11 VIF values in assessing collinearity between
all sets of predictor constructs . . . . . . . . . . . . . . . . . . . . . . . . . 138
Table 8.12 Effect size of path coefficients and their p-values . . . . . . . . . . . 140
Table 8.13 Indirect effects of GPP_1, GPP_2 and GPP_3 on QTO . . . . . . 142
Table 8.14 f2 effect sizes output from SmartPLS 3 software . . . . . . . . . . . 145
Table 8.15 Q2 value output from SmartPLS 3 software . . . . . . . . . . . . . . . 146
Table 8.16 One-sample t-test for the sixteen impacts of economic
recessions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
Table 9.1 Profile of case study respondents . . . . . . . . . . . . . . . . . . . . . . . 153
Table 9.2 Rival explanation analysis for proposition 1 . . . . . . . . . . . . . . . 154
Table 9.3 Pattern matching and replication logic for proposition 1 . . . . . 155
Table 9.16 Summary of hypotheses supported by the case study
method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Table 10.1 Profile of experts interviewed . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Table 11.1 Summary of hypotheses tested and results validated . . . . . . . . 182
Chapter 1
Introduction
1.1 Background
The conceptual relationship between construction quality and economic develop-

ment was first identified by Low (1993) who noted that quality in the Singapore
construction industry began to gain traction only in the late 1970s and early 1980s
when the country moved up the rungs of socio-economic development only during
this period of time. This observation supports Rostow’s (1962) proposition that all
societies can be identified under one or another economic dimension. These dimen-
sions at different stages of economic growth in nations include the traditional society,
pre-conditions for take-off, take-off, the drive to maturity, the age of high mass con-
sumption, and the search for quality (Rostow, 1962). When Singapore first gained
independence in 1965, her economy was relatively weak and the population, as a
result of colonial tardiness, was inadequately housed. Attention was then directed
to providing essential shelter and facilities in the shortest possible time for housing
the population during the early years following independence. As a result of this
urgency, the issue of quality in design and construction was largely side-stepped
in favour of pragmatism. With growing affluence in the late 1970s and early 1980s
following rapid economic growth in Singapore, quality and communication develop-
ment became symbolic with the growing aspirations and demands of the population.
The search for quality in the Singapore construction industry remains and continues
to be an important issue today (Low, 2018). Nevertheless, what exactly do quality
means in the context of the construction industry? How is quality to be defined? How
does the performance of the national economy influence construction quality? These
and other related issues have already been debated for a long time.
For a start, quality in business and indeed in construction has long been a concern
of practitioners in their endeavors to achieve one of the clients’ primary objectives.
Amidst all the difficulties encountered in defining construction quality, it was felt
that relevant developments and adequate provisions have already been made by way
of the traditional compromise to cover most if not all possible outcomes. While
© Springer Nature Singapore Pte Ltd. 2019 1

L. Sui Pheng and L. Shing Hou, Construction Quality and the Economy,
Management in the Built Environment,
https://doi.org/10.1007/978-981-13-5847-0_1
2 1 Introduction
there have been indications from the industry in some countries that construction
quality is gradually declining, it appears that the key stakeholders are aware of and
have taken measures to safeguard their interests within the technical-contractual
continuum of the traditional compromise. Within this spectrum, disputes and conflicts
at the interfaces are resolved with reference to this awareness. Further elaboration is
given below.
One of the primary objectives of any building procurement exercise is to obtain
for the client a quality standard that matches his expectations. As a result, there
has always been interest in the issues of what current quality standards are in the
industry and how these can be maintained, improved and assured. An understanding
of quality seems to be the first logical criterion which needs to be satisfied before
measures can be taken to achieve it. At the onset, most of us think that we know
what we mean by quality. It is such a simple word; about the meaning of which there
cannot be a mistake or so it seems. Although there are difficulties in defining and
understanding construction quality, the results of field studies indicate that this does
not seem to pose a major problem because quality appears to be recognised readily
by construction stakeholders.
Literally, the early spate of interests in construction quality in the United Kingdom
was sparked by a National Economic Development Office (NEDO) report: “The pro-
fessions in the construction industry” published by its Building and Civil Engineering
Economic Development Committee (1976). This was in turn amplified by a Building
Research Establishment (BRE) (Burt, 1978) report: “A survey of quality and value
in building.” Other investigations and reports followed in rapid succession. These
include Bentley’s (1981) work on “Quality control on building sites” for the BRE;
BRE’s (1982) investigations of “Quality in traditional housing”; and another NEDO
(Building Economic Development Committee, 1987) report on “Achieving quality
on building sites.” In the BRE (1982) report, a detailed study of fifteen sites was made
over a period of three years. The NEDO (1987) report was based on an investigation
of 38 sites located all over the UK. While the BRE’s (1982) and NEDO’s (1987)
investigations have highlighted the difficulties encountered in achieving quality on
site, it seems that provisions made within the technical and contractual framework to
resolve these issues in the construction industry have not been addressed adequately
at that stage of development in the construction industry in the UK.
1.1.1 Quality and Value for Money
Business quality is difficult to define yet it is a crucial criterion on the perceived cred-
ibility of a business entity. This does not apply only to the tangible products because
services are also the concern of any business entities, from the one-man entrepreneurs
to the multinational corporations. The answer as to how much service is sufficient
or what kind of quality is right appears to lie in the marketplace and as policies and
practices of the 30 most successful firms in America have then demonstrated (Peters
and Waterman, 1982), quality pays. In the UK, the quality message was driven home
1.1 Background 3
through the National Quality Campaign and in a Foreword to “Quality Counts”, the
then Secretary of State for Trade and Industry, emphasized that “quality means such
things as good design, reliable performance, prompt delivery—meeting a customer’s
expectation in full. It means doing so at a competitive price through ensuring that
the organization behind the product or service is efficient, and wasted effort kept to
a minimum (Department of Trade and Industry, 1986).”
While a business stands to benefit tremendously when quality commitments are
capitalized on for devising marketing strategies, there appear to be drastic conse-
quences as well when these commitments are not sustained correspondingly in the
long-run. As a result, businesses need to constantly improve and maintain opera-
tional efficiency in order to boost their abilities to meet competition strategically.
However, the achievement of quality is not without its attendant costs and this seems
to constrain a business’s desire to succeed in this sphere. Nonetheless, businesses
are adopting a rather myopic view if they deter their investments in quality simply
because capital cost is required for its realization. Where price remains competitive,
long term gains can still be achieved through cost-savings on other aspects. With ref-
erence to building costs, Bennett (1984) noted that “in broad strategic terms, higher
quality means higher costs. However, at a more detailed tactical level, higher qual-
ity, depending on management competence, may mean either higher or lower costs.
There must be at least two kinds of building costs which behave differently from
each other. One of which varies directly with quality and the other varies inversely
with quality.” Value for money is generally associated with quality and seems to
be understood quite readily. However, on further probing, there seems to be some
difficulties in its definition because value, as with quality, is again a matter of per-
ception. It appears that the consideration of value for money can only be meaningful
in the light of quality and some other appropriate and measurable criteria. Continued
patronage by customers seems to be a result of their perceived satisfaction of value
for money. It is thus the apparent relative value of the total package of products and
services that influences customer behaviour and thus competitive success.
In a major study of building value conducted by Burt (1978), the need for quan-
tification was acknowledged because “value is defined as quality in relation to cost.
Maximum value is then, in theory, obtained from a required level of quality at least
cost, the highest level of quality for a given cost or from an optimum compromise
between the two. The derivation of numerical criteria thus requires the ability to
quantify both quality and cost.” Burt’s (1978) research into quality and value of
buildings was in response to an earlier NEDO (Building and Civil Engineering Eco-
nomic Development Committee, 1976) report arguing that because quality generally
defies objective definition, the notion of value poses a problem in conceptualization as
well. As NEDO (Building and Civil Engineering Economic Development Commit-
tee, 1976) highlighted, “costs and duration can be readily measured and established.
But the balancing of quality against the other elements of value for money was seen
by respondents to pose a problem because quality is partly subjective. It depends on
matters such as appearance, comfort and user preferences, which cannot always be
quantified.”
4 1 Introduction
1.1.2 Problems with Interpreting Quality
Low’s (1987) affirms that quality is indeed a difficult term to define, judging from
the sheer volume of literature attempting to do so. Numerous references from vari-
ous sources have highlighted the difficulties faced in understanding and interpreting
quality in relation to construction. Each has its own contribution to make within its
respective frame of reference but the meaning of quality in construction encompasses
far wider implications. Quality in any one operation appears to be readily assessed,
described, explained, judged and generalized in its own rights. Nevertheless, it seems
difficult for quality to be defined meaningfully for any one construction project as a
single entity over time given its dynamics. It is even more difficult to quantify quality
for this reason. Ferry (1984) acknowledges that “the definition of quality in building
is much more difficult and it remains doubtful whether it will ever be possible to
measure quality, although it may be possible to measure some of its attributes. It
might even be possible to arrive at some sort of weighted index by assessing some
factors and measuring others, but this would contain so many subjectivities both in
the assessing and the weighting that its usefulness could be questioned.”
Low (1987) also notes that there is no consensus on a single definition of what
construction quality entails. Quality, in its abstract sense, for any operation cannot
be defined easily and an understanding of what it is all about can, at best, only be
described and explained albeit within its own frame of reference. Everyone believes
there is a problem with its definition that explains the incessant search for a solution
over the years. From this development, Low (1987) notes the emergence of five
different schools of thought for construction quality from within the multitude of
literature relating to this issue. These five schools of thought are:
• Fitness for purpose
• Conformance to specifications
• Fitness for purpose and Conformance to specifications
• System approach: technical rationality
• System approach: socio-technical rationality.
1.1.2.1 Fitness for Purpose
This appears to be by far the most commonly understood interpretation of the word
“quality”: fitness for purpose as illustrated in Fig. 1.1 for one construction element
such as ceramic floor tiles.
Fig. 1.1 First school of

thought: fitness for purpose
1.1 Background 5
Several writers and institutions have adopted this inclination in describing quality.
Among several other distinct purposes, the British Standards Institution (BSI) (1983)
viewed quality in a fitness for purpose sense, which relates the evaluation of a product
or service to its ability to satisfy a given need. Quality assurance (QA) appears to
be a contemporary issue within the construction industry today judging from the
numerous attempts made to fit construction operations into a QA framework. In the
Guidance Notes for quality assurance, the Cement and Concrete Association (1986)
succinctly stated that quality is fitness for purpose. This description was likewise
adopted by the Property Services Agency (PSA) in promoting quality assurance
schemes for projects under its jurisdiction. PSA (1986) noted that quality is fitness
for purpose, i.e. which satisfies need. It does not imply a Rolls Royce standard every
time, but the ability to provide consistently what the client requires.
The quality impression Rolls Royce has created seems to be well capitalized upon.
However, while this impression might be illustrated readily, there are difficulties in
identifying the essential features of such a level of quality. As Ritter (1984) explained,
the industry should treat quality as the ability to satisfy—to be fit for purpose, even
if that purpose is very broadly defined. This definition of quality does not imply a
high level of sophistication or cost; it does not imply a Rolls Royce, as opposed
to a Mini (in the 1980s). It is a matter of appropriateness to requirement. But in
determining that requirement, we do face special problems in the building industry.
These difficulties, if overcome, would appear to indicate the operational efficiency
towards achieving quality. Ridley (1987) acknowledged that cost-savings could be
realized as a result and opined that in its fullest sense, quality can be defined as fitness
for purpose. It is a measure of the efficiency with which the client’s objectives are
defined and realized in the completed building. However, the difficulties in deter-
mining appropriate requirements for creating a quality impression do not seem to be
a fundamental obstacle. The pressing problem appears to lie in first deciding what
objectives need to be set before the requirements can be formulated. Ferry (1984)
explained that fitness for purpose is perhaps a more promising line to pursue—the
extent to which a building succeeds in meeting the aesthetics, functional and cost
objectives that were set for it. This does however pose the problem of the quality of
these objectives that need clarification.
It appears that quality standards can be achieved satisfactorily once the client’s
objectives and requirements are established and met. Consequently, these may vary as
a result of client’s perceptions that evolved to safeguard their corresponding interests.
While hindered by the fundamental problem of defining what was meant by quality in
civil engineering, Murray (1986) observed there was general agreement that quality
in civil engineering encompassed more than the physical quality of the completed
project. Quality was a measure of the achievement of fitness for purpose and might
be judged on all aspects of the project including function, costs in use, durability and
aesthetics. The standard to be achieved in a project was determined by the client’s
requirements and those might vary considerably according to the objectives of the
client body. Private clients and public authorities often saw similar projects in a very
different light (Murray, 1986).
6 1 Introduction
Fig. 1.2 Second school of

thought: conformance to
specifications
1.1.2.2 Conformance to Specifications
A logical extension to the first school of thought would be conformance to specifica-

tions. While drawings seek to create a visual representation of a design, the descrip-
tions of quality standards are left mainly to material and workmanship clauses within
specifications. Alternatively, quality standards are communicated through perfor-
mance specifications. NEDO’s Building Economic Development Committee (1987)
stated very simply that contractually, quality is good when the work satisfies the
specifications (Fig. 1.2).
However, quality is often used in the sense of the material standards, e.g. high
quality finishes. Obviously, this does not mean the attainment of a standard far above
the scope of what has already been agreed in the contract. Tack (1986) explained that
quality does not mean luxury. It only entails working to set standards, and these stan-
dards should apply to every walk of life. Reference to acceptable standards within
the UK construction industry does not appear to pose much difficulty because of the
efforts of the British Standards Institution (BSI). The BSI has established standards
to cover conceivably all aspects of works and products met with in industry and this
plays an important role in communicating the quality standards to the parties con-
cerned. Snowdon (1977) agreed that the particular quality required, once determined,
has then to be defined to others either to implement or to use in relation to their own
work. In this context, the extended use of the British Standards specifications has
resolved this problem to a large extent. It would also appear that such standards fre-
quently leave room for choice within them and there is therefore always this element
of choice as to whether they are appropriate anyway. The elimination of choice in
drawings and specifications reduces the requirements for cross-referencing between
builders and designers. This led (Abdun-Nur, 1970) to suggest that quality level is
the level of quality which has been set up by the designer and defined by the design
drawings and specifications. Such documentation is needed to define a project that
serves its social purpose, at minimum overall cost. Nevertheless whatever level of
quality is finally decided upon by the designer, irrespective of the method used to
arrive at such a conclusion, the designer must convey this quality level to the builder
or contractor. In practice, the designer defines the quality and characteristics of the
design through a set of drawings and through specifications. These are part of a larger
communication process in engineering design and construction. Together with the
advertisement or announcement for bids, the drawings and specifications eventually
become part of the contract documents and define at all times the work and quality
to be provided by the contractor. In the construction industry, drawings and spec-
1.1 Background 7
ifications appear to be the only appropriate tools through which quality standards
are communicated efficiently. Hiltabidle (1965) acknowledged that there is no other
means on both large or small projects. These documents are an effective tool for stip-
ulating and obtaining quality to the degree that they are tailored to suit the particular
job and written to provide clear interpretation.
1.1.2.3 Fitness for Purpose and Conformance to Specifications
This school of thought emerged from those circumstances where difficulties were
encountered in interpreting quality either in terms of fitness for purpose or con-
formance to specifications. It seems that fitness for purpose can only be attained
when there is conformance to specifications. On the other hand, some cautioned that
there would be ambiguity in drafting specifications unless and until some specific
fitness for purpose could be identified first. An avenue out of this dilemma would
be to complement fitness for purpose with conformance to specifications. The fun-
damental reason as to why some writers adopted this approach is presented below
(Fig. 1.3).
In a comparative illustration of cooking utensils used in a domestic kitchen, a
busy commercial restaurant and an army kitchen, Tack (1986) argued that because
industry, generally, defines what is required in terms of a specification, the definition
is often manipulated into “good quality is meeting the specifications.” In using the
ubiquitous kitchen utensil as an example, Tack (1986) explained that the quality of
the three forms of product required to work in domestic, commercial and military
kitchens depends on their satisfying quite different specifications, even though the
function and form of the utensil are identical. Just right is good quality. Slackness on
either side represents poor quality. Using the definition “good quality is exact fitness
for intended purpose” would lead us naturally to view excessive cost as the result of
poor quality; unnecessary cost could always be attributed either to over-specifying
or to exceeding the demands of the specifications.
The requirement for meeting both the fitness for purpose and contract documen-
tation appears to be well recognized in the construction industry. However, while
contract documentation refers to the drawings, specifications, bills of quantities,
preambles, etc., there seems to be a problem in measuring the fitness for purpose of
both building materials and construction services. Pateman (1986) opined that when
we start by determining every characteristic that influences this fitness for purpose,
Fig. 1.3 Third school of

thought: fitness for purpose
and conformance to
specifications
8 1 Introduction
we could end up with a very long list indeed and at the end of the day, we could never
be sure that we have not omitted something of importance. As a result, we must be
able to measure quality. If we cannot, we would never know if we have achieved it. It
seems obvious that “fitness for purpose” can never be measured effectively. So a sim-
pler and more realistic definition of quality would be conformance to requirements
(Pateman, 1986).
Although fitness for purpose and conformance to specifications are the two main
pillars for quality, there appears to be a number of levels at which they apply. Brandon
and Powell (1984) explained that quality could be considered at a number of different
levels. Firstly, quality related to the workmanship employed in a project that would
largely depend on the skills and supervision of the workers. Secondly, quality related
to the level of specifications that would depend on the performance of the components
and materials chosen. Thirdly, quality related to spatial arrangement, circulation,
function, aesthetics, and so on which have its origins in the skills of the designer
(Brandon and Powell, 1984).
It appears clear that there are more levels to quality than simply fitness for purpose
and conformance to specifications. Taken as a whole, every conceivable building
operation would seem to have an influence on overall quality. This culminates to
the next school of thought that adopts a systems approach. The transition involves
both the technical and non-technical factors. In this context, Juran & Gryna (1985)
observed that the parameters involved in attaining fitness for use are quality of design
and quality of conformance. However, the wide variety of uses means that products
must process multiple elements of fitness for use. Each of these elements is a quality
characteristic that is the fundamental building block out of which quality is con-
structed. Quality characteristics can therefore be grouped into various species such
as structural, sensory, time-oriented, commercial and ethical (Juran & Gryna, 1985).
1.1.2.4 System Approach: Technical Rationality
The three schools of thought described so far can be narrow in scope. The develop-
ment of the fourth approach was derived in the main from a sum total of the three
previous schools and, in effect, covers all conceivable aspects which could have an
influence on quality (Fig. 1.4).
The fourth school of thought encompasses all resources and operations in any pro-
curement exercise and highlights the interrelationships between them. Stated simply,
in BS 6100, the British Standards Institution (1984) described quality as a totality of
properties that bear on ability to satisfy needs.
Along similar lines, Smith (1985) considered that the quality of a product or of
a complete building or other construction is the totality of attributes, which enable
it to perform satisfactorily for an acceptable period of time. The achievement of
quality therefore requires that everybody concerned with the manufacture and use
of products understands clearly how they are intended to perform and what to do (or
not do) to ensure that the intention is fulfilled.
1.1 Background 9
Fig. 1.4 Fourth school of thought: system approach—technical rationality
In the British Standards Institution’s (1983) Handbook 22 on Quality Assurance

that covers aspects other than construction, a distinction was made between quality
of a product and quality of a service. Handbook 22 (British Standards Institution,
1983) defined quality as the totality of features and characteristics of a product or
service that bear on its ability to satisfy a given need. This definition calls for the
identification of those characteristics and features bearing upon the fitness for purpose
of a product or service. The ability to satisfy a given need includes economics as
well as availability, maintainability, reliability, design and other characteristics that
the need for a product or service involves (British Standards Institution, 1983).
In the context of construction, this distinction is reflected appropriately in the large
number of operations involved and the resources used. Correspondingly, Hiltabidle
(1965) noted that quality in construction means the characteristics of workmanship,
materials, assemblies, and equipment to economically, effectively, efficiently and
aesthetically meet the needs of a particular project. In a pioneering survey of quality
and value in building for the Building Research Establishment, Burt (1978) similarly
acknowledged that quality is the totality of attributes of a building which enable it to
satisfy needs, including the way in which individual attributes are related, balanced
and integrated in the whole of the building and its surroundings. Subsequently, Burt
(1978) subdivided quality into external attributes, performance, and aesthetics and
amenity, and concluded that quality and value in building depend upon all parts of
the design and construction process being done well, although the preparation of
the brief and the layout design are seen to be critical. Quality and value therefore
depend on the skill and experience of all participants in the process, the adequacy
of the information and techniques available to them, and the effectiveness of the
communication between them.
The reference to human involvement and influence lies within the ambit of man-
agement, supervision and inspection, and has been observed to be one among sev-
eral other factors that affect quality. Inspection is therefore a precaution rather than
a remedy in the long term to safeguard against any possible shortfall in quality.
Holmes (1983) suggested that control should be built into the various stages and this
requires the appropriate cultivation of attitudes. Nevertheless, Holmes (1983) opined
that quality cannot be “inspected into” a product. Corporate action in management,
design, planning and construction is the real key to an effective control policy.
10 1 Introduction
Even if corporate action is taken, the multitude of activities involved in any build-
ing projects would possibly complicate matters. The control of quality would be a
formidable task if every single operation is to be documented and approved formally.
Parsons (1972) illustrated the organizational complexity very well, adopting a sys-
tems approach for construction quality and indicating the complications involved just
in setting up a flow diagram for quality control of concrete construction that is only
one among numerous subsystem flow diagrams in the entire procurement exercise.
This approach seems to be directed towards the treatment of the whole program rather
than its parts. It starts with objectives and mandates and ends with definable achieve-
ments. In between is a network describing interrelationships of methods, information
and people (Parsons, 1972).
Although Parsons’ (1972) proposition is a move closer towards reflecting the real
world, this may not be viable in the long term because circumstances in the building
industry are not static and their dynamism exacerbates the complications present
in the initial system framework shown above. In addition, the systems approach
proposed by Parsons (1972) has largely ignored the social factors that, quite often,
are substantive within most organizational structures.
1.1.2.5 System Approach: Socio-Technical Rationality
The last school of thought is a culmination of all the innate social factors that have
not been considered so far. At a macro level, the above analysis may seem adequate.
However, it would be naive to believe this to be the case. The reality is that orga-
nizations in the construction industry comprise of people with diverse interests and
goals. The operations of individual self-interests may result in actions that have an
adverse effect on quality. Conflicts inevitably arise as the power of different stake-
holders influence organizational decisions. Handy (1985) warned that to neglect or
bypass the political reality of organizations would be misleading or blind or both,
since all organizations of any size are political systems. In all organizations, there are
individuals or groups competing for influence or resources, there are differences of
opinions and values, conflicts of priorities and goals. There are pressure groups and
lobbies, cliques and cabals, rivalries and contests, clashes of personalities and bonds
of alliance. Where preferences clash, power and authority of the dominant coalition
are invoked either through hierarchical, occupational or contractual referral (Handy,
1985) These developments suggest there are many similarities with the evolution
postulated in organizational theories, from the classical and structural approaches,
to the political influences. Just as organizations are made up of people and reflect the
characteristics of the dominant coalitions within them, systems and subsystems alike
are also affected by this phenomenon. Research carried out in the UK by the BRE
and NEDO in construction quality acknowledged but did not adequately discuss the
influences from such social factors. The complexity in the approach suggested in this
last school of thought is illustrated in Fig. 1.5.
Freeman and Bently (1980) observed that whilst there are well-recognized respon-
sibilities for ensuring that the quantity and quality of work is executed as specified,
the realities of the situation on site are that only the quantity is ever likely to be
1.1 Background 11
Fig. 1.5 Fifth school of thought: system approach—socio-technical rationality
rigorously exacted. Quality is, to a degree, “negotiable” because it is difficult to

define in the first place, leaving its interpretation a matter for judgement. Simple
“go-no-go” criteria are seldom applicable. The quality that finally emerges is the
product of a highly complex “system” in which the standard of the project informa-
tion, availability or otherwise of relevant professional, managerial and trade skills,
individuals’ motivation, and pressure of time and finance all interact (Freeman and
Bently, 1980). Hence, it is clear that the influence from social factors deserves much
greater treatment than a mere acknowledgement. The inclusion of social factors
within the systems approach demonstrated Abdun-Nur’s (1970) understanding of a
more fundamental issue because the various technical activities and the contractor’s
effect on quality in the systems approach constitute only a fraction of the whole. In
the centre is a list that attempts to bring out the various non-technical forces that
determine in many cases, and at least affect in all cases, the quality of the finished
facility. These are areas that the engineer has shied away from getting involved in,
but which in today’s society are at least as important as the technical areas, if not
more so, as parameters of the total engineering picture (Abdun-Nur, 1970).
12 1 Introduction
1.1.2.6 Recognition of Quality
The different schools of thought presented align well with the initial perceptions of
the complexity likely to be encountered in trying to understand construction quality.
There appears to be no one consistent approach to understanding construction quality.
As a result, the diverse approaches adopted not only complicate the debate on what
quality actually means but also seem to herald in continuous conflicts and disputes
within the construction industry.
The impression derived seems to indicate that quality is a multi-faceted concept
and should therefore be best approached as such. Any trifle definition will not suf-
fice. However, despite all the difficulties in understanding and defining what good
quality entails, various fieldwork in the form of interviews and case studies from the
studies presented above suggest a different scenario. Although the stakeholders have
been unable to define quality off hand, many have indicated their ability to recognize
good quality when they see one. The stakeholders do not seem perturbed by the dif-
ficulties they faced in defining construction quality because their ability to recognize
good quality or otherwise has already been provided for within the technical and
contractual framework in the construction industry. Contrary to popular beliefs, the
difficulties they faced in documenting quality do not seem to be the main concern.
What do matter are the measures taken in response to the recognition of slipshod con-
struction quality standards. Of the various attempts made to set out a single meaning
and definition of construction quality, the final effect does not seem to be useful. The
tremendous efforts expended in this search appear to yield low returns except to spur
further debate and speculation that seem needless in view of the provisions already
made in the well-accepted technical and contractual framework of the construction
industry. Hence, because such explanations or definitions of construction quality are
similar and can be repetitive in many ways, any such future expositions may not
be helpful. Instead, attention should shift to the framework within the construction
quality function in the industry.
1.1.2.7 Regulatory Framework
From the above discourse, it appears that while the industry is aware of the need
to maintain quality standards, it also recognizes the difficulty in many instances
to dictating desired quality levels in absolute terms for regulatory purposes. As a
result, a traditional compromise seems to have developed over the years. Within this
compromise, a technical-contractual continuum has emerged (Fig. 1.6).
While objectivity can be defined in technical terms and provided for in contract
documents, some operational issues are difficult to describe technically and therefore,
can only be accounted for through contractual provisions. Hence, while there is an
obvious need to conform to specifications or bills of quantities, any other ambiguity
may only be resolved through contractual means. Out of this paradigm, it would
appear that quality standards are determined by the party who holds the power derived
from contractual provisions and socio-economic standing.
1.1 Background 13
Difficulty in defining Need to maintain

some aspects of quality standards
quality
TRADITIONAL
COMPROMISE
Continuum
Technical provisions Contractual

provisions
Fig. 1.6 Traditional compromise in relation to construction quality
1.1.2.8 Technical Provisions
In addition to express provisions made in contract documents, six methods have also
been observed to be adopted by parties within the traditional compromise to arrive
at a common understanding as to what quality standard is required or offered.
1. The employer or his representative directs the contractor to a specific building
and says to him: “This is the quality we expect from you.” There appears to be an
understanding that when this approach is used, older buildings are generally excluded
because of the accepted knowledge that their level of quality is difficult to achieve
today. This approach may be used during the tender stage where the contractor is
often required to visit the site before tendering so that he may become acquainted
with the quality standards of surrounding buildings.
2. Alternatively, the contractor directs the employer or his representative to one
of his completed or on-going projects and says: “This is the quality we can offer
you.” The contractor will naturally direct attention to only his best and quite often
prestigious projects.
3. Samples of materials such as anchor bolts and door hinges are shown to the
architect/clerk-of-works before the contractor uses these materials on site. All sub-
sequent deliveries are then expected to be generally of the same standard as the
approved sample.
4. The contractor fabricates samples of heterogeneous materials on site for the
architect’s approval before incorporating them into the actual works, e.g. pebble-
dashed finish on a 600 × 500 mm blockwork panel may be fabricated on site for this
purpose.
5. The contractor mocks up a small portion of the actual work for the archi-
tect’s/clerk of works’ approval/acceptance before he proceeds further. Examples can
include the complete finishing of three rooms in a hotel project for the architect’s
selection and approval, the fabrication of part of a new roof structure for the clerk-
of-works’ acceptance, and the preparation of a single stone panel for the architect’s
approval.
6. The contractor and architect/clerk-of-works refer to manufacturers’ literature
to reach an agreement.
14 1 Introduction
1.1.2.9 Contractual Provisions
Most construction projects adopt standard forms of building contract for implemen-
tation. Hence, it is appropriate to analyze typical standard forms of building contract
to consider the various provisions made therein which may have an influence on the
quality of construction works. Such standard forms of building contract appear to
be a product of the traditional compromise, drafted out to protect the employer’s
interests in situations where the achievement of quality by the contractor may not be
clear because of operational problems relating to definitions. The employer is likely
to rely on the provisions stipulated in the standard forms of building contract for his
benefit.
Correspondingly, some ambiguities within the project appear to be formulated
against the contractor by requiring him to perform to the reasonable satisfaction of
the architect—which can be a contentious matter of opinion. Further ambiguities
may also be present when supplementary clauses are included with provisions such
as “materials used shall be the best of their respective kind”, and so on. This then
raises the question of what do you mean by “best of their respective kind?” Such
ambiguities may be crafted for the employer’s benefits because the final decision in
the event of a dispute or uncertainty rests with a building professional who is engaged
to look after the employer’s interests. Other contractual provisions that appear to have
an effect on quality may include:
1. Vouchers, inspection and testing
2. Removal of defective works and materials
3. Dismissal of persons from the work
4. Deductions, liquidated damages and determination
5. Defects liability period
6. Retention percentage
7. Access for architect, etc. to the works
8. Clerk-of-works
9. Foreman-in-charge
10. Approval for subcontracting.
It is clear that perceptions relating to quality and value for money contribute to
frameworks that parties to a building contract seek to identify and fulfill their respon-
sibilities. The lifecycles of construction projects are much longer than most other
industries. Hence, construction projects evolve according to time and circumstances
throughout their lifecycles. As a result, there appears to be a lack of clear uniform
evaluation standards in assessing overall construction quality as in the case of man-
ufactured products and materials. Most, if not all, construction projects are unique.
Thus, construction projects may possibly end up being evaluated subjectively in
many aspects. To overcome this difficulty in definition, building professionals have
attempted to describe quality as satisfying fitness for purpose and conformance to
specifications. The coalescence of these two approaches was identified as subsystems
within a larger system built up from technical rationality. Some building profession-
als have however pointed out that the technical rationality approach is incomplete
because this excludes the consideration of social factors and that organizations are
1.1 Background 15
made up of stakeholders who determine quality according to their perceptions that

are quite often different.
Technical clarifications were adopted by the contractor, the employer and the
employer’s representatives to avoid ambiguity. Among others, these include the use
of samples and mock-up components on site. Due to the awareness that quality in the
construction industry must be properly managed, contractors have taken measures
to safeguard their own interests. Hence, there is a tendency to sublet works only to
subcontractors who have worked well with them before. Considerable emphasis is
also being placed on supervision and proper selection of workers.
Within the socio-economic structure of the industry, the power of the employer to
invite or prequalify contractors for projects is an effective deterrent for contractors
not to produce poor quality work. Further sanctions are provided through contractual
provisions to safeguard the employer’s interests.
As a result of all these provisions, it seems the difficulties encountered in defining
qualitative aspects of construction works are not crucial. It is not simply a matter of
how quality is defined but rather what provisions are available for the stakeholders
when there is a shortfall in the delivery of the expected quality standards.
The above discussions suggest that the concern with construction quality is not
a recent phenomenon. Issues relating to construction quality have been around for
many decades (Low & Ong, 2014). Such issues will continue to be discussed not only
globally but also in specific local context such as that in the Singapore construction
industry where this present study is based.
1.1.3 Construction Quality in Singapore
Since the early 1990s, major quality schemes have been introduced in Singapore
to raise the quality standards of the Singapore construction industry. In the 2000s,
the Building Construction Authority (BCA) of Singapore adopted the notion of a
high quality built environment as one of its five strategic thrusts (BCA, 2018a). With
such dedication from the government, one must be expecting world class if not com-
mendable quality standards from the Singapore construction industry. However, in as
recent as 2017, the Singapore construction industry saw desperate firms bidding for
projects at excessively low rates when caught in property downturns. This prompted
the Minister for National Development to warn that: “consultants and contractors
who bid very low to get the contract end up having to cut cost, and worse still,
cut corners” (Ong, 2017). In August 2017, investigations into the fatal Pan-Island
Expressway viaduct collapse earlier in that year revealed that the main contractor,
Or Kim Peow (OKP), had the lowest quality score among qualified bidders for the
expressway project (Tan, 2017).
One then must be questioning, why is the case as such? Low and Tan (1996b)
suggested that albeit measures in nurturing a high construction quality environment
in Singapore, a stable flow of construction demand is ultimately a key determinant
of quality standards. Without a stable flow of jobs in the market for developers and
contractors, firms would struggle to survive let alone achieve high quality works. Low
16 1 Introduction
and Tan (1996b) then concluded that since the cycles in the construction industry
are unavoidable, poor quality issues could therefore be perpetual. Hillebrandt (2014)
observed that during recessionary times, the objective of companies switched from
growth to survival, with a concentration on financial matters. Hillebrandt (2014)
further observed that in a recession, contractors resort to cost cutting measures such
as lowering overheads, cutting back support staff, freezing salaries and reductions in
other employee benefits. The concept that economic recessions would stymie growth
of performance areas is not distant. Greenhalgh and Squires (2011, p. 241) stated:
“Desperate contractors cannot really argue in recessionary times, when supply now
exceeds demand”. Reason (2016, p. 176) similarly stated: “safety is a target moving
continuously towards zero risk except for interruptions during times of economic
distress or high unemployment”. Hence, it is clear that economic recessions have
intricate effects on construction performance areas such as quality. As such, this
study aims to establish a deeper understanding of the effects of economic recessions
on construction quality in the form of a conceptual framework.
In developing the conceptual framework for depicting the effects of economic
recessions on construction quality, the research team sees the need for a logical flow
of review in literatures on (1) the impacts of economic recessions on contractors (i.e.
the firms), (2) the external environment in which Singapore contractors operate in
which includes governmental influences and the effects of those influences on the
contractors, (3) the list of characteristics and strategies that would account for firm
dynamism and last but not least (4) the theories that would rationalize firm behavior
under the conditions induced by economic recessions. In doing so, a conceptual
framework depicting the effects of economic recessions on construction quality (at
the firm level) may be crafted.
1.2 Research Problem
Upon review of existing literature studying the effects of economic performance on

the construction industry, the research team classifies this field of study according
to three levels of detail. Figure 1.7 provides a conceptual summary of the level of
detail in existing literature studying the effects of economic performance on the
construction industry. The first level of detail pertains to studies made to uncover the
effects of economic performance on the construction industry as a whole or vice versa.
The second level of detail pertains to literatures that study the effects of economic
performance on construction performance areas such as quality, safety, productivity
and sustainability at the industry level. The third level of detail pertains to literatures
studying the effect of economic performance on construction performance areas at
the firm level.
Level 1: The effects of economic performance on the construction industry or vice
versa is a widely studied field where these studies largely uncover the contributions
of the construction industry to the economy (in terms of output) where indicators
such Gross Domestic Product (GDP) and Gross National Product (GNP) are used to
explore the relationship (e.g. Ofori, 1984, 1988; Hillebrandt, 2014).
1.2 Research Problem 17
Fig. 1.7 Conceptual summary of the level of detail in existing literature studying the effects of
economic performance on the construction industry (Source author)
Level 2: On a more detailed level, others studied the effects of economic perfor-
mance on construction performance indicators such as quality, productivity, safety
and sustainability. Many studied the effects of the global financial crisis as well as eco-
nomic recessions at large on Occupational Safety and Health (Anyfantis, Boustras, &
Karageorgiou, 2016; Boone, van Ours, Wuellrich, & Zweimuller, 2011; Boustras &
Guldenmund, 2017; De La Fuente, Lopez, Devereux’s, 2014, Gonzalez, Alcantara,
& Ritzel, 2014; Nielsen, 2015; Sonderstrup & Bach, 2017). Treasy, Spillane, and
Tansey (2016) looked at the effects of economic recessions on disputes in the con-
struction industry; identifying seven critical factors which resulted in construction
disputes in Small and Medium Enterprises in Ireland during a recession. Navarro and
Fuentes (2011) explored the effects of economic recessions on the construction indus-
try building engineers’ feelings and attitudes towards construction unemployment.
Some studied the impacts of economic recessions on the effectiveness of specific
forms of contracting method (Brooks, Spillane, Tansey, & Hendron, 2016; Manase,
2010). Feiler (1991) examined trends in Arab labor mobility in the Middle East during
the recession of 1982 to 1989 while others studied the effects of economic reces-
sions on unemployment (Burger, Damijan, Kostevc, & Rojec, 2017; Cascio, 2013;
Cowling, Liu, Ledger, & Zhang, 2015; Mukacha, 2010). Low’s (1993) study drew
conclusions on how construction quality at the industry level moves in tandem with
the economy; concluding that quality takes on a higher priority as the economy of a
country progresses. Last but not least, Low and Tan (1996b) explored the effects of
fluctuating construction demand on quality and concluded that the reason why poor
18 1 Introduction
quality standards persist in Singapore’s construction industry then is because there

is uncertain demand for construction contributed by cyclical economic conditions.
Level 3: Hence, particularly from those explored by Low and Tan (1996b), existing
studies have explored the effects of economic recessions on construction performance
areas at the industry level. However, the literature has yet to touch on the more intricate
effects of economic recessions on construction performance areas (in particular,
construction quality) which lie at the firm level. Specifically, this study seeks to
explore how economic conditions, in particular economic recessions, affect the time-
cost-quality tradeoff decisions of contractor firms; which are the very decisions that
determine the final output.
1.3 Research Aim and Objectives
The aim of this study is to understand the effects of economic recessions on con-
struction quality at the firm level through the following objectives:
• To understand the impacts of economic recessions on contractor firms.
• To understand the external environment (largely induced by the Singapore gov-
ernment) that contractor firms in Singapore operates in.
• To understand firm dynamism.
• To understand the theories of firm behavior.
• To identify the underlying theories that would rationalize firms’ time-cost-quality
tradeoff decisions in light of the impacts of economic recessions on firms.
• To propose a conceptual framework that depicts the effects of economic recessions
on construction quality at the firm level.
With the six objectives set out, the research team seeks to rationalize these objectives
sequentially. Chapters 2–6 would address these objectives while the remaining chap-
ters serve an equally crucial role of providing proof and validation for the conceptual
framework proposed.
1.4 Research Hypotheses
The research hypotheses are solely derived from the proposed conceptual framework
for this study. There are a total of five hypotheses and their derivations are presented
in Chaps. 2–5.
1.5 Research Significance
The proposed conceptual framework should be of significance to policy makers,

firms and the research community. For policy makers, the conceptual framework
would provide them with the points of intervention; giving them an overview of the
series of effects from the point of economic recessions to the point where quality
1.5 Research Significance 19
tradeoff decisions are made. For contractor and subcontractor firms, they will be
able to identify the pitfalls and best practices to progress towards higher quality
performances despite recessionary times. For the research community, the conceptual
framework would provide a baseline for researchers to better understand the effects
of a cyclical phenomenon and construction performance areas at the firm level.
1.6 Book Structure
This book is divided into eleven chapters and the outline is summarized in Fig. 1.8.
Chapter 1 – Introduction
• Background
• Research problem
• Research aim and objectives
• Research hypotheses
• Research significance
• Book structure
Chapter 2 – The Chapter 3 – The Chapter 4 – Chapter 5 – Firm’s

economy and the government and her Firm TCQ tradeoff decisions
construction high quality built characteristics and the theory of firm
industry environment and strategies behavior
Chapter 6 – Conceptual framework

• Developing the conceptual framework
• The conceptual framework
Chapter 7 – Research design & methodology

• Research overview
• Survey method
• Case study method
• Expert interview for validation of findings
Chapter 8 – Survey results analysis and discussion

• Descriptive statistical analysis
• Inferential statistical analysis
• Summary of findings
Chapter 9 – Case study analysis & discussion

• General analytic strategy
• Specialized analytic strategy
• Summary of findings
Chapter 10 – Expert interviews

• Triangulated
• Non-triangulated
• Revised conceptual framework
Chapter 11 – Conclusion
• Summary of main findings
• Limitations of research
• Research significance
• Future research
• Concluding statement
Fig. 1.8 Book structure

Chapter 2
The Economy and the Construction
Industry
2.1 Some Basic Concepts of the Construction Industry
2.1.1 Construction as an Economic Activity
Generally, there are three levels to define construction within the literature (Dang &
Low, 2015). At one extreme, construction is referred to as an economic activity that
involves the entire construction process from producing raw and manufactured build-
ing materials and components, and providing professional services such as design and
project management, to executing the physical work on site. In this view, construction
is an economic activity that crosses over all three economic sectors: primary sector
that involves the extraction of natural resources; secondary sector that involves the
manufacture of building materials and components, and the transformation of these
materials into finished buildings; and tertiary sector that involves the provision of
consultancy services such as project management, design and structural engineering
(Gruneberg, 1997). From this angle of approach, the construction process actually
starts long before the physical work on site that transforms materials and design into
the complete buildings, structures and facilities.
At the other extreme, construction is conceived as an economic activity that
focuses only on the last stage of the construction process which is the physical
work carried out on the production site. From this perspective, all services such as
project management, planning and design as well as the offsite manufacture and
supply of building materials are excluded. One typical example of this kind of def-
inition is the one provided in the International Standard Industrial Classification of
all Economic Activities (United Nations, 1990). According to this classification,
project management for construction, architectural and engineering activities, and
the manufacture of building materials are listed under different categories other than
construction. This manner of classification is considered convenient for statistical
purposes (Ofori, 1990). Following this classification, construction is perceived as
an economic activity directed to the new work, renovation, repair or extension of
22 2 The Economy and the Construction Industry
buildings, structures and other heavy constructions such as roads, bridges, dams and
so forth (United Nations, 1990). Accordingly, only the work force working on the
construction site is defined as the labour force of the construction industry (Ive &
Gruneberg, 2000).
There is one more way of defining the construction industry, which is somewhat in
between the two above mentioned extremes. In this context, construction is referred
to as the production process of the built environment including various activities from
conception through design to execution. The objects of the built environment include
buildings and other fixed structures (Ive & Gruneberg, 2000). In other words, the
construction industry is “a sector of the economy which, through planning, design,
construction, maintenance and repair, and operation, transforms various resources
into constructed facilities” (Moavenzadeh, 1978, p. 98). As such, the construction
industry encompasses all firms or organizations, who professionally engage in the
construction process, from those providing consultancy services in the planning,
design, supervisory and managerial services to those carrying out execution work on
site such as the general contractors and builders (Colean & Newcomb, 1952; Ofori,
1990). These firms or organizations, in turn, often have a close relationship with
clients and financers (Hillebrandt, 2000). This phenomenon is directly derived from
the characteristics of the industry’s products, which are described below.
All the three levels of definition of the construction industry are useful. In order
to obtain a full picture of the industry, it is reasonable to use the broadest definition
mentioned above. However, the other two narrower definitions are more relevant to
this study. It is important to know whether the final products, which is defined by the
narrowest definition of the construction industry is increasing or decreasing. This type
of information is often of great importance for economic planning purposes (Ofori,
1990). There have also been views arguing that construction should be considered
as a project-based level economic activity (Groak, 1994), or views that questioned
if construction is one industry (Ball, 1988; National Economic Development Office,
1978) or several industries (Ive & Gruneberg, 2000). However, for the purpose of
this study, which analyzes construction in relation to other economic activities, the
concept of one industry would be more appropriate.
2.1.2 Construction Products
This section looks at the classification of the construction industry’s products and
their characteristics. The classification of products is necessary as each type of out-
put represents different kinds of supply and demand, which will be affected by
different factors in the market (Ofori, 1990). According to the International Standard
Industrial Classification of all Economic Activities (United Nations, 1990), complete
products of the construction industry consists of dwellings, office buildings, stores
and other public and utility buildings, farm buildings, etc., or heavy constructions
such as highways, streets, bridges, tunnels, railways, airfields, harbors and other
water projects, irrigation systems, sewerage systems, industrial facilities, pipelines
2.1 Some Basic Concepts of the Construction Industry 23
and electric lines, sports facilities, etc. More generally, outputs of the construction
industry are grouped into housing, infrastructure, industrial and commercial build-
ings, and repair and maintenance (Gruneberg, 1997; Wells, 1986). Another way to
classify construction outputs is to group them into civil engineering work, buildings,
and repairs and maintenance. Civil engineering work includes transport facilities,
telecommunication and power networks, water supplies, etc. Buildings include hous-
ing and the remainder (hospitals, schools, offices, factories, hotels and agricultural
buildings) (Wells, 1985).
Construction’s final outputs share certain common characteristics with each other,
such as their custom-built nature, immobility, complexity, durability and costliness
(Colean & Newcomb, 1952; Moavenzadeh, 1978). These products are also often
distinguished from others in terms of time lag, labour intensive operations, site pro-
duction and temporary organizations (Ofori, 1990; Koskela, 2003). It is not difficult
to envisage products of the construction industry in these terms. Construction prod-
ucts are not mass produced commonly. Each construction product is only constructed
after the client decides to procure it. Custom-built nature or the one-of-a-kind nature
of construction outputs is featured by different clients with different needs and prior-
ities, by different sites, and by different views of designers (Ofori, 1990). Products of
the construction industry are immobile; they are fixed to the site where they will be
used (Colean & Newcomb, 1952). The products are constructed on site as well. As a
result, the construction process depends not only on the natural conditions of the site
but also on the local resources such as the local labour force, local subcontractors,
local building materials suppliers, local regulations, etc. Complexity of construction
products follows from their custom-built nature and site production. The high diver-
sity of customers’ requirements and site conditions result in a wide range of materials,
technological requirements, design solutions and construction methods of varying
degrees of complexity. Another reason for the complexity is the number of different
teams from different parties involved in the construction works (Ofori, 1990). Each
team with different professional practices, specializing in different operations often
leads to a complicated organization in the construction process. The organization is
obviously only temporary for a particular product.
Construction products are extremely durable. They are built to generate a flow
of services for a very long time. Civil engineering works and buildings thus often
last for generations. Except for catastrophes caused by human or nature, a construc-
tion product is only demolished when it becomes obsolete and no one wants to
use it, which means it is no longer economical to maintain (Colean & Newcomb,
1952; Gruneberge, 1997). Durability and complexity are the main reasons why the
construction of civil engineering works and buildings is capital-intensive, involves
a large number of labour, and takes a long time to complete. Delays are also often
unavoidable. Delays can be caused by unexpected natural events, technical, financial,
procedural, and contractual problems (Ofori, 1990).
2.1.3 Infrastructure
Infrastructure in the construction industry is generally related to economic infrastruc-

ture. Economic infrastructure is constructed to facilitate other economic activities of
the national economy. Development economists often refer to infrastructure as “so-
cial overhead capital” or public infrastructure capital since it has traditionally been
owned and managed by the public sector (Howes & Robinson, 2005). Some other
broader definitions of economic infrastructure also include offices, shops, housing,
factories, warehouses, industrial parks, schools, hospitals, etc. (Miller, 2000; Howes
& Robinson, 2005). The economic infrastructure as defined by the World Bank (1994)
is the most suitable one adopted for this study. According to the definition, there are
three main groups in economic infrastructure:
• Public utilities—power, telecommunications, piped water supply, sanitation and
sewerage, solid waste collection and disposal, and piped gas.
• Public works—roads and major dam and canal works for irrigation and drainage.
• Other transport sectors—urban and inter-urban railways, urban transport, ports
and waterways, and airports (World Bank, 1994, p. 2).
The concept of infrastructure by the World Bank (1994) has been widely adopted
in many national, regional as well as international economic studies and reports
(Parkin & Sharma, 1999; ESCAP, 1994; Kohsaka, 2006; Mody, 1997).
2.1.4 Structure of the Construction Industry
By nature of the work, the structure of the construction industry can be characterized
by type of product, size of contract, complexity and geographical location of finished
products (World Bank, 1984). By type of product, the construction industry consists
of construction firms specializing in residential, industrial and commercial buildings,
and infrastructure or civil engineering works. The construction industry can also be
structured by size of contract and degree of complexity. Large construction firms
usually undertake large contracts with high degree of complexity. The technical as
well as managerial skills are the two major advantages that large construction firms
have over the small firms. This explains that the potential competitors for large civil
engineering works are often large construction firms. Geographical location is also
an important determinant of the structure of the construction industry. Construction
firms are usually market-located (Gruneberg, 1997). Because construction product
is characterized by site-production, most construction firms need to consider the
transportation costs of materials, equipment and labour to the production site. Beyond
a certain geographical area, these costs become excessive in relation to other costs,
thus rendering the project’s profitability unattractive. Only for large contracts would
the proportion of transportation costs in total costs become small enough, so that it is
still profitable for firms to undertake the jobs farther afield. For very large projects,
2.1 Some Basic Concepts of the Construction Industry 25
firms might set up a local office to reduce transportation costs, but then these firms
will need to consider the attendant overheads associated (Hillebrandt, 2000).
By pattern of production organization, this study focuses on the formal sector
rather than the informal one. Within the formal sector, the structure of the construc-
tion industry can be classified into public and private firms, and domestic and foreign
firms. Public firms are state-owned enterprises, which are often protected by the gov-
ernment. The establishment of these public enterprises is essential to take on works
which are unattractive to private firms or as required by the government, or perform
as a source of providing the necessary trained labour for the development of the
construction industry. Meanwhile, private contractors contribute to the development
of the construction industry by their competitiveness, efficiency and flexibility. One
more noticeable point in the structure of the construction industry is the participation
of international contractors. Their presence can make the competition more difficult
for domestic firms. However domestic firms will become stronger in the process.
The structure of the construction industry can be quite different among countries
depending on the social and economic environments such as the development state
of the economy, government policies, and the traditions of doing business (World
Bank, 1984).
2.2 Major Economic Factors Influencing Construction

Activity
2.2.1 Instability of Demand
Construction demand is inherently volatile. Wide fluctuations in construction out-

puts are common. Studying a number of countries with different income from various
parts of the world, the World Bank (1984) indicated that the fluctuation of construc-
tion outputs was more than half of the manufacturing sector and the economy as a
whole. A study of the European region by the United Nations (1976) came to the
same conclusion that the construction industry experienced stronger movements of
business cycle than other economic sectors. These fluctuations are partly due to the
nature of construction demand and partly due to the nature of construction prod-
ucts. Demand for construction outputs is considered derived demand from other
economic activities (United Nations, 1976; Hillebrandt, 2000). Outputs of the con-
struction industry are investment-goods, which are produced to facilitate the creation
of other consumption-goods and services. In other words, the construction industry
itself cannot create the demand for its outputs (Nam & Tatum, 1988). Demand for
construction is therefore largely dependent on the business activities of other goods
and services that the construction products help create. Following the ups and downs
of the economy, the demand for construction can go through the movement of a
business cycle earlier and more strongly than other sectors because of the nature
of its products (Riggleman, 1933; United Nations, 1976). A construction product
is immobile and is often constructed only after the client realizes the demand. This
nature of construction products makes the industry unable to stock up products for
sale. Hence, when there is a sudden increase in demand, the industry cannot respond
to the demand quickly (United Nations, 1976; Nam & Tatum, 1988). The fluctuations
of construction demand can be very large, thus affecting the economy considerably.
The immobility and the durability properties also make construction demand geo-
graphically dependent. Demand for construction within a geographical area will at
some time in the future experience a substantial fall and suffer saturation when much
of the demand in the area is met and the existing facilities are still economical to
maintain (Colean & Newcomb, 1952; Hillebrandt, 2000).
Apart from the above mentioned factors, the stages of economic development
as well as the structural changes also have significant influences on the growth rate
of demand for construction as well as the compositions of demand for construction
over time. A study by the United Nations (1976) pointed out that the fluctuations
in construction activity, with reference to those of other economic sectors, tend
to be greater in developing than in developed countries. In developing countries,
the demand for infrastructural facilities is of the greatest proportion compared with
other construction demands. Since in the initial stages of development, infrastructure
is of great importance in creating the framework for the economy, spending on
building new infrastructure in these stages is relatively heavy (Lewis, 1955). As a
result, the share of construction expenditure on public works and public utilities
such as harbours, railways, roads, electricity, etc., in the less developed countries
are often higher than that in the more developed countries (Lewis, 1955). Structural
changes such as changes in development goals, priorities of economic growth among
sectors, and changes in demographics can also impact the demand for construction
(United Nations, 1976). The World Bank (1994) observed that as countries develop,
infrastructure must adapt to support changing patterns of demand.
2.2.2 Main Construction Inputs
Main inputs in construction include labour, materials and equipment. The character-
istics of each component are discussed further below.
2.2.2.1 Labour
Since construction products are frequently labour-intensive, labour is one of the major
cost components in construction (Ive & Gruneberg, 2000). The construction labour
force can be divided into the major categories of: administrative, managerial, pro-
fessional and technical staff, and workers. Demand for labour is directly affected by
the characteristics of demand for construction. In line with the cyclical fluctuations
in construction outputs, the level of employment in the industry can vary noticeably
(United Nations, 1976). As a result, a large proportion of construction labour force
2.2 Major Economic Factors Influencing Construction Activity 27
is paid on a project-by-project basis, rather than on a permanent basis, except for

a small number of administrative and managerial staff. Furthermore, outsourcing
labour through subcontractors also make the employment in construction increas-
ingly temporary and insecure (International Labour Office, 2001). At the bottom of
the supply chain, construction workers have low job security and need for mobility
(Moavenzadeh, 1978). Careers in construction are also less attractive because of the
high rate of accidents (Jensen, 1983). The industry therefore has to compete with
other sectors of the economy for manpower by increasing wage level (Ofori, 1990).
Labour can also be imported if the wages of the imported labour plus transport costs
can be less than the local wages (Gruneberg, 1997). In addition, the price of con-
struction labour is affected by minimum wage laws and union agreements, which
would raise the costs of hiring unskilled labour substantially (World Bank, 1984).
The labour market of the construction industry is characterized by the shortage
of skilled labour, especially in the developing countries. In the developed countries,
the skilled workers account for about 50% of the total labour force (Moavenzadeh,
1978). However, the construction industry in these countries has apparently been
experiencing a shrinking workforce, thus a reduction in the number of the skilled
labour (Ofori, 1990). Meanwhile in the developing countries, the shortage of skilled
labour is more serious. The labour markets in these countries are largely unstructured
and relatively unorganized, which rely heavily on a relatively untrained workforce
(Gruneberg, 1997). In public works construction, the shortage of skilled labour occurs
at both levels, the supervisory personnel and skilled workers (Moavenzadeh, 1978).
The inability of the industry to attract workers and to invest in training them has
seriously affected the productivity and quality of construction products and hence
the ability of contractors to satisfy the clients’ needs (International Labour Office,
2001). One of the solutions to the problem is to improve vocational training in the
domestic construction industry. While this solution has proved to be successful in the
developed countries, the non-availability or inadequacy of educational and training
facilities is still a problem in the developing countries (Rao, 1983; Edmonds & Miles,
1984). Another way to reduce the dependence on labour is through the use of labour-
saving construction technology such as prefabrication. However, this solution has
proved to be inappropriate in the developing countries as will be illustrated below.
2.2.2.2 Equipment and Construction Technology
The intensity of equipment used in construction projects depends on construction

technology. Construction technology reflects the level of mechanization used in the
method of construction. The use of construction technology can vary across projects.
This is because there is a certain degree of technological flexibility for the same
construction work. For the same construction work, designers and contractors can
choose between the two construction methods: one that is highly mechanized; and
the other that is fully manual (Moavenzadeh, 1978). The choice of the contractor
depends on the constraints of time and budget. If time is of the essence, then the
highly mechanized method may be used. However, if the total cost of using plant
and equipment plus wages for technical personnel and semi-skilled workers is much
higher than the total labour cost of minimally-trained unskilled workers used in
the fully manual method, the latter may be used when the budget is limited (Ofori,
1990). In developed countries where labour has become more costly compared to
other inputs, the use of equipment-intensive technology has been more common than
in developing countries where the cost of plant and equipment is high and labour
is still cheap and abundant (International Labour Office, 2001). In other words, the
choice of technology is predominately affected by the prevailing prices of labour and
equipment (World Bank, 1984).
In a research study by the World Bank (1984), the role of labour-intensive tech-
nology in the development of infrastructure in developing countries has proved to be
important. The results of the study showed that labour-intensive technology in capital-
scarce, labour-abundant economies were technically and economically feasible for
government-run labour-intensive civil construction programs. With improvements at
the managerial and technical level, labour-intensive methods could be fully compet-
itive with equipment-intensive methods in terms of quality and productivity (World
Bank, 1984). Since labour continues to be abundant in developing countries, more
serious efforts from the government would be essential to make the labour-intensive
option more attractive for a wide range of construction activities.
2.2.2.3 Building Materials
Building materials make up a major component of total construction costs (Ive &
Gruneberg, 2000). The price level of building materials thus directly affects the
construction output value. The price of a particular type of materials depends on the
market forces, demand and supply of that building material. Demand for a particular
building material in turn depends on client’s tastes and preferences, and level of
income; local building standards and codes; and the choices made by designers
and contractors. The choices made by designers and contractors vary according to
the experience of the designers, the familiarity of contractors with the technology
involved in the use of the materials and the availability of human resource with the
required skills (Ofori, 1990).
The supply of a particular building material is affected by: the availability of raw
materials; the technology for extracting and processing raw materials; the environ-
mental impacts related to the production process; and the government policy. The
availability of raw materials directly determines the supply level of building mate-
rials. Some countries that lack raw materials have to import them. Apart from the
lack of raw materials, building materials supply may be unable to meet local demand
because of the low production capacity and low quality, especially in the developing
countries. Production capacity and quality of building materials in turn depends on
the technology of extracting and processing the raw materials used (Ofori, 1990). The
technology used in the developing countries is generally older than in the developed
countries. In line with older technology, environmental impacts in the developing
countries are also more serious than that in the developed countries. A growing
2.2 Major Economic Factors Influencing Construction Activity 29
awareness of these environmental impacts has made governments in the developing

countries restrict the production of low-grade materials that uses the old technology,
and support the import of more modern technology from the developed countries
(ICR Research, 2007, 2008).
Apart from market forces, the price of building materials may also be controlled
by the government. To facilitate the local construction industry, the government can
fix the price levels, and provide subsidies for some materials, especially for the
materials that are used in public sector projects. The government can encourage or
discourage the import of some building materials by changing import duties, and
taxes, or quotas on them (World Bank, 1984; ICR Research, 2007, 2008).
2.2.3 Sources of Finance
Financing production in construction is quite different from that in manufacturing.

The production in construction is financed largely by clients, rather than the con-
tractors, the producers of construction products. At the top of the payment chain in
the construction industry are the contractors and at the bottom are the subcontractors
and the suppliers. Contractors receive advance payments and periodic payments to
mobilize resources (labour, equipment and materials) necessary for the construction
projects. Cash flow of subcontractors and suppliers are therefore also affected by
the payment procedure. The source of client’s finance is often in the form of bank
loans backed by the constructed facility itself. Although the major source of finance
come from clients, the contractors in some countries can obtain bank loans from
special banks, which are established to assist the financing of construction works
and investments in the construction industry. Other forms of financial assistance that
help contractors get started in heavy construction works can include supplier credit,
direct loans from commercial banks, and the establishment of companies that lease
and hire equipment (World Bank, 1984).
Contractors’ financial concerns can be different across the construction phases and
the technology employed. The initial stages of mobilization require a large amount
of cash, especially for contractors using the equipment-intensive construction tech-
nology to purchase the equipment. Meanwhile, cash flow at the later stages of an
uneventful construction operation is generally more stable. Delayed payments and
uncertainty of cash flow are common in the construction industry (World Bank, 1984).
The problem has continually raised concerns in construction industries throughout
the world, although the problem can be more serious in the developing countries.
Payment problems were considered a factor that can hamper the healthy development
of the construction industry (Wu et al., 2008).
In the developing countries, financial aids for the major construction projects
largely come from the government or international agencies. This is because an
infrastructural construction project is often capital-intensive, and due to its pub-
lic good characteristics, is not directly seen to be feasible from the viewpoint of
individual private investors. For example, a new transportation facility could bring
about improvement in the performance of all individual firms. However, it is not in

the interests of an individual firm to address such issues. Moreover, the high cost
of investment may render the returns from the project unenviable. Meanwhile, the
external effects of the consumption of such goods by the whole community can go
beyond the benefits to individual investors. In other words, the social rate of returns
from such investments is higher than the purely private rate of return. In that case, it
is the responsibility of the government to provide the investment-goods for the econ-
omy as a whole. Consequently, public investments form the major source of demand
for construction in these countries. In such a situation, the government and these
international agencies can exert great influence on the level of construction activity
through their loan conditions (Moavenzadeh, 1978). Therefore, investments in the
construction industry can be used as a government tool to introduce desired changes
in the economy (Lea, 1973; Ofori, 1988; Lange & Mills, 1979; United Nations, 1976;
Hillebrandt, 2000; Howes & Robinson, 2005). This would be examined further below.
However, some infrastructural facilities are quasi-public goods. That is, infras-
tructure displays public good properties up to a certain point. When the infrastructure
gets overly congested, it diminishes the benefits of other users. At this point, there
is rivalry in the consumption of infrastructure services, and positive marginal cost.
The private good characteristics of some infrastructural facilities make it more pro-
ductive for the private sector to provide (Howes & Robinson, 2005). As a result,
there has been a shift away from public demand to private demand for infrastructural
construction in more developed countries (Colean & Newcomb, 1952; Hillebrandt,
2000). Only a small part of the demand is public demand in these countries because
of national security issues. Although infrastructure in some developing countries
has started to be privatized, governments of most developing countries still own and
finance nearly all infrastructure (Colean & Newcomb, 1952; World Bank, 1994).
Recently, the development of new arrangements of both private and public financ-
ing (i.e. public-private partnership or PPP) has broadened the provision capacity of
infrastructural construction (Hillebrandt, 2000; Howes & Robinson, 2005).
2.3 Construction and Aggregate Output
2.3.1 Capital Formation
The productive capacity of an economy is usually described in terms of the complete

utilization of factors of production; that is the full employment of the factors of pro-
duction (labour and capital). Hence, the productive capacity determines the aggregate
supply or national output of an economy in the long run. If there are changes in the
total capital stock, the fixed amount of national output will change accordingly. One
way for an economy to expand production or grow is to invest in capital stocks (human
and physical resources). The relationship has long been recognized in economic the-
ory. According to the Harrod-Domar model of economic growth, net investment (I),
2.3 Construction and Aggregate Output 31
Fig. 2.1 Effect of increases

in capital stock on the
production possibility
frontier
which is defined as the change in the capital stock (K), is necessary for the economy
to grow. Besides investments in new factories, machinery, equipment, and materials,
investments in economic infrastructure—roads, electricity, communication and the
like—also increase the physical capital stock of a nation, thus expanding national
output level. Investments in economic infrastructure are considered a supplement to
other physical capital. For example, a farmer may increase the total output of the
crops by an investment in a new tractor, but without adequate transport facilities,
this extra product cannot be available in local commercial markets, and thus his
investment may not add anything to national food production. As a result, assuming
there were only two products, product 1 and product 2, produced by the economy at
a given technology level, increases in capital stock (human and physical resources)
would make it possible to shift the production possibility curve outward uniformly
from PP to P’P’ as shown in Fig. 2.1 (Todaro & Smith, 2003).
Infrastructure can also raise productivity of other factors of production. For exam-
ple, an installation of a new irrigation system can improve the quality of farm land,
thus raising productivity per hectare and shifting the production possibility curve out-
ward (Todaro & Smith, 2003). The higher productivity in turn attracts more resources
(private investments) into production, which further contribute to higher levels of out-
put, profitability of production, income and employment in these sectors. The process
of investing in the physical capital stocks of an economy, including infrastructure is
measured by the gross fixed capital formation (GFCF).
There has been a huge amount of literature analyzing the positive correlation
between aggregate output growth and investments in infrastructure. In the end 1980s
and early 1990s, many empirical studies on the returns on total infrastructure invest-
ments indicated high rates of returns in developed countries such as the US (Aschauer,
1989; Munnell, 1990), Sweden (Berndt & Hansson, 1992), and Canada (Wylie,
1996). There have also been studies focusing on a specific type of infrastructure. In
the European Conference of Ministers of Transport (ECMT) (2002), transport was
demonstrated to foster economic development by enhancing the efficiency of the eco-

nomic system in both the goods and employment markets. Easterly and Rebelo (1993)
studied historical time series and cross-country data of 28 developed countries. The
study showed a highly and consistently positive correlation between transport and
communication investments, and economic growth rate. Studies aimed at the devel-
oping countries have also been conducted by Canning and Fay (1993), and Canning
(1998). Throughout these studies, transportation and telephone systems appears to
promote economic growth. For example, Canning and Fay (1993) examined the rates
of returns of the transportation (road and rail) infrastructure and telephone systems
from 1960 to 1980 in 104 countries at different income levels. The cross section
analysis showed that both transportation and telephone systems had large effects on
growth rates, with high rates of returns; especially for countries with lower ratios
of infrastructure to output, the rates of returns were higher than 40%. Many studies
addressed the impacts of inadequate infrastructure on economic development as well.
For example, in a study of economic development in Africa by Mountjoy and Hilling
(1988), low rate of capital formation was argued to have a clear link with poverty
in this continent. The study by the United Nations (1990) indicated that infrastruc-
tural development was an essential part of economic development in Asia and the
Pacific region. As a result, this has been interpreted as a causal linkage, suggesting
that infrastructure investment does appear to lead economic growth by improving
the capacity as well as the efficiency of the economy.
As an industry supplying the physical infrastructure facilities, construction thus
has a profound impact on economic development. GFCF by construction is the total
value of all additions within a year, including new construction and all capital alter-
ations or extensions, which significantly improve upon the utility or extend the life of
the building or works to fixed capital. Repair and maintenance are not included in the
indicator (Turin, 1969; Ofori, 1990). Many studies have emphasized that about half
of the investments in GFCF in most developing countries comes from construction
(Turin, 1978; Ofori, 1988; Lewis, 1955; World Bank, 1984; Wells, 1985; Gruneberg,
1997; Hillebrandt, 2000; Ruddock & Lopes, 2006). It is thus understandable that
the construction industry plays a dominant role in a country’s rate of GFCF (Lewis,
1955; Gruneberg, 1997). The cross-section analysis of 87 countries at different per
capita GDP levels during the period of 1955–65 by Turin (1969) showed a strong
linear correlation between the logarithms of per capita formation by construction
and per capita GDP. The share of capital formation in construction in GDP also
increased with per capita GDP (Turin, 1969). Further studies by Strassmann (1970),
Turin (1973) and Wells (1986) all argued that during the periods of accelerating
economic growth, the construction industry needs to grow faster than the economy
as a whole. A study by the World Bank (1994) also confirmed that infrastructure has
to expand fast enough to create adequate infrastructure and productive facilities for
economic growth (World Bank, 1994). Inadequate construction capacity is therefore
a constraint on capital investment programs (Wells, 1986).
2.3.2 National Income
Construction like any other economic activities can contribute to national income
by creating income or value adds. Based on the definition by the United Nations,
Ofori (1990) explained that value added in construction is the gross output value
at producer’s prices less the value of all industry’s current purchases from other
enterprises. It is important to note that according to the narrowly defined scope of
the construction industry, all industry’s current purchases from other enterprises are
excluded, which are the value of input materials and components, costs of hiring plant,
costs of goods sold in the same conditions as purchased, legal and other professional
fees, and payments made for repair and maintenance undertaken by others on the
construction firm’s own assets. Value added therefore is actually the sum of salaries
and wages of employees, interest on borrowed capital, net rent, profit and allowance
for depreciation (Ofori, 1990). According to data provided by the World Bank (1984),
the value added-to-output ratios of the construction industry in most developing
countries were higher than that of manufacturing over the period of 1970–1980. In
some countries, the ratios of the construction industry could be as high as 60% (World
Bank, 1984).
The linkage between the value added of construction as a share in GDP and per
capita GDP has long been recognized. According to Turin (1969) and Strassmann
(1970), there is a strong linear correlation between the logarithms of per capita value
added by construction and per capita GDP. The share of value added in construction
as a percentage in GDP also increases as per capita GDP increases. The share of the
valued added in construction as a percentage to GDP was found to be around 3–5%
for developing countries and 5–8% for more developed countries over the period of
1955–1965 (Turin, 1969). The results were later confirmed by many other studies
such as those completed by Edmonds and Miles (1984), Wells (1985, 1986), Ofori
(1988), Low and Leong (1992), and Chen (1998). Although these studies focused
more on the static view of the close relationship between construction activity and
economic growth, these studies do note that construction’s role in the economy would
decline when the economy reaches the middle income stage (Strassmann, 1970) or
when the volume of construction products was sufficient to raise the productive
capacity of the economy at a steady growth rate (Wells, 1986). The contribution of
the construction industry required for a steady economic growth as suggested by
Edmonds (1979) should be 5% of GDP. Lopes, Ruddock, and Ribeiro (2002) also
demonstrated that when the share of construction value added in GDP was around
4–5%, the economy would enter a period of sustained growth. The level should be
interpreted within the long term trend rather than the annual fluctuation (Lopes et al.
2002).
The dynamic views of construction in the national economy have been further
examined by Bon (1992, 2000). Analyzing the data over different development
stages in the more developed countries, the US, UK, Japan, Italy, Finland and Ire-
land, Bon (1992, 2000) argued that as a country develops, the share of construction
in total GNP as well as the total construction output actually follows an inverted
Fig. 2.2 Share of construction in GNP and per capita GNP
U-shape. That is, in the initial development stages, the share of construction output
in GNP increases, but starts to decline in the more mature stages. Thus in the long
run, the volume of construction output will decline accordingly. The contribution
of the construction industry to economic growth is therefore not indefinite (non-
linear relationship). Bon (1992, 2000) observed that there is a point at which the
basic major infrastructure is put in place and the need for new construction gradually
becomes less. However, Ruddock and Lopes (2006) and Lopes (2009) argued that in
the more mature stages of development, construction output declines only in relative
terms, not in absolute terms. That is, in the more developed countries, construction
still grow but at slower rates than the economy. The inverted U-shaped relationship
between the share of construction in GNP and GNP per capita proposed by Bon (1992,
2000) (as shown in Fig. 2.2) was further confirmed by Maddison (1987), Crosthwaite
(2000) and Yiu, Lu, Leung, and Jin (2004). These observations implied that capacity
expansion in construction is more important for the developing countries than for
the developed countries. The feature of the activity in the industry is also different
between the developing and developed countries. Repair and maintenance capacity
become important in the developed countries, whereas the industry’s capacity for
new build as well as the development of capacity for repair and maintenance is a
major focus of the developing countries (Bon & Crosthwaite, 2000).
As a result, policy implications within the literature have focused on the measures
to expand the capacity of the construction industry in the developing countries.
The development strategies for the construction industry are consequently centered
on the schemes to remove the constraints of the industry’s production factors such
as labour, materials, capital and technology. By building up an adequate domestic
capacity, the construction industry is expected to drive economic growth. The policy
recommendations also include creating an institutional environment that facilitates
a competitive business environment for an efficient construction industry. At the
macroeconomic level, monetary and interest rate policies are expected to deal with
the distortions in factor prices, the limits to the availability of foreign exchange for
the purchase of imported inputs and related issues such as foreign exchange rates and
import tariffs. Meanwhile, fiscal policies related to government spendings and taxes
on public construction works are expected to encourage employment, and to stabilize
construction activities. Throughout these studies, the role of governments has been
demonstrated by using these policies to directly or indirectly influence construction
activities to stimulate economic growth.
2.3.3 Other Observations
Further empirical studies have shown that the contribution of construction in the
economy as suggested by Turin (1969) as well as Bon (1992, 2000) is not consis-
tent across countries, especially in the developing countries. The data provided by
the World Bank (1984) indicated that construction value added in most developing
countries over the period of 1970–1980 varied between 3 and 8% of GDP. Studying
the data of 75 countries in 2003, Ruddock and Lopes (2006) found that the share
of gross value added in construction varied considerably from over 2% to over 10%
across countries in the same category of GDP per capita. Meanwhile, a study of the
share of construction in GFCF by Lewis (2009) found that the figure was much lower
than 50% as suggested by previous studies. The average proportion of construction
in GFCF from 1970 to 2006 for developed countries was around 26% and for the
developing countries was around 23%. There was also a trend of divergence among
the developing countries. The divergence trend was explained by the fact that most
infrastructure in the developing countries was financed by the government; and thus
was directly affected by different government-expenditure policies (Lewis, 2009).
The problem of the direction of the causality between construction and GDP has
also been analyzed. However, the results of these empirical studies were inconclu-
sive. On the one hand, the study using data from Hong Kong by Tse and Ganesan
(1997) indicated that the causality ran from GDP to construction activity. On the
other hand, the study using data from Western Europe by Wilhelmsson and Wigren
(2009) showed that the causality effect was weak in the case of infrastructural con-
struction in the long run. Meanwhile, Chan (2001), in studying the linkage between
construction and other economic sectors in Singapore, found a bi-directional causal
relationship between construction activities and GDP. In the case of China, the study
by Zheng and Liu (2004) also indicated a bi-directional casual relationship; construc-
tion investment had a strong short-run effect on economic growth, whereas economic
growth had a long-term effect on construction. Lewis (2009) indicated that the rela-
tionship between construction and the national economy of Trinidad and Tobago
changed over time under different circumstances. During the economic upturn, the
economy led construction; and during the economic downturn, construction drove
the economy.
In striking contrast to a number of the above studies, there have been studies
concerning the negative impacts of the construction industry in the economy. The
concern was first raised by Drewer (1980). Analyzing the data of the United Nations
Economic Commission for Europe (ECE) region between 1970 and 1976, Drewer
(1980) observed that more construction works do not necessarily result in higher
economic growth when resources are misallocated. Drewer (1997) found that the
relationships between construction and the economy are unstable and the uncon-
trolled expansion of the construction industry could negatively impact the economy.
A number of other studies found a negative relationship between public expenditure
and economic growth. Analyzing data from 69 developing countries over a 20-year
time series, Devarajan, Swaroop, and Zou (1996) noticed a statistically significant
negative relationship between the share of central government investments on trans-
port and communications, and per capita GDP. The study explained that the negative
relation was possibly caused by political factors in decision-making. The study of
the US data by Kocherlakota and Yi (1996) illustrated that infrastructure does not
permanently raise economic growth rate. Furthermore, the study of infrastructure in
developing countries by Devarajan et al. (1996) indicated that infrastructure actually
had negative impacts on economic growth if infrastructure is over-supplied relative
to the economic scale. The empirical analysis of 210 transportation infrastructure
projects completed between 1969 and 1998 around the world by Flyvbjerg (2008)
also confirmed the problem of an over-estimation of demand for infrastructure. The
economic recessions in Southeast Asia in 1997, in Singapore in 1985 and in Trinidad
and Tobago around the same time (Lewis, 1984; Ganesan, 2000) were caused by
excessive supply of construction outputs. The pressures generated by the expan-
sion of the construction industry may push up the costs of inputs (such as labour and
materials), affect the availability of financial capital for other uses, and intensify envi-
ronmental stress. As a result, the over-expansion of construction activities may affect
macroeconomic stability by generating inflationary pressures, and misallocating as
well as wasting resources. The negative impacts of over-expansion of construction
activities may considerably offset the real growth of the economy.
2.4 Construction and Sectoral Output
The ability of the construction industry to stimulate economic growth also comes
from the strong linkages between construction and other sectors in the economy. The
construction industry is one of the top four out of twenty economic sectors in terms
of inter-sectoral linkages, backward and forward linkages (Riedel & Schultz, 1978).
The important role of construction through a complex set of inter-relationships was
also highlighted by Ofori (1990).
2.4 Construction and Sectoral Output 37
2.4.1 Backward Linkages
Since large quantities of building materials and components are purchased from a
large number of supply industries, an expansion of the construction industry can
stimulate the expansion of these industries through backward linkages. The impact
can be significantly large because much of the building materials can be provided by
relatively unsophisticated labour-intensive domestic resources and by basic indus-
tries such as cement and steel manufacturing (World Bank, 1984). Many input-output
analyses (Park, 1989; Pietroforte & Bon, 1995; Bon & Yashiro, 1996; Bon, Birgonul,
& Ozdogan, 1999) have demonstrated the strong backward linkages. Consequently,
should the value added by construction takes into consideration the backward link-
ages such as the manufacture of building materials and components, the value added
can account for a considerable proportion in GDP. The value added through back-
ward linkages could be up to 55% of the value of construction purchases of materials
and services from other industries (Kirmani, 1988). However, it is important to note
that the value add will be high when locally produced inputs are used. Hence, while
imported materials may be necessary in the short run, an economy needs to develop
its local supply industries in the long run if it aims to increase value add. These issues
have been addressed in many studies (Drewers, 1980; Wells, 1986).
2.4.2 Forward Linkages
The indexes of forward linkages of the construction industry are relatively less exten-
sive than that of the industry’s backward linkages (Bon & Minami, 1986; Bon &
Pietroforte, 1990; Pietroforte & Bon, 1995; Bon & Yashiro, 1996; Bon et al., 1999).
Nevertheless, the magnitude of the forward linkages can be more significant since
the demand for construction outputs is derived demand from all other sectors of the
economy. As a result, how these sectors react to the change in the level of construction
activity, and vice versa, ultimately affect the economy.
Within the literature of infrastructure, how infrastructure impacts on other sectors
is somewhat clear. Many studies have shown the strong linkages between infrastruc-
ture investments and sectoral outputs. The strong linkages stem from the fact that
all other sectors of the economy use the flow of services generated by infrastruc-
ture, which in turn can lead to growth in the production of other economic sectors
in two ways: through the reduction in costs of intermediate inputs from infrastruc-
ture services such as transport, water and electricity; and through the increase in the
productivity of other factors of production. As a result, the supply of infrastructure
services can raise the profitability of production, level of returns, output, income and
employment of other sectors. In studies by Binswanger et al. (1987, 1993), roads and
electricity supply were found to have a strong positive effect on aggregate agricultural
output, as well as the growth of farm investments. Antle (1983) found that spending
on transport and communication services was a significant determinant of differ-
ences in aggregate agricultural productivity across countries. The study by Chhibber

(1988) concluded that public goods and services, including infrastructure, were the
determinant of agricultural outputs in the developing countries; meanwhile, in the
more developed countries which had better basic infrastructure, the determinant was
price. Elhance and Lakshmanan (1988), Kranton (1991) and Lee and Anas (1992)
examined the contribution of infrastructure to growth through reductions in costs and
found that infrastructure could be a major share of business expenses. The unreliable
delivery of infrastructure services and lack of access to infrastructure services could
result in multiple economic costs such as direct costs of production delays, loss of
perishable raw materials or outputs, costs of under-utilization of productive capac-
ity, etc. In addition, several studies of the U.S. (Bartik, 1985; Carlton, 1979; Fox &
Murray, 1990) indicated the impacts of infrastructure on attracting private capital.
Among other infrastructure components, transportation was found to be the most
important factor to locational decisions of business investments. Public investments
in infrastructure was credited to have a positive effect on private investments in sev-
eral studies of developing countries as reviewed by Chhibber and Dailami (1990) and
Serven and Solimano (1992). Infrastructure has also become one of the determinants
of international competitiveness, which directly impact the ability of countries to
engage in international trade, and to compete for direct foreign investments. A num-
ber of studies on the relationship between infrastructure, especially transport and
communication, and trade found that an adequate and reliable infrastructure system
can promote trade, expand market through cost and time savings in transportation
and telecommunications (Peters, 1992; Hulten, 1996; ECMT, 2002). The remark-
able growth of a number of developing countries in Asia in recent decades has been
attributable much to the expansion of international trade, which in turn has been
supported by the development of infrastructure systems (Hukill & Jussawalla, 1989;
Brooks & Menon, 2008). All these important contributions of infrastructure on other
sectors of the economy highlight the crucial role of construction’s supply capacity
in raising other sectoral outputs. However, little is known about the reverse flow of
influence, which is how the adaptive capacities of other economic sectors can affect
the construction sector. The influence is equally important since over-expansion of
the construction sector and misallocation of resources in the economy might stem
from the lack of understanding of this effect.
2.5 Construction and Macro-economic Stabilization
The contribution of construction in the economy has also been measured by construc-
tion employment as a share of total employment (Strassmann, 1970; Turin, 1978;
Wells, 1985). Turin (1978) suggested that since employment in construction cor-
related positively with economic growth, there is a potential use of construction to
generate sustained employment. Turin (1978) also argued that the misuse of construc-
tion by the government as a cheap way to absorb unskilled unemployment through
2.5 Construction and Macro-economic Stabilization 39
ill-planned public work programs would only damage the healthy development of
the construction industry.
Numerous data has shown that there have been dramatic increases in construction
employment in most developing countries (International Labour Office, 2001). The
fact that the construction industry is more labour intensive than many other indus-
tries, especially relative to manufacturing (Hillebrandt, 2000), makes the industry a
traditional focus of employment-generation policy in many countries through labour-
intensive public works projects. The labour created in these projects in turn spends
the income from the employment on other locally produced goods and services,
thereby stimulating demand in the rest of the economy through the multiplier effect.
The employment multiplier effect also makes public works a more promising instru-
ment for moderating the business cycle over others such as credit or tax incentives
offered to the private sector. As a result, during periods of slack demand and high
unemployment rate, infrastructural construction projects funded by the government
are often implemented as a counter-cyclical instrument (Gruneberg, 1997; Hille-
brandt, 2000). Similarly, the government can stabilize the economy by postponing
these projects during boom periods (Burns & Grebler, 1984). Through fiscal policy
such as changing the amount of public expenditure or interest rates of loans financ-
ing these infrastructure projects, the government can generate desired changes in
the economy, which has been the subject of many studies (Lea, 1973; Ofori, 1988;
Lange & Mills, 1979; United Nations, 1976; Hillebrandt, 2000; Howes & Robinson,
2005). The 2008–2009 economic crisis has witnessed many countries relying con-
siderably on construction spendings to jumpstart the economy and spur employment.
Many countries around the world have included construction of infrastructure such
as railways, highways, airports and power grids into their fiscal stimulus packages
(Donnges, 2009).
However, there are several difficulties in realizing the expected results. One of
the difficulties is the time lag between government action and the actual construction
works from the project start to completion. As a result, “unless the government
can foresee problems far in advance, the effect will be too slow to be useful at the
beginning of the period and the major effect will come much later, perhaps at a
time when the contrary effect is clearly required” (Hillebrandt, 2000, p. 188). Other
difficulties might come from technical considerations when the government wants
to postpone infrastructural construction. Technical problems make it difficult and
costly to cancel infrastructural construction in mid-stream (Burns & Grebler, 1984).
An empirical study of the regional data of the U.S. by Duffy-Deno and Eberts (1991)
indicated that these difficulties caused infrastructure to only have short-run multiplier
effects.
In many poor countries, the objective of public programs is usually a combination
of poverty alleviation, employment generation and the provision of infrastructure.
These public programs have been carried out for decades in South Asia and Africa
(World Bank, 1994). However, the results of these programs were varied. On the
one hand, as reviewed by Kessides (1992), the emphasis of traditional public work
programs on short-term benefits (through quick creation of employment and assets)
have dampened the long term economic benefits, which could be derived from more
careful project selection, creation of higher-quality assets, and more emphasis on

the training of workers. On the other hand, as reviewed by McCutcheon (2001),
large scale programs for employment-intensive construction and maintenance have
successfully created employment without compromising cost, quality or time. The
experience suggests that these programs should be integrated into other long term
development programs to generate the greatest benefits.
2.6 Government Institutions for Construction Industry

Development
The role of the construction industry in the economy recognized by academics has
led to the recommendation of creating a government agency which specifically deals
with the development of the construction industry. Having observed the critical role of
construction in the developing economies, Turin (1978) suggested the establishment
of such a government department. The roles and functions of such an agency were fur-
thered analyzed by Ofori (1985). Several countries have realized the constraints of the
domestic construction industry and have established sophisticated agencies to guide
the industry towards development. The Construction Industry Development Board
of South Africa was established in 2000 after the 1997 Green Paper identified some
of the challenges facing the industry (Construction Industry Development Board,
2000). In Australia, after a report prepared by the Joint Working Party (consisting
of the major contractors, the Australian Federation of Construction Contractors, the
National Building and Construction Council and the National Public Works Com-
mittee) to provide a report on the difficulties facing the industry in the late 1980s, the
government outlined the Construction Industry Reform Strategy, which led to the
establishment of the Construction Industry Development Agency and Construction
Industry Development Council in 1992 (Commonwealth of Australia Law, 1992;
Royal Commission into the Building and Construction Industry, 2002). The Con-
struction Industry Development Board of Singapore was formed in 1984 to deal with
the then pressing issues of the industry (Ofori, 1993) which has now been renamed
the Building and Construction Authority (BCA). Some other example of countries
that have established the bureau or boards to respond to problems in the construction
industry include Indonesia, India and Malaysia. The government agencies are often
under ministerial control. Members of these agencies are usually appointed by the
Ministry and compose of government officials, academics and private consultants to
monitor and manage the sector. Generally, the creation of these agencies is to address
the issues concerning the weaknesses of the local construction industry. The com-
mon functions of the agencies relate to formulating, monitoring, managing policies,
standards, programs and initiatives to deal with the shortage of local skilled labour,
materials, low output productivity and quality, or the low competitiveness of the
local construction industry. Other focus might be the issues relating to sustainability,
regulatory reforms, new procurement procedures and measurement of the industry’s
2.6 Government Institutions for Construction Industry Development 41
performance. To fulfill these functions, these agencies formed divisions or depart-

ments, and advisory boards or committees for specific purposes. For example, the
Construction Industry Development Board of Singapore, when established in 1984,
consisted of the Manpower Division (to deal with manpower development), Tech-
nology Development Division (to deal with technology development) and Industrial
Development Division (to deal with commercial aspects of construction industry)
(Ofori, 1993).
Other government agencies, professional bodies and trade associations, and aca-
demic institutions can also impact construction industry development (Ofori, 1994;
Miles & Neale, 1991; Tan, 2002). Construction activities can be influenced by other
government bodies such as the Ministry of Finance (through public spending and
fiscal policies, etc.), the Ministry of Trade and Industry (through raw materials, man-
ufacturing regulations, prices, tariff, taxes, etc.), and the Ministry of Labour (employ-
ment regulations, site safety, wage policies, etc.). The roles of professional bodies and
trade associations were also emphasized (Ofori, 1994; Miles & Neale, 1991). These
institutions can enhance the competitivenessl of the construction industry by prepar-
ing their members necessary skills “through accreditation of courses, continuing pro-
fessional development and dissemination of relevant state-of-the-art information and
facilities through central data services, computerized libraries and similar” (Ofori,
1994, p. 208). In this context, academic institutions implement research programs,
providing the industry with pertinent views about shortcomings in construction, and
new techniques or approaches to overcome these shortcomings.
By establishing these institutions to attend to pressing issues in the construc-
tion industry, governments have demonstrated an active commitment to construction
industry development. The agency that is specifically concerned with construction
industry development can be considered the core agency for this purpose. To function
effectively, the core agency needs to co-ordinate with other government bodies and
organizations in connection with the performance of its tasks.
2.7 Key Concepts
The key concepts relating to the role of the construction industry in economic devel-
opment over the past 40 years were reviewed above. Much of the existing empirical
literature on the linkage between construction and economic growth seeks to capture
this effect through observation of the relationship between increases in the con-
struction outputs (measured by the share of construction in GFCF or value added)
and some measures of aggregate output (GDP or GNP). Many of the findings from
these studies over the past 40 years have demonstrated the positive and statistical
significant relationship between the construction industry and economic growth in
the developing countries. However, the conclusions have been questioned when fur-
ther studies on this relationship were conducted for more developed countries. The
results of these studies indicate that the relationship between economic development
and the construction industry appears to be more complicated. Moreover, whether
growth in the share of the value of construction activities in total GDP is a cause or
a consequence of economic growth is not clear. However, there exists a general con-
sensus on the underlying pattern of the relationship between GDP per capita and the
share of construction in total GDP. This means that in the initial development stages
of an economy, the share of the construction industry in GDP increases at a faster
rate, then levels off and finally declines at higher levels of economic development.
This suggests that in developing countries, construction is still a crucial factor for
consideration when economic policies in these countries are being formulated.
Since construction involves high stakes in the developing economies, most of the
policy implications recommended within the literature focus on stimulating construc-
tion outputs, and expand the domestic construction capacity. However, the preceding
discussion also suggests that there are high potential costs from over-expansion in the
sector, especially in infrastructural construction. Consequently, construction might
contribute to the economy in the short run, but offset the real growth of the economy
in the long run. Since demand for construction is derived demand from other sec-
tors of the economy, construction can only contribute to the economy when there is
sufficient complement and basic productive level of other sectors to absorb the con-
struction outputs. Further expansion of the construction industry beyond the adaptive
capacity of the economy will only waste national resources (Dang & Low, 2015).
When placed within the institutional framework described above, the relation-
ship between the construction industry and the national economy is strategically an
important one. This is because beyond this, there are also other implications relating
to market competitiveness that can affect allied issues such as construction qual-
ity delivered during boom and bust times in the national economy. In this context,
construction quality may be compromised when contracting firms try to cut corners
in order to survive during a recession. It is therefore of interest to understand how
construction quality pans out correspondingly with national economic performance.
The national economy and construction industry of Singapore, where this study was
based, will be examined for this purpose.
2.8 Economic Recessions in Singapore
The economic cycle is the natural fluctuation of the economy. An economic cycle,
also referred to as the business cycle, has four stages: recovery, peak, recession and
trough. As the terminology suggests, economic cycles are recurring and the economy
revisits each phase of the cycle.
In the United Kingdom, recessions are measured by the adjusted quarter-on-
quarter figures for real GDP; commonly defined as two consecutive quarters of
negative economic growth (BBC NEWS, 2018; “Glossary of Treasury terms”, 2018).
Similarly, Singapore defines a technical recession as two consecutive quarters of
decline in economic output (Chia, 2016). Figure 2.3 illustrates the quarterly GDP of
Singapore spanning the first quarter of 1993 to the third quarter of 2017. Table 2.1
2.8 Economic Recessions in Singapore 43
Quaterly GDP
1,20,000.0
1,00,000.0
80,000.0
60,000.0
40,000.0
20,000.0
0.0
1993 1Q
1994 1Q
1995 1Q
1996 1Q
1997 1Q
1998 1Q
1999 1Q
2000 1Q
2001 1Q
2002 1Q
2003 1Q
2004 1Q
2005 1Q
2006 1Q
2007 1Q
2008 1Q
2009 1Q
2010 1Q
2011 1Q
2012 1Q
2013 1Q
2014 1Q
2015 1Q
2016 1Q
2017 1Q
Fig. 2.3 Quarterly GDP of Singapore (Source SingStat, 2018)
Table 2.1 Timeline of recessionary periods in Singapore post-1965

No. Recessions Remarks
1 1985–1986 In 1985, the Singapore economy went into a recession (Menon, 2015).
Nonetheless, a swift recovery was made in mid-1986. By the second
quarter of that year, Singapore posted a growth of 1.2%, which increased
to 3.8% in the third quarter (NLB, 2018)
2 1998–1999 The Asian financial crisis in 1997 (Menon, 2015)
3 2001–2003 The global IT industry meltdown in 2001 (Menon, 2015)
The SARS virus in 2003 (Menon, 2015)
4 2008–2009 The Global financial crisis in 2008 (Menon, 2015)
specifies the economic recessions experienced in Singapore since the country gained
independence in 1965.
As observed from Fig. 2.3, there are two consecutive falls in GDP from 1998
Q1 to 1998 Q2, two consecutive falls from 1998 Q4 to 1999 Q1, three consecutive
falls from 2001 Q1 to 2001 Q3, two consecutive falls from 2003 Q1 to 2003 Q2,
two consecutive falls from 2008 Q1 to 2008 Q2 and two consecutive fall from 2008
Q4 to 2009 Q1. These periods are the periods of recession in Singapore since 1993.
There were no data for the quarterly GDP between 1965 and 1992. Nonetheless, with
archival sources, Table 2.1 shows the timeline of recessions in Singapore post-1965.
2.9 Economic Recessions and the Impact on Construction

Firms
Firms in the construction industry have always had to confront economic cycles
and developing strategies to address the resulting effects on them. In fact, economic
recessions have huge effects on the construction industry, more so than most other
industries (Ruddock, Kheir, & Ruddock, 2014). However, the cycles are rarely ana-
Table 2.2 A review of existing literature on the impacts of economic recessions on the construction
industry
No. Impacts of economic recessions on the References
construction industry
1 Fall in construction demand and volume Grogan (2010), Ruddock, Kheir, and
of work Ruddock (2014), Tansey (2014)
2 Construction firms feel pressure to get Lim et al. (2010)
work
3 Aggressive assumptions made for Lim et al. (2010)
bidding
4 Higher contractor to projects ratio Alaka, Oyedele, Owolabi, Bilal, Ajayi,
and Akinade (2017)
5 Bidding competition increases Alaka et al. (2017), Ruddock et al.
(2014), Tansey (2014), Yoo and Kim
(2015)
6 More changes to the agreed scope of Treacy, Spillane, and Tansey (2016)
works and/or requests for increase in
speed of project
7 Fall in prices of property Grogan (2010), Yoo and Kim (2015)
8 Poorly motivated people resulting in Schleife et al. (2014), Albattah, Shun,
declining performance in all areas Goodrum, and Taylor (2017)
9 Risk of failure in the supply chain which Ruddock et al. (2014)
includes subcontractors and suppliers
10 Overhead costs rises Lim et al. (2010)
11 Clients defaulting on their payment Ruddock et al. (2014)
12 Sources of fund are affected and firms Lim et al. (2010), Ling and Lin (2013),
see a reduction in lenders Tansey (2014), Thach and Oanh (2018)
13 Higher interest rates charged for lending Deereper, Lobez, and Statnik (2017)
i.e. higher costs of borrowing
14 Fluctuations in prices of materials, BCA (2018b)
manpower and machinery
lyzed and management often cannot react correctly to the economic cycles because
the firm is usually still reacting to the last cycle the company experienced, while
simultaneously attempting to anticipate the actions needed to address the next cycle
(Schleife, Sullivan, Murdough, & Wallace, 2014).
In Singapore, it was reported that approximately 97% of contractors suffered
heavy losses as a result of the 1997 Asian financial crisis (The Contractor, 1998).
Consequently, the number of construction firm cessations recorded rose by 49%; from
205 cases in 1997 to 306 cases in 1998 (Lim, Oo, & Ling, 2010). Many established
contractors (such as Econ Corporation, Neo Corporation and Wan Soon Construc-
tion) applied for cessations during the 1997–2005 recessionary period (Teh, Sua, &
Nadarajan, 2006). Table 2.2 identifies the impacts of economic recessions on the
construction industry in further detail.
2.9 Economic Recessions and the Impact on Construction Firms 45
Construction contracts awarded

45,000.00
Contracts awarded in million
40,000.00
35,000.00
30,000.00
dollars SGD
25,000.00
20,000.00 private sector
15,000.00 public sector
10,000.00 total
5,000.00
0.00
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Years
Fig. 2.4 Construction contracts awarded annually in Singapore (Source BCA, 2018b)
Table 2.2 details the impacts of economic recessions on the construction industry
as suggested by existing literature. However, it is important to understand firms’
perceived impacts (for they can be exaggerated, reduced or even absent) in order to
better capture firms’ considerations and the subsequent decisions they make. As such,
Hypotheses 1a–1p are formulated; following the analysis of trends such as construc-
tion contracts awarded annually as shown in Fig. 2.4 and the prices of construction
resources discussed later.
Keeping in mind the periods of economic recession detailed in Table 2.1, one
can observe from Fig. 2.4 that the contracts awarded by the private sector falls in
1998 following the Asian financial crisis in 1997, in 2001 following the global IT
meltdown in 2000 and in 2009, following the global financial crisis in 2008.
One observation from these dips is that there is a gestation period between eco-
nomic recessions and the impacts on the construction industry. This is because, taking
the 2008 recession (which Singapore was hit with in 2008 Q2) as a case in point, the
contract value awarded in the private sector was $6.1 billion in 2008 Q1, $7.1 billion
in 2008 Q2, $5.2 billion in 2008 Q3, $1.8 billion in 2008 Q4, less than $1 billion in
2009 Q1 and $1.5 billion in 2009 Q2. Keeping in mind that it takes on average three
to six months for the tendering process before contracts are awarded, the statistics
presented suggest that construction demand may have reacted instantly to periods of
economic recessions. Hence, the reflection of the lower volume of contracts awarded
in 2009 Q1 and 2009 Q2 is a result of lesser construction demand two to three quar-
ters prior to these contract award periods. However, one should note that at the point
of recession, firms in Singapore are still preoccupied with jobs. The impacts are only
felt two to three quarters after the onset of an economic recession. In fact, even at
the point where the total value of building commencement falls, contractors may
not have been affected yet because sufficient works are still around to keep their
resources occupied. It is only upon substantial completion of construction work and
when the same resources are left idle that the impacts would set in (Low & Tan,
1996b). This would suggest that the total time lag for certain effects of economic
recessions to affect firms would be beyond two to three quarters. Having said that,
Hypotheses 1a–1l are set out as follows.
Hypothesis 1a: When an economy falls towards a recession, the construction

demand in Singapore falls.
Hypothesis 1b: When an economy falls towards a recession, firms’ pressure to

secure new projects rises.
Hypothesis 1c: When an economy falls towards a recession, the more aggres-
sive the assumptions made by firms in deriving the bid price.
Hypothesis 1d: When an economy falls towards a recession, the number of

bidders per project generally rises.
Hypothesis 1e: When an economy falls towards a recession, bidding competi-

tion rises.
Hypothesis 1f : When an economy falls towards a recession, the changes to the

agreed scope of work rises.
Hypothesis 1g: When an economy falls towards a recession, employee produc-

tivity falls.
Hypothesis 1h: When an economy falls towards a recession, supply chain

reliability (which includes subcontractors and suppliers) falls.
Hypothesis 1i: When an economy falls towards a recession, overhead costs

rises.
Hypothesis 1j: When an economy falls towards a recession, defaults in payment

rises.
Hypothesis 1k: When an economy falls towards a recession, sources of fund

decreases.
Hypothesis 1l: When an economy falls towards a recession, lending/interest

rates rises.
With reference to the fall in property prices, the research team studied the “Singa-
pore residential property price index” and “Singapore office space in central region
price index” from 1975 to 2018 in Figs. 2.5 and 2.6.
With reference to Figs. 2.5 and 2.6, one observes an instant fall in the prices
of property (for both residential and commercial) following recessions with sharp
declines of property prices in 1997 Q1 and 2008 Q1. Hence, it can be concluded
that there is a positive correlation between economic recessions and property prices
and there is little to no gestation period between the downturn of an economy and
the fall in property prices. Hypothesis 1m is established to test the perceived impact
of this phenomenon on main contractors and subcontractors in times of economic
recession.
Hypothesis 1m: When an economy falls towards a recession, property prices

fall.
Singapore residential property price index
Fig. 2.5 Singapore residential property price index (Source Trading Economics, 2018)
Singapore office space in central region price index

180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
1975 1Q
1976 3Q
1978 1Q
1979 3Q
1981 1Q
1982 3Q
1984 1Q
1985 3Q
1987 1Q
1988 3Q
1990 1Q
1991 3Q
1993 1Q
1994 3Q
1996 1Q
1997 3Q
1999 1Q
2000 3Q
2002 1Q
2003 3Q
2005 1Q
2006 3Q
2008 1Q
2009 3Q
2011 1Q
2012 3Q
2014 1Q
2015 3Q
2017 1Q
Fig. 2.6 Singapore office space in central region price index (Source Trading Economics, 2018)
In relation to the fluctuations in the prices of materials, manpower and machinery,

examining the trends with the aid of time series statistics from government archives
would shed light on the effects of economic recessions on the prices of materials,
manpower and machinery. One useful indicator would be the tender price index
as it reflects prices of major construction resources such as construction materials,
manpower and machinery. The tender price index for Singapore’ Housing and Devel-
opment Board (HDB) per se reflects the price movements in construction materials,
equipment, manpower and elements of competition, risk and profit allowance by
contractors (SISV, 2018). Figure 2.7 examines the tender price index in Singapore
from 1987 to 2016.
From Fig. 2.7, the tender price index starts at a low point in 1987, falls in 1992 and
falls relatively largely in 1998 and 1999, remained as a low in what some touted as
Tender price index

160.0
Tender price index
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Years
Fig. 2.7 Tender price index in Singapore (Source BCA, 2018b)
Prices of concrete and steel per tonne

200.00 1800.00
$/ toone SGD for concrete
180.00 1600.00
$/ toone SGD for steel

160.00 1400.00
140.00 1200.00 ready
120.00 mixed
1000.00 concrete
100.00
800.00
80.00
60.00 600.00
steel
40.00 400.00
20.00 200.00
0.00 0.00
Jan-1999
Jan-2000
Jan-2001
Jan-2002
Jan-2003
Jan-2004
Jan-2005
Jan-2006
Jan-2007
Jan-2008
Jan-2009
Jan-2010
Jan-2011
Jan-2012
Jan-2013
Jan-2014
Jan-2015
Jan-2016
Jan-2017
Fig. 2.8 Price of concrete and steel in Singapore (Source BCA, 2018b)
an 8-year long recessionary period from 1997 to 2004 and falls in 2009 following the
global financial crisis in 2008. The sharp decline in tender price index in 1998 and
2009 seems to suggest that prices of materials, manpower and machinery fall in times
of economic recession. In addition to the tender price index, statistics on the price of
steel, concrete, labour costs and wholesale trade index (for construction machinery)
shall be studied as well. Figure 2.8 shows the trend in the prices of concrete and steel
in Singapore from 1999 to 2017.
Studying the prices of concrete and steel in Fig. 2.8, one observes that there is
a distinct spike in the price of concrete in early 2007 followed by a steep rise in
steel prices stretching towards May 2008. This anomaly in the time series is likely
to be explained by the sand ban by Indonesia in early 2007 which resulted in a
sharp decrease in the supply of sand in Singapore, a major component of concrete
formation. Hence, as supply of sand falls with demand for sand holding relatively
constant at that point in time, the price of concrete surged. Naturally, the construction
industry in Singapore would turn towards alternative construction methods which
Percentage increase in basic wage % Construction industry basic wage change

6
2 construction
industry basic
1 wage change
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Fig. 2.9 Singapore’s construction industry basic wage change (Source BCA, 2018b)
would have included steel. The forces of the basic principles of economics, demand
and supply, have explained the anomaly of concrete and steel prices in 2007 and
2008 respectively.
Having said that, Fig. 2.8 captures the prices of concrete and steel spanning
1999–2017 which means that there are only two periods of recession in Singapore
observable in Fig. 2.8: 2001–2003 and 2008–2009. One would observe that in the
2001–2003 recessionary period, only the price of concrete fell; with steel prices
falling marginally from 2000 to 2001 and started a gradual increase over the next
few years. The 2008–2009 recessionary period on the other hand, saw a rather distinct
fall in prices of steel and concrete. As such, the research team would lean towards
Hypothesis 1n.
Hypothesis 1n: When an economy falls towards a recession, prices of materials

fall.
Similarly from Fig. 2.8, taking the global financial crisis as a case in point (which
started in Singapore in Q2 of 2008), prices of concrete and steel witnessed a fall
only in Q1 of 2009. This suggests a gestation period of approximately two to three
quarters between the onset of economic recessions and fall in prices of materials.
Figure 2.9 shows the basic wage change in the Singapore construction industry
from 1998 to 2016.
The increase in basic wage for the construction industry falls in the recessionary
periods in 2001–2003 and 2008–2009; the only two recessionary periods observable
from Fig. 2.9. This supports the hypothesis that price of labour falls in times of
recession.
Wholesale trade index for industrial and

construction machineries
110.0
Wholesale trade index
105.0
100.0
industrial and construction
95.0 machineries
90.0
85.0
2009 2010 2011 2012 2013 2014 2015 2016
Fig. 2.10 Singapore’s wholesale trade index (Source BCA, 2018b)
Hypothesis 1o: When an economy falls towards a recession, prices of labour

fall.
Similarly, using the 2008 global financial crisis as a case in point, the fall in the
increase of basic wages is witnessed in 2009, following the recession in Singapore in
Q2 of 2008. This suggests a similar gestation period of two to three quarters before
the impact of recession is felt on the construction industry.
Lastly, Fig. 2.10 captures Singapore’s wholesale trade index only from year
2009–2016. As such, little can be concluded from Fig. 2.10. Nonetheless, with the
wholesale trade index in 2009 standing at a rather low point as compared to the
remaining years, the research team shall lean towards Hypothesis 1p.
Hypothesis 1p: When an economy falls towards a recession, prices of machin-

ery fall.
2.10 Economic Recessions and the Effects on Construction

Quality
2.10.1 What Is Quality?
As discussed earlier in Chap. 1, quality is a term difficult to define, judging from the
sheer volume of literature attempting to do so. Low (1987) noted the emergence of
five different schools of thought for construction quality from within the multitude
of literature relating to this issue. Low (1987) later concluded that fixation on a
single definition of quality could possibly complicate matters and one should instead
recognize quality as a multi-faceted concept and should be best approached as such.
Hence, attention should instead shift to the regulatory framework to better manage
construction quality in the industry.
Nevertheless, it is essential to establish a baseline on what quality means to pro-
ceed with this study on common grounds. Drucker (1985) defined quality as what
the customer gets out of something and is willing to pay for. The international certifi-
cation for quality management, ISO 9000 (ISO, 2018) defined quality as the “degree
to which a set of inherent characteristics fulfills requirements”. Rausand and Hoy-
land (2004) defined quality as the conformity of the product to its specifications
as manufactured. Quality, in its simplest form, can be defined as meeting the cus-
tomer’s expectations (Jha & Iyer, 2006). To reiterate, these definitions of quality
revolve around the concepts of fit for use, fit for value and meeting customer expec-
tations. However, these parameters are hard to quantify. Six sigma on the other hand,
examined quality by the number of defects per million outputs (Motorola University,
2018). Such a definition provides a clear indicator for measuring quality. Hence,
to be able to proceed on common grounds and to adopt a quantifiable definition of
quality, construction quality shall be defined as the number of defects observed in
a building constructed. This is discussed further below on how building defects are
monitored and tracked in the Singapore construction industry.
2.10.2 The Yardstick
In Singapore, the Construction Quality Assessment Scheme (CONQUAS) measures

the defects in a construction project and is used as the de facto yardstick to measure
quality performances of construction projects in Singapore (IQUAS, 2017). As such,
CONQUAS shall be used to examine trends in construction quality in Singapore and
subsequently, the effects of economic recessions on construction quality will be
distilled.
2.10.3 The Trend
CONQUAS was introduced in Singapore in 1989 to assess the quality of building

projects; with the summation of architectural, structural and mechanical and electri-
cal (M&E) scores as the overall CONQUAS score. Nonetheless, having run through
the more than 4000 projects that have underwent CONQUAS scoring to date; it is
only from 1993 onwards that the breakdown of CONQUAS scoring into architec-
tural, structural and M&E scores was fully disclosed for most projects. As such, in
analyzing the trends in the yearly average of the architectural, structural, M&E and
the overall CONQUAS scores, Fig. 2.11 displays the CONQUAS score trends in
Singapore from 1993 to 2017.
2.10 Economic Recessions and the Effects on Construction Quality 53
CONQUAS trend by category

100
95
90
85 Struc score
Archi score
80
M&E score
75 Overall score
70
65
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Fig. 2.11 CONQUAS trends (Source IQUAS, 2018)
Observing the overall CONQUAS trend in Fig. 2.11, one would see a steady rise
in the construction quality performance in Singapore. However, looking at the trend
in architectural scores from Fig. 2.11, one observes prominent dips in architectural
scoring from 2000 to 2001, 2004 to 2007, 2008 to 2009 and 2016 to 2017. The sharp
decline from 1993 to 1994 for architectural scoring is an anomaly largely because
in 1993, the number of projects assessed is much lesser compared to the other years
where there are approximately 103 projects assessed in 1993 and approximately
138 projects assessed in 1994 (i.e. a more than 30% increase in projects assessed in
1994 as compared to 1993); with the succeeding years having increasing numbers of
project assessed annually. With the dip in architectural scoring from 2000 to 2001,
2004 to 2007, 2008 to 2009 and 2016 to 2017, one sees that the economic recessions
that hit Singapore in 2001 and 2008 may have had an impact on construction quality.
As for the fall in architectural scoring from 2016 to 2017, could it have been due to
the constant signals the economy gave in 2016 that it will be slipping into a technical
recession (Chia, 2016)? However, two indications suggest that construction quality
could be independent of economic recessions. The first pertains to the fall in archi-
tectural scores from 2004 to 2007 for these were not periods of economic recessions
in Singapore. The second is the seemingly unchanged status in architectural scoring
from 1997 to 1998 which was the period of the Asian financial crisis.
The quality trend for structural works showed patterns similar to the architectural
scores where the dips in construction quality correspond to periods of economic
recessions (as observed in the dip of structural scoring from 2000 to 2003, 2008 to
2009 and 2016 to 2017). Nonetheless, similarly, the quality performance of structural
works seems to be undisturbed by the 1997 Asian financial crisis.
In analyzing the CONQUAS scoring trend for M&E works, an interesting phe-
nomenon was observed where there is a steady spike in the performance of the
CONQUAS scoring for M&E works from 1999 to 2005. As to why performance in
the quality of M&E works improved drastically, several factors could be at play but
it seems from the trend in M&E scoring that there may be no correlation between
economic recession and quality. Having said that, one should note that it is this rise
in the performance of the quality of M&E works that masked the dips in construction
quality observed in the quality of architectural works and structural works.
In summary, there is no sure sign from the CONQUAS trends from 1993 to
2017 that there are definite effects of economic recessions on construction quality.
However, one cannot deny that there is a possibility and perhaps even a high one that
there could in fact be a strong relationship as suggested by the trends of the quality of
architectural and structural works in Singapore. Hence, this study seeks to draw up a
conceptual framework depicting the effects of economic recessions on construction
quality.
2.11 Summary
This chapter has basically discussed three concepts. Firstly, the research team studied
the economic trends in Singapore to identify the periods of economic recessions in
Singapore; namely in 1985, 1998, 2001 and 2008. Secondly, this chapter conducted
a literature review to understand the impacts of economic recessions on construction
firms; where sixteen key impacts were identified. Lastly, this chapter looked at the
overall, architectural, structural and M&E CONQUAS trends and concluded that
there are indications suggesting that economic recessions affect the quality perfor-
mance of contractors in Singapore. Following a review of Chaps. 3–5, Chap. 6 shall
propose how the impacts of economic recessions on contractor firms would affect
construction quality.
Chapter 3
Government’s Role in a High Quality
Built Environment
The emphasis on achieving high construction quality by the Singapore government

is evident from the Building and Construction Authority (BCA)’s mission statement
stating: “we shape a safe, high quality, sustainable and friendly built environment”
with a strategic thrust (among five others) seeking to achieve “a safe and high quality
built environment – ensuring high safety standards and promoting quality excellence”
(BCA, 2018a). A closer examination of the existing major policies and initiatives
adopted by the Singapore government in upholding high construction quality is
discussed in Sects. 3.1 and 3.2.
3.1 Major Construction Quality Schemes in Singapore
3.1.1 National Productivity and Quality Specifications

(NPQS)
The National Productivity and Quality Specifications (NPQS) aims to standardize

the industry building specifications and to provide a platform for achieving better
efficiency and quality in the design and construction process. To further encourage
the use of NPQS by the industry, the electronic National Productivity and Quality
Specifications (eNPQS) was developed. Having said that, the eNPQS is currently
discontinued due to shortfalls in the software. BCA has announced that it is in the
process of carrying out a comprehensive redevelopment of eNPQS based on open
source technology as well as a review of the existing content to better embrace
environmental sustainability, quality and productivity (BCA, 2018d).

56 3 Government’s Role in a High Quality Built Environment
3.1.2 ISO Specifications
The ISO 9000 family of quality management systems standards is an international

standard that deal with the fundamentals of quality management systems (Tsim,
Yeung, & Leung, 2002). The BCA launched the BCA ISO 9000 Certification Scheme
in 1991 and have since transitioned from the then quality assurance based certifica-
tion to a quality management based ISO 9001:2015 certification. This has further
been touted as a platform for the induction of Total Quality Management (TQM)
which has been shown to result in improved quality standards (Low & Seet, 2011).
The objective of this scheme is to induce international quality management system
standards in Singapore’s construction industry. In a further step to strengthen the
BCA’s commitment to establishing recognition for the BCA ISO 9000 Certification
Scheme, BCA signed a Memorandum of Understanding (MoU) with Japan Quality
Assurance Organization (JQA) in 1998 to provide higher international recognition
for local firms certified under the BCA ISO 9000 Certification Scheme. According
to the IQUAS website, more than 200 firms in the built environment have since been
certified under this scheme (IQUAS, 2018).
3.1.3 Buildable Designs and Higher Productivity
BCA has placed an increasing emphasis on the adoption of technology to achieve

higher buildability and productivity in the construction industry. Although buildabil-
ity, productivity and quality are distinct performance areas in their own right, there
can be a positive correlation between these performance indicators; evident from
how BCA parks buildability and productivity initiatives as part of its overall plan for
achieving a high quality built environment (BCA, 2018a). BCA’s encouragement in
firms adopting technologies such as Prefabricated Prefinished Volumetric Construc-
tion (PPVC) techniques, the use of cross laminated timber, Prefabricated Bathroom
Units (PBUs), the establishment of a Code of Practice and legislation for buildable
designs, use of the Buildable design appraisal system and Constructability appraisal
system, assigning Buildable Design Score (BDS) Index and Constructability Score
(CS) Index of Firms and the adoption of the Electronic Productivity Submission Sys-
tem (ePSS) are prime examples of the government’s initiatives. BCA (2018c) further
provides comprehensive funding to uphold its initiatives for higher buildability, pro-
ductivity and a high quality built environment.
3.1.4 BCA Awards for Construction Excellence
The BCA Awards for Construction Excellence aim to serve as an incentive for con-
tractors operating in Singapore to invest in high standards of management, technical
3.1 Major Construction Quality Schemes in Singapore 57
expertise and workmanship as well as to promote competition for construction work

excellence. The award consists of three criteria with the first being (1) builder’s over-
all management of the project, (2) builder’s technical capacity and innovation and
(3) quality of the completed project (BCA, 2017a).
3.1.5 Procurement Frameworks for Public Sector Projects
There are two procurement frameworks adopted for public sector projects; one for the
award of consultancy contracts and another for construction contracts. The Quality
Fee Method (QFM) is established for the public sector’s procurement of consultancy
services which takes into consideration both the quality criteria submitted by firms
and their fee proposals. As such, QFM is primarily a quality-based approach with a
high weightage given for quality.
Similarly, the Price Quality Method (PQM) is a tendering framework that gives
weight to both the price and quality attributes but for the evaluation of construction
tenders. PQM formalizes the assessment of quality attributes into quantitative scores,
awarding the tender to the tenderer with the highest price and non-price attributes for
the project. Since the development of the PQM framework, BCA has progressively
enhanced the framework to meet the growing needs of Government Procuring Entities
(GPEs) and the industry.
In fact, following the inquiry of a couple of prominent incidents in 2017 (such as
the PIE viaduct collapse), Singapore Minister for National Development, Minister
Lawrence Wong has announced that the non-price attributes (with quality as the
major component) for public projects tender assessment shall be raised to 60% with
effect from January 2018 (Au-Yong, 2017). The proposed revision was realized
with effect from 31 January 2018; where the framework now specifies up to a 60%
weightage allocation for non-price attributes in the tender assessment criteria, with
heavier emphasis on quality components (BCA, 2018e). The PQM is an essential
piece to establishing a high quality built environment because it ensures construction
quality is addressed upstream. Such mandates on project delivery methods minimize
construction costs while minimizing project duration and maximizing construction
quality (Minchin & Smith, 2001; Lim, 2016).
3.1.6 Higher Skilled Construction Workforce
For employing foreign workers in the Singapore construction sector, there are a
maximum number of years a foreign worker can work in Singapore on a Work
Permit. Basic skilled workers are eligible up to a maximum period of employment
of 10 years while higher skilled workers having up to 22 years. This is further
subject to compliance with the requirements for work permit holders, quota (of
7 work permit holders for every full-time local employee), man-year-entitlement
Table 3.1 Levy rate

Tier Monthly Daily
Malaysians and North Asian Sources $300 $9.87
(NAS)—higher skilled
Malaysians and NAS—basic skilled $700 $23.02
Non-Traditional Sources (NTS) and $300 $9.87
People’s Republic of China (PRC)
NTS and PRC—basic-skilled, on MYE $700 $23.02
NTS and PRC—higher-skilled, MYE $600 $19.73
waiver
NTS and PRC—basic-skilled, MYE $950 $31.24
waiver
Source MOM, 2018
requirements, source countries and age, Furthermore, there is a levy rate to be paid
as shown in Table 3.1.
Besides the levies set out in Table 3.1, there is a minimum percentage of Higher-
Skilled (R1) workers that a firm must employ. A minimum of 10% of a firm’s con-
struction work permit holders must be Higher-Skilled (R1) before a firm can hire
any new Basic-Skilled (R2) construction workers; with dire restrictions on man-
power employment if firms do not meet the requirements. Furthermore, a levy bond
is imposed for requirements breached by firms (“Construction sector: Work Permit
requirements”, 2018). Hence, it is evident that the Singapore government has inten-
tions of pushing for a higher quality construction workforce at the industry level.
3.1.7 BCA Contractor Registration System (CRS)
To enable the government to have a pool of reliable contractors for public works,
the Construction Industry Development Board (CIDB now known as BCA) has also
introduced a system for registering contractors in 1985. Prior to bidding for public
sector contracts, all Singaporean and foreign contractors must first register with
the CIDB in the appropriate grade. To qualify for registration, contractors must
first comply with specific requirements on track records, financial and personnel
resources which apply to particular grades. These requirements for registration has
led to a willingness on the part of local contractors to invest and upgrade their staff as
well as management expertise to achieve effective organizations which will in turn
lead to higher construction quality and productivity (Low, 1993).
3.1 Major Construction Quality Schemes in Singapore 59
3.1.8 Tapping the Overseas Market
As a counter-cyclical measure, the Singapore government encourages local con-

struction firms in venturing into overseas markets (Low & Tan, 1996a). In fact, in
as recent as 2017 where construction demand in the Singapore construction industry
is stale, International Enterprise Singapore (formerly known as the Trade Develop-
ment Board) assisted local firms in venturing into the overseas market (Lee, 2017;
Williams, 2017). Hence, it is clear that the Singapore government seeks to assist
firms in counteracting recessionary times by accessing the overseas market.
3.1.9 The Quality Mark Scheme
The BCA Quality Mark (QM) for good workmanship scheme was launched in 2002 to
meet the rising expectations of homeowners for quality homes. The scheme measures
the quality of workmanship in each newly completed residential unit by assessing
all internal finishes and fittings. Home units that meet the minimum workmanship
quality standard are issued with a Quality Mark (QM) certificate; certifying the
condition of the unit at the time of inspection based on a combination of visual
assessment and measurement by tools are in compliance to tolerances and standards
set out in the manual, “CONQUAS—The BCA Construction Quality Assessment
System” (BCA, 2014b). The difference between Quality Mark and CONQUAS is
that there is no limit to the number of re-assessments for QM. Under CONQUAS,
only samples are taken of the architectural, structural and M&E works throughout the
duration of the project. In other words, the CONQUAS score is determined based on a
“first time right” principle with no provisions for re-assessment. Hence, in this sense,
CONQUAS may be considered a stricter yardstick for rating a project’s construction
quality.
3.1.10 BCA Construction Quality Assessment System

(CONQUAS)
Introduced in 1989, CONQUAS have since become the de facto quality yardstick
for the construction industry with more than 4000 projects assessed to date (IQUAS,
2018). CONQUAS assesses projects on three major components; namely, architec-
tural works, structural works and M&E works. For details on the assessment crite-
ria, one should refer to the manual, “CONQUAS—The BCA Construction Quality
Assessment System” (BCA, 2014b). The “Enhanced CONQUAS Scheme” was fur-
ther introduced on 15 November 2017 for private residential projects which applies to
all CONQUAS applications for private residential projects. The new scheme aims to
help developers and contractors further raise the quality of their projects by covering
more samples and identifying more areas for improvement.
3.1.11 Bonus Scheme for Construction Quality (BSCQ)
The BSCQ was set up to promote the upgrading of workmanship in the construction
industry. Contractors are paid bonuses if their quality of workmanship exceeds a
specified standard; but penalized (in the form of disincentives and debarment) if
their quality of workmanship is poor; where the measure of building quality is based
on BCA’s CONQUAS scheme. The first disincentive takes effect when a contractor
has accumulated CONQUAS default points in the latest five contracts; resulting in
a price-loading of 0.2% for each CONQUAS default point, subject to a maximum
of two million Singapore dollars, for all tender proposal by the contractor for public
sector projects. The second disincentive downgrades the contractor under the BCA
CRS; where if the contractor accumulates more than five CONQUAS default points
in the latest five contracts, it will be downgraded by one grade for up to a period of
twelve months. Lastly, perhaps the most detrimental of all is a debarment imposed
if the contractor accumulates ten or more default points in the latest five contracts
(BCA, 2016). Such an incentive system has been touted to have served its purpose in
encouraging firms to invest in delivering good quality standards (Low & Ong, 2009).
3.1.12 Better Quality Home Choices for Consumers
Last but not least, the BCA has recently been making a push to build better qual-
ity homes; seemingly turning towards consumer forces to pressure developers to
build better quality homes. The information on the webpage “Search and Compare
CONQUAS Score and QM Score by Properties, Developers and Contractors” (BCA,
2018f) provide homebuyers a platform to make more informed decisions when buy-
ing a home. It allows homebuyers to search and compare quality performance of
housing developments, developers and contractors in Singapore which reflects their
workmanship quality standard (BCA, 2018f).
3.2 Government Pump-Priming on the Construction Industry 61
3.2 Government Pump-Priming on the Construction

Industry
3.2.1 Government Pump-Priming in the Singapore

Construction Industry
It is important to note that in Singapore, government pump-priming in recessionary

periods has been a consistent strategy by the Singapore government. As spelt out by
Dr. Tony Tan, then Singapore’s Minister for Trade and Industry, the public sector’s
role in lessening the effects of the private sector’s sharp dip after 1982 reflected the
government’s effort in pump-priming the industry (Tan, 1982; Low & Tan, 1996b).
Low, Arain, and Lim (2010) stated that, in a way, the Singapore’s construction indus-
try is a recession-proof industry. When the economy is doing well, the construction
industry progresses in tandem; but when the economy is not doing too well, the
government steps into stimulate economic activities through pump-priming the con-
struction industry. This suggests that in examining the effects of economic recession
on construction quality, one must observe that government pump-priming is a present
condition in the external environment for firms. Figure 3.1 shows the construction
contracts awarded annually in Singapore.
Keeping in mind the periods of economic recession detailed in Table 2.1, one
can observe from Fig. 3.1 that the contracts awarded by the private sector falls
in 1998 following the Asian financial crisis in 1997, in 2001 following the global
IT meltdown in 2000 and in 2009 following the global financial crisis in 2008. In
response to these dips arising from recessions in Singapore, one can observe from
Fig. 3.1 that public sector (i.e. government) projects awarded did not dip in 1998 and
2009 and rose sharply in 2000, 2002 and 2016. These statistics are clear indications
of how the Singapore government timely releases public sector projects to ease falls
in construction demand particularly in times of economic recession.
Construction contracts awarded

Contracts awarded in million dollars
45,000.00
40,000.00
35,000.00
30,000.00
25,000.00
private sector
SGD
20,000.00
15,000.00 public sector
10,000.00
total
5,000.00
0.00
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Years
Fig. 3.1 Construction contracts awarded annually in Singapore (Source BCA, 2018b)
Hence, indeed on the industry level, government pump-priming facilitates a

recession-proof industry in the sense that construction demand in the market as a
whole is moderated with the aim of providing the construction industry with suffi-
cient jobs to fuel the industry. However, of interest to this study is whether government
pump-priming has the ability to curb the impacts of economic recessions on con-
struction firms and subsequently, whether those easing would result in a change in
the performance of construction firms; where in this study, the focus is the effect on
the performance of quality.
3.2.2 Keynesian’s Theory and the Impact of Government

Pump-Priming
Pump-priming is the action taken to stimulate an economy, usually during a reces-

sionary period. Pump-priming relates to the Keynesian economic theory, which states
that government intervention, aimed at increasing aggregate demand, can result in a
positive shift within the economy; advocating a managed market economy with an
active role of government intervention during recessions (Blinder, 1993).
The Keynesian economics school of thought however, is not without discourse.
Since the oil shock in 1973, there was a fall in the adoption of Keynesian thought.
The Ricardian equivalence hypothesis suggested that fiscal policy is ineffective
for macroeconomic stabilization (e.g., Barro, 1974; Lucas, 1972). Nevertheless,
although fiscal policy is still considered to be distortionary and inflationary, these
deficiencies can be exploited in extreme deflationary periods to produce growth
(Woodford, 2003). In fact, the global financial crisis of 2007–2008 saw resurgence
in Keynesian thought; serving as the theoretical underpinnings of economic policies
in response to the crisis by many governments (“What Is Keynesian Economics”,
2018).
However, it is important to note that the effectiveness of government pump-
priming can become ineffective if not implemented under the right economic condi-
tions. Many concluded that Keynesian thought is appropriate only when unemploy-
ment is persistently high, above the non-accelerating inflation rate of unemployment;
where there must be significant slack in the labour market before fiscal measures
would be justified.
All in all, although the effects of government pump-priming on employment,
income distribution, and public investment was poor, using the National Income and
Product Accounts data, there was empirical verification that fiscal policy has been
relatively successful in stabilizing growth and profits (Minsky, 1986). Another study
found that government spending have considerable influence on cash flows, balance
sheets, and profits (Tcherneva, 2014). The injection of construction funds into the
public sector in the United States have also been found to enable contractors to move
from private sector work into the public sector to stay afloat financially (Honek, Azar,
& Menassa, 2012).
3.2 Government Pump-Priming on the Construction Industry 63
Hence, with an active role of the Singapore government in pump-priming the

construction industry during recessionary times, one would expect more construction
firms to stay afloat financially; where government pump-priming would have had an
impact on stabilizing firms’ cash flow, balance sheets and profits.
3.3 Summary
This chapter evaluates the Singapore government’s commitment to nurturing a high

quality built environment. Twelve major initiatives to nurture a high quality built
environment were identified. Furthermore, as discussed earlier, it is clear that the
Singapore government pump-primes the construction industry with public sector
projects to cushion the fall in private sector demand during recessionary times. With
this string of government initiatives, one may expect the industry to reciprocate by
delivering high quality works. Nonetheless, this proposition will be discussed in
Chap. 5 and reflected in the conceptual framework proposed in Chap. 6.
Chapter 4
Firm Characteristics and Strategies
Tay (1994) summarized the construction industry as one that is characterized by

activities which are discontinuous, dispersed, diverse and distinct; referring to how
the industry is made up of a diverse range of trades and disciplines that are intercon-
nected to deliver a project. For instance, to construct a relatively simple two storey
bungalow, one would need a team of consultants, a team of contractors to work on
different trades and disciplines and a range of suppliers. Hence, construction quality
of a project depends on not just one firm but a multitude of firms. Each firm in this
value chain exercise their own judgement on the time-cost-quality tradeoff decisions
on their respective works; with each firm’s decision contributing towards the overall
construction quality of the project. Having said that, the research team purports that
the total quality tradeoff decisions of contractors in Singapore would equate to the
overall quality performance in the construction industry because the actions of con-
tractor firms would have reflected the inputs of all other firms in the value chain (from
clients, consultants to suppliers). The time-cost-quality tradeoff otherwise known as
the iron triangle of project management is the framework that governs firm decisions
on construction projects (e.g. Babu & Suresh, 1994; Jha & Iyer, 2006; Lock, 2007;
Afshar, Kaveh, & Shoghli, 2007; Vahidi & Greenwood, 2010). Figure 4.1 illustrates
the time-cost-quality breakdown in projects.
Hence, as seen in Fig. 4.1, the overall performance in the time, cost and quality
dimension depends very much on the firms governing the project. As such, it is
important to understand the traits of firms and how they would behave. The question
as such becomes: “what would define traits of a firm”?
Hoang (1998) suggested that export performance is largely influenced by a firm’s
international marketing strategies; and the strategies in turn were determined by firm
characteristics. Pehman, Karini, and Danaee (2013) stated that firm characteristics
have consistently been found to have considerable impacts on export performance and
the marketing strategy applied by the firm is an important issue related to performance
as well. Similarly, other studies have studied the influence of firm characteristics and
firm strategies on their export related performances (e.g. Koh, 1991; Dean, Menguc,
& Myers, 2010). Hence, in exploring construction quality as a performance area
66 4 Firm Characteristics and Strategies
Fig. 4.1 Breakdown and formation structure of time-cost-quality in a construction project (Source
Hu & He, 2014)
being affected in times of economic recession, the research team shall conduct a
literature review on firm characteristics (discussed in Sect. 4.1) and firm strategies
(discussed in Sect. 4.2) that either assists firms in upholding quality works or weather
economic recessions. The unique characteristics and strategies of firms will therein
determine if quality will be compromised as a result of firms’ perceived impacts of
economic recessions.
4.1 Firm Characteristics
The BCA Contractors Registration System (CRS) serves the procurement needs
of the Singapore government. Under the BCA directory of registered contractors
and licensed builders, contractors are categorized into the following: Construction,
Construction Related, Maintenance, Mechanical and Electrical, Regulatory, Supply,
Trade, General Builders and Specialist Builders; where the classification is made
according to firms’ financial standing (paid up capital and net worth), management
certifications, track record for the past three years and relevant technical personnel
(Low & Ong, 2014; BCA, 2017b). Since the BCA CRS was partly induced to ensure
there were competent contractors serving public projects, the classification criteria
set out may be considered firm traits that would uphold construction quality. In
addition to the above, a literature review was conducted to identify firm characteristics
that would assist firms in weathering economic recessions. Table 4.1 shows the
compilation of firm characteristics that would uphold construction quality and/or
assist firms in weathering economic recessions.
4.2 Firm Strategies 67
Table 4.1 Firm characteristics that uphold quality works and/or assist firms in weathering economic
recessions
No. Firm characteristics (that either uphold References
quality works or weather economic
recessions)
1 Firm with specialized services and/or Nafday (2011)
niche areas
2 Favorable access to distribution networks Nafday (2011), Yoo and Kim (2015),
and/or high bargaining power. Yoo and Peric and Vitezic (2016)
Kim (2015) suggested that the larger the
firm size, the easier it is to survive
recessionary times as they enjoy high
bargaining power relative to smaller firms
3 Cost advantage from technology Nafday (2011), Yoo and Kim (2015),
know-how, high research and Peric and Vitezic (2016)
development capabilities and/or
possession of value adding intellectual
property. Yoo and Kim (2015) suggested
that the larger the firm size, the easier it
is to survive recessionary times as they
enjoy better R&D capabilities relative to
smaller firms
4 Good reputation, track record and Nafday (2011), Low and Ong (2014),
management certifications BCA (2017b)
5 Financial standing (paid up capital and Nafday (2011), Ling and Lin (2013), Low
net worth). Yoo and Kim (2015) and Ong (2014), Yoo and Kim (2015),
suggested that the larger the firm size, the Peric and Vitezic (2016), BCA (2017b)
easier it is to survive recessionary times
as they enjoy higher financing ability
relative to smaller firms
6 Relevant technical personnel Low and Ong (2014), BCA (2017b)
7 Culture of quality and/or strong Low and Ong (2014)
management commitment on quality
works
4.2 Firm Strategies
A review of literatures on firm strategies that weather economic recessions is docu-

mented in Table 4.2. Note that bidding related strategies are not discussed in Table 4.2
because bidding strategy is a separate subject of study in this book. The research team
holds the view that bidding strategies directly affect the quality tradeoff decisions;
while the following are deemed to be moderating factors in firms’ quality tradeoff
decisions.
68 4 Firm Characteristics and Strategies
Table 4.2 Firm strategies that seek to weather recessionary impacts

No Firm strategies that seek to weather References
recessionary impacts
1 Diversification and entry into new Pearce and Michael (1996), De Waal and
markets Mollema (2010), Lim, Ooi, and Ling
(2010), Tansey (2011), Nafday (2011),
Vassolo, Garcia-Sanchez, and Mesquita
(2017)
2 Divestiture and placing greater emphasis Tansey (2011), Nafday (2011), Pearce
on niche areas and Michael (1996), Lim et al. (2010),
Vassolo et al. (2017)
3 Crisis management strategies in Pearce and Michael (1996), Ruddock,
addressing economic recession impacts Kheir, and Ruddock (2014), Sfakianaki,
on construction firms and/or conducting Iliadis, and Zafeiris (2015), Danforth
pre-recession preparations (2017), Alaka, Oyedele, Owolabi, Bilal,
Ajayi and Akinade (2017)
4 Establishing strong client relationships Lim et al. (2010), Ruddock et al. (2014),
Danforth (2017)
5 Establishing good relationships with Tansey (2013), Ruddock et al. (2014),
subcontractor and/or engaging in Alaka et al. (2017), Danforth (2017)
partnerships to optimize working capital
and reduce costs arising from closer
cooperation with suppliers
6 Investing in technology, innovation and Nafday (2011), Ruddock et al. (2014),
research and development (R&D) to raise Tansey (2014), Danforth (2017)
competitiveness of bids and/or reduce
construction costs
7 Streamlining operations to reduce waste Ruddock et al. (2014), Tansey (2014)
and/or cost
8 Cost reduction by means of laying off Lim et al. (2010)
employees, freezing bonuses, pay-cuts,
converting permanent employees to
temporary placements and hiring via
contract basis etc
9 Marketing efforts, where according to Betts and Ofori (1992), Pearce and
Betts and Ofori (1992), establishing Michael (1996), Lim et al. (2010), Tansey
position is a strong competitive force, (2014), Danforth (2017)
particularly for the smaller construction
firms
10 Project risk management which includes Ruddock et al. (2014), Lim et al. (2010)
contracting-related strategies (such as
putting equity into projects, acquiring
projects, entering into forward contracts
and setting limits of project size) and
financial related strategies (such as
entering into security agreements, setting
aside contingency funds and investing in
machineries with high liquidity value)
(continued)
4.3 Summary 69
Table 4.2 (continued)

No Firm strategies that seek to weather References
recessionary impacts
11 Actively documenting lessons from past Ruddock et al. (2014)
recessions
12 Negotiating for alternative loan services Lim et al. (2010), Hillebrandt (2014)
to service debt and increase working
capital
13 Joint ventures, mergers and acquisitions Lim et al. (2010), Nafday (2011)
and partnerships
4.3 Summary
From the review of existing literature, seven firm characteristics (compiled in

Table 4.1) and thirteen broad level strategies (compiled in Table 4.2) have assisted
firms in weathering recessionary periods. One would notice that most of these char-
acteristics or strategies do not pertain directly to the call for a focus on delivering
better quality works. Nonetheless, these characteristics and strategies serve to allevi-
ate the impacts of economic recessions on firms; allowing the firm to survive or even
grow in recessionary periods. Hence, naturally, firm characteristics and strategies
that successfully assist firms in weathering economic recessions would imply that
the time-cost-quality tradeoff decisions of firms will in turn be influenced. The fol-
lowing chapter shall provide theoretical reasoning on how firms’ unique traits would
affect their quality tradeoff decisions.
Chapter 5
Firm’s Time-Cost-Quality (TCQ)
Tradeoff Decisions and the Theory
of Firm Behavior
To provide clarity in presentation, the research team presents this chapter in inverse
order where the output of the same (as summarized in Table 5.1) is first presented
followed by the justification of how Table 5.1 was derived from a review of existing
literature on theories of firm behavior. The research team’s conception of the effects
of economic recessions on construction quality can be inferred from Chaps. 2, 3, and
4, with the proposed effects documented in Table 5.1. In proposing path relations
in conceptual frameworks, the support of existing theories is crucial for validity as
will be explained in Chap. 6. Thus, a review of existing theories on firm behavior is
called for. Table 5.1 first summarizes the output of this chapter.
Table 5.1 Proposed effects of economic recessions on construction quality for the conceptual
framework and the respective theoretical support
No. Effects Supporting theories
1 The effects of government pump-priming Keynesian’s theory on the need for
on firms’ perceived impacts of economic government interventionism
recessions
2 The effect of the impacts of economic Auction theory
recessions (on the bidding phase of
projects) on firms’ bidding behavior
3 The effects of bid price decisions on Profit maximization theory
quality tradeoff outcomes
4 The effects of the impacts of economic Profit maximization theory
recession (on the construction phase of
projects) on quality tradeoff
5 The effects of differing firm Institutional theory (normative pillar and
characteristics and firm strategies on cultural-cognitive pillar)
quality tradeoff
6 The effects of Singapore’s quality Institutional theory (regulative pillar)
environment on quality tradeoff

72 5 Firm’s Time-Cost-Quality (TCQ) Tradeoff Decisions …
In uncovering theories to understand firm behaviors on time-cost-quality tradeoff

decisions, one should first understand the fundamental decision making considera-
tions of firms in relation to TCQ tradeoff. As such a review of literature on the TCQ
shall first be presented in Sect. 5.1. Following which, Sect. 5.2 presents the review of
existing literature on theories of firm behavior as well as to provide justifications on
why the theories in Table 5.1 are most appropriate in defining the proposed effects.
5.1 Firms’ Time-Cost-Quality Tradeoff Decisions
As discussed in Chap. 4, each firm in the construction value chain exercise their
judgement on the time-cost-quality tradeoff decisions on their respective works;
with each firms’ decision contributing towards the overall construction quality of the
project.
Babu and Suresh (1994) pointed out traditional practices of considering the time-
cost tradeoffs in project fast tracking decisions where quality is left out; resulting
in quality being compromised. Cost is usually the most important determinant of
selecting a contractor in the current construction industry. In order to reduce costs,
some contractors use inferior construction materials and incompetent labor which
frequently results in poor quality (Hu & He, 2014). Tao (2012) conducted a literature
review on papers written on firms’ project optimization decisions and found that most
focused on cost minimization or the time-cost tradeoff, while ignoring project quality.
More specifically in the context of Singapore, the achievement of high CONQUAS
score is restricted by clients who are still focused on cost and time (Low & Ong, 2014).
This is evident as Poon and Xu (1997) found that organisations needed to minimize
costs due to issues such as fierce price competition during bidding. As a result, staffs
often had to undertake heavy job scopes to assist firms in cutting costs; resulting in
quality issues being handled ineffectively. Hence, it is clear from the literature that
generally, quality is of a lower priority than cost and time; implying that firms would
exercise a compromise on quality when faced with tradeoff decisions.
Despite this underlying behavior of construction firms, in revealing the effects
of economic recessions on firms’ TCQ tradeoff, it is important to recognize that
there is a series of events and circumstances arising from economic recessions that
would affect the TCQ tradeoff decisions of firms and thus, the eventual quality of
the project. As such, a review on the theories of firm behavior has to be made in
order to provide theoretical support for the TCQ tradeoff decisions of firms during
recessionary times.
5.2 Theory of Firm Behavior 73
5.2 Theory of Firm Behavior
Microeconomic theories that seek to depict firm behavior are wide. The research
team chooses to broadly classify theories that explain firm behaviors as theories of
the firm, decision theories and institutional theories. The theory of the firm consists
of a number of economic theories that explain and predict why firms exist, their
behaviors, their structure, and their relationship to the market. Decision theory (or
the theory of choice) is the study of the reasoning underlying a decision maker’s
choices (Gilboa, 2010). Where decision theory is concerned with the choices of
individual agents, a closely related field known as game theory is concerned with the
interactions of agents whose decisions affect one another. Lastly, institutional theory
is a theory on aspects of social structure; examining how structures, schemes, rules,
norms, and routines, influences social behavior. Table 5.2 provides a compilation of
major theories under each of these broad level theories in rationalizing firm behaviors.
The description given for each theory in Table 5.2 is in no way representative of
the sophistication of the theories in terms of their mathematical rigour. However,
a depiction of these theories in qualitative terms would assist one in capturing an
overview of the range of theories seeking to explain firm behavior.
Table 5.2 Compilation of major theories under each broad level theory in firm behavior
No Theories Remarks
Theory of the firm
1 Profit maximization theory In microeconomics, profit maximization theory
relates to how a firm determines the price and
output levels that provides the greatest profit
(Landsg, 2002). The mechanism will be discussed
in a later section
2 Transaction cost theory in 1937 Coase (1937) pointed out that in addition to
production costs, one must also consider
transaction costs in defining firms. Transaction
costs are expenses incurred when buying or
selling a good or service which includes cost that
facilitates the exchange such as brokers’
commissions and spreads
3 Theory of the growth of the firm in The theory proposed by Penrose (1985) in 1959
1959 highlighted the growth of firms, as well the
economic context of firms, and their approaches
towards achieving and sustaining their
competitive edge. In fact, the Resource Based
View (RBV) of the firm by Birger (1984) adopts
Penrose’s theory as its foundation
(continued)

No Theories Remarks
4 Behavioral theory of the firm in Cyert and March (2007) questioned the two
1963 critical assumptions of the theory of the firm in a
paper published in 1963; profit maximization and
perfect knowledge. Cyert and March proposed
that firms aim at satisficing rather than
maximizing their profits; where they may opt for
“good enough” achievements rather than pursuing
the best possible outcome. This came from a
concept known as bounded rationality. However,
many critics lean towards profit maximization
rather than satisficing behavior of firms
5 Team production in 1972 Alchian and Demsetz proposed a theory in 1972
which suggests that firm progression is due to the
yield arising from team production which
nonetheless depends on the firm’s ability to
mitigate metering issues (where cost of
quantifying the yields from the contributions of
each team member as rewards is high) and the
ethical danger issue (Alchian & Demsetz, 1972)
6 Transaction cost theory in 1975 Williamson (1975) proposed another theory of the
firm, known as the transaction cost economics.
Transaction costs can be defined as the cost of the
process of organizing information related to
workers and machines that are involved in
primary procedures. Williamson (1988), in the
transaction cost economics approach, also argued
that the maximization of profit and the
minimization of costs are significant for the
progression of firms and to gain competitive edges
7 Agency theory in 1976 Jensen and Meckling (1976) proposed a theory
that is structured around managerial behavior,
agency expenses and ownership framework. In the
“nexus of contract” theory of the firm, contractual
relationships are touted as the key defining traits
of the firm. Jensen and Meckling believed that
firms are simply one form of legal fiction, serving
as a nexus for contracting relationships. One of
the key elements of agency theory is opportunism,
a point stressed heavily by Williamson; where the
agent may choose to maximize her own utility
instead of the principal’s. This is inefficient and
the costs resulting from this agency problem
includes both the loss of potential benefits and the
costs of prevention. Agency theory is thus, based
on the incompleteness of contracts and the
separation of ownership and control
(continued)

No Theories Remarks
8 Property rights approach to the Hart and Moore (1990) argue that in reality,
theory of the firm and the contracts are incomplete and hence, it is
Incomplete contract paradigm in impossible to contractually specify what decisions
1990 will have to be taken in any circumstance it may
be. Therefore, there is a hold-up problem. Hence,
property rights are important because they
determine who has control over future decisions if
no agreement will be reached. From this
perspective, property rights would determine the
parties’ future bargaining positions
9 Theory of managerial discretion in Williamson (2002) hypothesized that profit
2002 maximization would not be the objective of
managers in joint stock organisations
10 Knowledge-based theory of the firm Knowledge is seen as the most important resource
in 1992 of a firm where the intellectual abilities and
knowledge possessed by employees, as well as
their capacity to learn and acquire more
knowledge should be valued (Kogut & Zander,
1992)
Decision theories
11 Pascal’s wager Pascal’s wager introduced several key ideas in
decision theory (Gilboa, 2010):
• The notion of a decision matrix
• The notion of a weakly dominant strategy
• The idea of expected utility maximization
• The notion of multiple priors
12 Expected utility theory from 1939 In expected utility theory, the higher the expected
onwards which was an extension utility, the better it is to choose the decision. In
from expected value theory in 1738 mathematical terms, the expected utility of a
decision A depends on two features: (1) the value
of each outcome, measured by a real number
called a utility and (2) the probability of each
outcome conditional
on A
EU (A) o∈O PA (o)U (o)
where O is the set of outcomes, PA(o) is the
probability of outcome o conditional on A, and
U(o) is the utility of o (Briggs, 2018)
13 Prospect theory A behavioral economic theory stating that people
make decisions based on the potential value of
losses and gains rather than the final outcome
using certain heuristics (Gilboa, 2010)
14 Intertemporal choice Intertemporal choice refers to how people make
choices about what and how much to do at
different points in time, where opportunity costs
in decisions are present
(continued)

No Theories Remarks
15 Game theory Some decisions are difficult because of the need
to take into account how others would make
theirs. Today, game theory applies to a wide range
of behavioral relations; applied across many game
types that include cooperative-non-cooperative
games, symmetric-asymmetric games,
zero-sum-non-zero-sum games,
simultaneous-sequential games, games of
perfect-imperfect information, combinatorial
games, infinitely long games, discrete-continuous
games, differential games, many-players game,
stochastic games and meta-games to name a few
prominent ones
16 Auction theory Auction theory is an applied branch of economics
which deals with how people act in auction
markets where many have treated construction
contract bidding as a common value (sealed-bid)
auction (Dyer & Kagel, 1996)
Institutional theory
17 Institutional theory Institutional theory is a theory on aspects of social
structure; considering the processes by which
structures, schemes, rules, norms, and routines
influences social behavior (Scott, 2004).
18 Theory of institutional deficiency Martinsons (1998) suggests that factors such as
personal connections, informal information, and
blurred business-government relations may result
in a deviation from social behaviors seemingly
supported by institutional theory
5.2.1 Auction Theory for the Conceptual Framework
Auction theory deals with how people act in auction markets. There are four major
auction formats namely (1) the English auction where the seller solicits progressively
higher bids, (2) the Dutch auction where the seller begins by offering the item at a high
price, (3) the First-Price sealed bid auction where all bids are made simultaneously in
sealed envelopes and the winner is the bidder who submitted the highest bid and (4)
the Second-Price sealed bid auction where all bids are similarly made simultaneously
in sealed envelopes but the price the winner pays will correspond to the second highest
bid. Auctions have also been classified as either (1) private value auction in which
each bidder knows his or her individual valuation of the object which is auctioned
off while the (2) common value auction is one in which the item has the same value
to all bidders but the bidders do not exactly know its value and their estimates vary.
Given the nature of the construction industry, construction contract bidding is usually
treated as a common value (sealed-bid) auction (Dyer & Kagel, 1996). Having said
that, the object of this study is not a precise mathematical derivation of bid outcomes
but rather to observe how auction theory would predict firms’ bidding decisions in
light of the impacts of economic recessions. These impacts are largely suggested by
Hypotheses 1a–1e in Chap. 2.
Skitmore (2008) used Monte Carlo simulation to derive bids that are generated
randomly from a normal distribution for six bidders and mark-ups were applied
systematically for each bidder until equilibrium is reached. Following an extensive
numerical analysis, Skitmore’s findings suggested that first price auctions with rela-
tively high coefficient of variations and a larger number of bidders led to firms bidding
higher in equilibrium. Tse, Pretorius, and Chau (2009) found that auctions in Hong
Kong broadly conform to auction theory prediction and that increased uncertainty
does lead to lower bids. The winner’s curse (which refers to how the winning bidder
would possibly make a loss from winning a bid) is a major concern associated with
construction bidding and Ahmed, El-adaway, Coatney, and Eid (2006) pointed out
that in fact, contractors suffer from the winner’s curse for reasons including poor
estimates of project costs, increased number of contractors in the market, attempts
to minimize losses, highly competitive market, differences in opportunity costs, and
deliberate attempts to win the project and later remedy the losses through change
orders, claims, and other mechanisms. Many have similarly considered the effect of
an increase in the number of bidders on bidding strategies. Researchers have also
made the distinction between the competitive effect and the winner’s curse effect
(De Silva, Dunne, Kankanamge, & Kosmopoulou, 2007). Dyer and Kagel (1989)
carried out a laboratory experiment to observe the bidding behavior of firms and
found that changes in the number of bidders and expected profits had a statistically
significant effect on bidding behavior. Hence, auction theory suggests that with the
impacts of economic recessions as suggested by Hypotheses 1a–1e, the following
can be hypothesized.
Hypothesis 2: The higher the number of bidders per project and bidding com-
petition arising from economic recessions, the lower the bid prices in order to
win new projects.
5.2.2 Profit Maximization Theory for the Conceptual

Framework
In microeconomics, profit maximization theory relates to the process where firms

determine the price and output level that return the largest profit (Landsg, 2002).
One can see the application of profit maximization theory under varied levels of
competition in the market; ranging from perfect competition to monpolies. Under
perfect competition, the firm is one among many others. Hence, the individual firm
Fig. 5.1 Profit

maximization model
has no influence on the market price of the product. It can only decide the output to
be sold at market prices. Figure 5.1 shows the profit maximization model.
Profit maximization theory suggests that firms would maximize profit by pro-
ducing an output at a price where marginal cost is equal to marginal revenue. One
would observe two such points in Fig. 5.1; point A and point B. Point A satisfy the
condition of MC MR, but it is not a point of maximum profits because it does
make business sense for a firm to produce the minimum output when it can earn
larger profits by producing an output beyond M. At point B, however, the firm will
stop further production because any plans to produce more than M1 would result in
the firm incurring losses, for the marginal cost exceeds the marginal revenue after
the equilibrium point B. Thus, the firm maximises its profits at point B and at output
level M1 .
Applying profit maximization theory to the case of how impacts of economic
recessions will affect firms’ decisions to deliver high quality work, one can hold
quality as the output in question. By doing so, one can adopt the profit maximization
theory to understand firm’s behavior in maximizing profit and the optimal quality
output to produce. Although one may say that the challenge is in determining the
marginal revenue curve with quality output as the y axis, the intent is not to accurately
posit the revenue that one can derive from quality works but the tradeoff in quality
output that a firm would exhibit in attempts to maximize profits. Hence, in such case,
holding a hypothetical marginal revenue curve held constant for both pre-recession
and during the recession and subsequently studying the output would sufficiently
shed light on the outcome. Figure 5.2 shows the decrease in quality output when MC
rises.
With reference to Fig. 5.2, in light of the higher costs of producing at the same
level of quality due to firms 1) bidding at low prices (hence, resulting in less budget
for the work at hand) and 2) experiencing impacts that relate to the construction phase
of a project (such as an increase in the costs of borrowing, less regular payments and
higher costs of overheads etc.), MC1 would shift upwards to MC2 . Thus, the new
Fig. 5.2 Decrease in quality

output to maximize profits
when marginal cost rises
equilibrium where the firm would maximise its profits is now point C instead of point
B where the quality output would fall from M1 to M2 . Hence, profit maximization
theory suggests Hypotheses 3a and 3b.
Hypothesis 3a: Not considering the presence of moderating factors, the lower
the firm’s profit margin reflected in the bid price, the higher the quality tradeoff.
Hypothesis 3b: Not considering the presence of moderating factors, the higher
the impacts of an economic recession that relates to the construction phase of
a project, the higher the quality tradeoff by the firm.
Similarly, when the prices of materials, manpower and machinery fall, the
marginal cost of producing quality output would be expected to fall as shown in
Fig. 5.3.
Holding the assumption that marginal revenue of producing quality output is a
straight horizontal line, a fall in marginal cost from MC1 to MC3 would imply that
the new equilibrium where the firm would maximize its profits is now point D instead
of point B where the quality output would increase from M1 to M3 . Hence, profit
maximization theory suggests Hypothesis 3c.
Hypothesis 3c: Not considering the presence of moderating factors, the higher
the fall in the prices of materials, manpower and machinery, the lower the
quality tradeoff by the firm.
Fig. 5.3 Increase in quality

output to maximize profits
when marginal cost falls
5.2.3 Institutional Theory for the Conceptual Framework
Institutional theory is a theory on aspects of social structure; considering the processes

by which structures, schemes, rules, norms, and routines influences social behavior
(Scott, 2004). Organisations must conform to the rules and belief systems prevailing
in the environment in order to survive (Meyer & Rowan, 1977). Scott (1994) built
on the concept of institutions by proposing a model of institutions that involves
three components: (1) meaning systems and behavior patterns, (2) symbolic elements
including representational, constitutive and normative components and (3) regulatory
processes. These three components eventually evolved to form the three pillars of
Scott’s institutional framework (Scott, 2008).
5.2.3.1 Scott’s Three Pillars of Institutional Processes
Isomorphism was broadly introduced by DiMaggio and Powell (1983), describing

three mechanisms of institutional isomorphic change: coercive, mimetic and norma-
tive isomorphism. Fundamentally, coercive isomorphism deals with formal and infor-
mal pressures by other organizations and by cultural expectations through forceful
means. Mimetic isomorphism refers to the influence of other organizations to con-
form to benchmarks or standards that are perceived as best practices in the industry.
Normative isomorphism involves the pressure induced from the working environ-
ment (DiMaggio & Powell, 1983). Following the three mechanisms suggested by
DiMaggio and Powell (1983), Scott (2008) identified three systems as crucial ingre-
dients to institutions and their basis, referring to them as pillars of institutions. The
three pillars, namely regulative, normative and cultural-cognitive, have unique char-
acteristics as described by Scott (2008), and correspond to the identified mechanisms
or pressures by DiMaggio and Powell (1983).
5.2.3.2 Regulative Pillar
The regulative pillar corresponds to the mechanism for coercive pressure by DiMag-
gio and Powell (1983). It encompasses the regulative aspects of institutions, which
restrict behaviors (Scott, 2008). Scott (2008) referred to the regulatory processes
as those which define the rules and their enforcement, as well as the accompany-
ing rewards or punishment that influence organizational behavior. Indicators of such
institutions would be rules, laws or sanctions.
Having laid out the major construction quality schemes in Singapore and the
government’s commitment to pump-priming the construction industry in Chap. 3,
Singapore has clearly displayed commitment to establishing high construction qual-
ity in her built environment. Such efforts when viewed from the lens of institutional
theory imply the formation of the regulative pillar of institutional theory which results
in a social behavior around quality where firms would not compromise on quality
despite recessionary times. As such Hypothesis 4a is proposed.
Hypothesis 4a: Governmental efforts in nurturing a high quality built environ-

ment in Singapore reduce the extent of quality tradeoff arising from economic
recessions.
However, Low and Tan (1996b) suggested that albeit measures in nurturing a
high construction quality environment in Singapore, a stable flow of construction
demand is ultimately a key determinant of quality standards in Singapore because
without a stable flow of jobs in the market for developers and contractors alike, firms
would struggle to survive let alone achieve high quality works. Low and Tan then
concluded that since the cycles in the construction industry are unavoidable, poor
quality problems may be perpetual. In fact, in as recent as 2017, the Minister for
National Development, Mr. Lawrence Wong said: “… Consultants and contractors
who bid very low to get the contract end up having to cut cost, and worse still, cut
corners.” (Ong, 2017); spurring the Singapore government to revise its tender assess-
ment criteria to place heavier emphasis on quality. In August 2017, investigations
into the fatal Pan-Island Expressway viaduct collapse earlier in 2017 revealed that
the main contractor Or Kim Peow (OKP) had the lowest quality score then among
qualified bidders (Tan, 2017).
Hence, the research team posits that achieving quality works in Singapore is yet
to be embraced as a “have to” and this will result in firms cutting back on quality
under certain conditions. As such, Hypothesis 4b is proposed.
Hypothesis 4b: In times of economic recessions, existing governmental efforts

have weak effects in reducing the extent of quality tradeoff.
5.2.3.3 Normative Pillar and the Cultural-Cognitive Pillar
The normative pillar refers to the values and norms that guide the action of the firm
or individual. Scott (2008) defined values as “conceptions of the preferred or the
desirable” of which norms are means to achieve these values (p. 54). The values and
norms essentially create roles for firms or individuals, which define actions they deem
necessary based on normative expectations. Examples of what would constitute the
normative pillar for firms would be that of industry norms and what would constitute
the normative pillar for individuals would be that of the working conditions the
individual is subjected to.
Scott (2008) defined the cultural-cognitive pillar as the “shared conceptions that
constitute the nature of social reality and the frames through which meaning is made”
(p. 57). Scott used the term cultural-cognitive to stress both cultural frameworks as
well as the internal interpretive processes of decision makers that give rise to these
elements of institutions. It is the meaning put into the cultures and social roles that
make other type of behavior inconceivable; empowering decision makers to feel
competent and connected when their beliefs align to these cognitive interpretations.
As discussed in Chap. 4, there are seven firm characteristics and thirteen broad
level strategies that assist firms in weathering recessionary periods. These firm traits
serve to alleviate the impacts of recessions on firms; allowing firms to survive or
even grow in recessionary periods. Hence, naturally, such firm traits would influence
the time-cost-quality tradeoff decisions of firms during recessionary times. This is
because, from the lens of the normative and cultural-cognitive pillars of institutional
theory, firm traits that uphold construction quality and/or weather recessions would
induce values and norms that guide the actions of the firm towards higher quality
works. The shift from a survival mode to growth mode arising from appropriate firm
traits during recessionary times would empower decision makers to feel competent
and connected to the notion of producing higher quality works when the environment
and culture permits. The presence of these pillars would result in a social behavior
around quality where firms would not compromise on quality despite recessionary
times. Hence, the research team proposes Hypotheses 5a and 5b.
Hypothesis 5a: There is a relationship between some or all of the strategies

adopted by firms to weather recessionary periods and the extent of quality
tradeoff for a project during recessionary times.
Hypothesis 5b: There is a relationship between some or all of the firm charac-
teristics that either uphold quality works or weather recessionary periods and
the extent of quality tradeoff for a project during recessionary times.
5.2.3.4 Institutional Theory of Deficiency
Martinsons (2008) developed the theory of institutional deficiency suggesting that,

as opposed to rule-based markets, relationship-based markets will prevail in the
presence of institutional deficiencies. Martinsons (2008) suggest that factors such
as personal connections, informal information, and blurred business-government
would overtake rule-based markets. Nonetheless, the research team assumes that the
construction industry in Singapore is a largely rule-based market as opposed to a
relationship-based market.
5.3 Summary
Auction theory has been selected to rationalize firm behaviors in response to the
impacts of economic recessions on the bidding phases of projects. Profit maximiza-
tion theory would suggest that any resulting impacts of economic recessions that
would put time and/or cost pressure on firms would result in a quality tradeoff.
Having said that, each of the three pillars of Institutional theory would moderate
the extent of quality tradeoff arising from the impacts of economic recessions. All
in all, these theories would form the theoretical underpinnings for the conceptual
framework proposed in Chap. 6.
Chapter 6
The Conceptual Frameworks
From the literature review conducted in Chaps. 2–5, a conceptual framework depict-
ing the effects of economic recessions on construction quality at the firm level is
proposed. However, before examining the conceptual framework in Sect. 6.2, it is
important to understand the defining factors of a conceptual framework and the role
of theories in developing them. These shall be discussed in Sect. 6.1.
6.1 Developing the Conceptual Framework
Heinrich (1984) and his associates once conducted an in-depth research on ant lions,
insects that trap ants in pits they have dug. Heinrich later found that his results were not
aligned with the works of other researchers and thus, began re-experimenting in hope
of finding an explanation to these discrepancies. Heinrich found that he and his team
left out an important assumption that pertains to ant lions’ time frame; where their
observations were not carried out over a sufficiently long period of time to detect some
key aspects of these insects’ behavior. As such, Heinrich concluded, “Even carefully
collected results can be misleading if the underlying context of assumptions is wrong”
(p. 151). And hence, it is for this reason that the conceptual framework of any study
must carefully consider the system of concepts, assumptions, expectations, beliefs,
and theories that constitutes the research (Miles & Huberman, 1994; Robson, 2011).
Miles & Huberman (1994) went on to define a conceptual framework as a visual or
written product, one that “explains, either graphically or in narrative form, the main
things to be studied—the key factors, concepts, or variables—and the presumed
relationships among them” (p. 18).
Becker (2007) suggest that there are four main sources of “modules” that one can
use to construct a conceptual framework for a study: (1) the research team’s expe-
riential knowledge, (2) existing theory and research, (3) the research team’s pilot
and exploratory research, and (4) thought experiments. In developing the conceptual
framework for this study as shown in Fig. 6.1, being aware that the research team may
86 6 The Conceptual Frameworks
Contractor firm
Construction Number of bidders Firm characteristics that upholds quality/ weather recessions
demand per project (F4) Bid
Hypothesis 2
(F1) 1. Firm have niche areas/ specialized services
price
2. Firm have relatively high bargaining power in the
Firm’s pressure to secure (F5) Bidding industry/ good network in the industry
bids (F2) competition 3. Firm has cost advantage from technology know-how,
high R&D capability and/ or possession of value adding
Aggressive bid Impacts intellectual property Hypotheses 4a-b
assumptions (F3) from bidding 4. Firm has relatively good reputation, track record and
phase management certifications
5. Firm has relatively strong financial standing
Changes in work scope 6. Firm has relevant technical personnel Firm’s extent of QTO
(F6) Hypothesis 3a 7. Firm has a relatively strong culture of quality with depends on the
strong management commitment to quality regulative, normative
Staff productivity (F7)
and cultural/
Firm strategies that weather recessions cognitive pillar of the
Cost of
Supply chain reliability Impacts from construction phase firm towards
producing 1. Diversification and entry into new markets
(F8) producing quality
quality 2. Divestiture and placing greater emphasis on niche
output works as suggested by
Overhead costs (F9) 3. Crisis management strategies and pre-planning
Hypothesis 3b 4. Establishing strong client relationships
IT; where PMT
dictates that QTO will
Payment defaults (F10) 5. Establishing good relationships with sub-con. , IT dictates the
6. Investing in technology, innovation and/ or R&D extent in which QTO
ER Sources of fund (F11) 7. Streamlining operations/ leaner management will by
8. Cost reduction through human resource means
Lending rates (F12) 9. Emphasis on special marketing efforts
Property prices 10. Risk management
(F13) 11. Document lessons from past recessions Hypotheses 5a-b
12. Negotiating for special loan services
Material price (F14) 13. JV, M&A, partnerships and collaborations
Prices of manpower, machineries & materials Cost of

Manpower price (F15) producing QTO does not
quality
output
Machinery price (F16) Hypothesis 3c
Hypothesis 1a-1p
= Path relations suggested by Auction Theory (AT)

= Path relations suggested by Profit Maximization Theory (PMT)
= Path relations suggested by Institutional Theory (IT)
= Path relation suggested by Keynesian theory (KT)
= Start of economic downturn and subsequent recovery

= Construction demand
= Prices of residential and commercial property
= Prices of material, manpower and machineries
= Quarterly construction contracts awarded
Q1 Q2 Q3 Q4 Q1 ...
Year 1 Year 2
Fig. 6.1 Conceptual framework depicting the effects of economic recessions on construction qual-
ity at the firm level (Legend: ER Economic Recession; QTO Quality Tradeoff; Dotted boxes
the external forces (i.e. government pump-priming and Singapore’s quality environment) and the
internal forces (i.e. firm characteristics and firm strategies) that would influence the social behavior
of upholding quality despite recessionary periods as suggested by the three pillars of institutional
theory)
possibly lack first-hand experiential knowledge relative to industry practitioners, the

research team therefore taps on the remaining three modules to construct the con-
ceptual framework where module three and four are used to develop the framework
and module two is the anchor for the derived framework.
Having said that, one should particularly question the purpose of existing theories
(module two) in developing a conceptual framework. Existing theories serves as “coat
hooks” where they provide places to “hang” data, showing their relationship to other
data. Theory is a spotlight; drawing the researcher’s attention to particular events,
shedding light on relationships that might otherwise go unnoticed. However, no
theory is exclusively inclusive. Hence, an awareness of alternative sources of concepts
and theories about the phenomena one studies is important; where one should engage
in the “believing” and “doubting” game. In the believing game, one accepts the theory
and look for ways it can deepen the understanding on the phenomenon studied. In
the doubting game, one challenges the theory, looking for its flaws in explaining the
phenomenon.
However, many researchers rarely challenge the theories employed (Dressman,
2008). In 1937, Coase (1937) stated that economic theory suffered from a failure
to clearly state its assumption as economists often fail to examine the underlying
assumptions when building up theories. Similarly, Maxwell (2013) stated that the
6.1 Developing the Conceptual Framework 87
tension between the underuse and the uncritical overuse problem in applying theory
is an inescapable part of research.
In summary, apart from the identification of the three modules to systematically
construct a conceptual framework, one should exercise prudence in using existing
theories and research by understanding their purposes. The purposes of existing
theories and research as discussed earlier are as follows: (1) to inform one on what
a rock is and how it differs from other things; where theories are the “coat hooks”
providing places to “hang” data, showing their relationship to other data; (2) to
narrow in on what one sees by drawing attention to particular events, phenomena
and/or relationships that might otherwise go unnoticed or misunderstood; (3) to
accept the theory and look for ways it can deepen the understanding of the things
studied and last but not least; (4) to understand the assumptions behind the selected
theories and look for discrepancies in those used to explain the phenomenon of study.
With these in mind, the following conceptual framework was developed, taking into
consideration Chaps. 2–5.
6.2 The Conceptual Framework
With reference to Fig. 6.1, the earlier chapters of this book have derived at the
hypotheses that there are sixteen perceived impacts of economic recessions repre-
sented by F1 to F16. F1 to F5 outline the impacts of economic recessions on the
bidding phases of projects; F6 to F13 on the construction phases of projects; and
F_14 to F_16 on the fluctuations in the prices of materials, manpower and machin-
ery.
Auction theory suggests that in the presence of F1 to F5, firms respond by bidding
at low prices in order to win a bid; even at the expense of the phenomenon known as
the winner’s curse where the firm winning the bid may eventually make a loss.
Profit maximization theory suggests that firms would maximize profit by pro-
ducing an output at a price where marginal cost is equal to marginal revenue; as
shown in Figs. 5.2 and 5.3. In light of the higher costs of producing at the same
level of quality due to firms (1) bidding at low prices and (2) experiencing the per-
ceived impacts suggested by F6 to F13, a firm’s quality tradeoff will be higher in
order to maximize profits. Similarly, when the costs of producing quality output
decreases when prices of major construction resources fall (as suggested by F_14 to
F_16), assuming a constant marginal revenue curve for simplicity purposes, firms
will produce a higher quality output to maximize profits.
Having said that, institutional theory would suggest that the regulative, normative
and cultural-cognitive pillars would reduce the extent of quality tradeoff decisions
during recessionary times. In Chap. 3, the research team spells out the Singapore
government’s efforts in nurturing a high quality built environment in Singapore;
with various policies, regulations and initiatives. Hence, the research team posits
with the largest dotted box in Fig. 6.1 as one that suggests that such governmental
88 6 The Conceptual Frameworks
efforts may reduce the extent of a firm’s quality tradeoff decisions; in accordance
with the regulative pillar of institutional theory.
In relation to the firm characteristics and firm strategies listed in the smaller dotted
box in Fig. 6.1, the presence of such firm traits may reduce the extent of a firm’s
quality tradeoff decisions; in accordance with the normative and cultural-cognitive
pillar of institutional theory.
In relation to the influence of government pump-priming in Singapore, Keynesian
theory suggests that government interventionism would alleviate the impacts of
recessions. However, the research team posits that these efforts are insufficient and
holds little weight in the framework due to reasons suggested in Chap. 5. Nonetheless,
the effects of pump-priming will still be examined in following chapters to test the
research team’s hypothesis.
Lastly, the conceptual framework includes a depiction of the gestation period
between the onset of economic recessions and the impacts felt by contractor firms.
Based on the literature review conducted in Chaps. 2 and 3, the gestation period for
most of the impacts of economic recessions is two to three quarters from the onset
of economic recessions. Nonetheless, this study does not seek to validate the exact
gestation periods for the research team believes this aspect deserves a separate study
in its own right.
As a final note, the research team purports that the total quality tradeoff decisions
of contractor firms in Singapore would equate to the overall quality performance in
the construction industry because the actions of contractor firms would have reflected
the inputs of all other firms in the value chain; from clients, consultants to suppliers.
6.3 Summary
This chapter reviewed the attributes that would constitute a strong conceptual frame-
work and proceeded to propose a conceptual framework that depicts the effects of
economic recessions on construction quality at the firm level based on the literature
review carried out in Chaps. 2–5. In summary, economic recessions would impact
the bidding phases and construction phases of projects and when the impact subse-
quently results in higher costs of producing quality output, the quality tradeoff for a
project will be higher. On the other hand, a fall in the costs of producing quality out-
put arising from the dip in prices of major construction resources during recessionary
times would suggest otherwise. Last but not least, the presence of moderating factors
such as governmental efforts in nurturing a high quality built environment and the
firm’s characteristics and strategies would alter the extent of the quality tradeoff.
With the proposed effects and hypotheses set out in the conceptual framework, the
study proceeds to test the hypotheses to validate the conceptual framework.
Chapter 7
Research Design and Methodology
Hernandez, Perez, & Rangel (2016) defined research methodology as a highly intel-
lectual activity that deals with the manner in which data is collected, analyzed
and interpreted for a particular investigation. Tan (2012) similarly defined research
methodology as one that shall include specification of the research design, method
of data collection and method of data analysis. With these definitions, the research
team developed an overview of the research process; where the research design for
each research method shall include the sampling, data collection protocol as well as
the data analysis techniques.
7.1 Overview of Research Process
In crafting the research design and selecting the most appropriate research method(s),
a tactful approach would be to learn from those before us; asking how have other
researchers managed similar topics (Blaxter, Hughes, & Tight, 2010). The study of the
firm’s time-cost-quality tradeoff decisions in time of economic recessions is one that
falls under the field of strategic management research. Dagnino and Clinici (2015)
conducted a literature review on research methodologies for strategic management
research and established a chronology of research methods for the field as shown in
Table 7.1.
Dagnino and Cinici (2015) identified that strategic management as a field of
inquiry in the early 1960s’ had a main goal of catering applied knowledge to business
practitioners rather than for the purposes of scientific advancements. Hence, the
dominant research method was highly inductive in nature; more specifically, in-
depth case studies of a single firm or industry. From the 1980s, Michael Porter (1980)
sparked an interest in scholars to seek findings that can be generalized, looking for
more rigorous and practical results to better comprehend the sources of firms’ and
industries’ competitive advantage. For this reason, strategic management started to
emphasize on scientific generalizations based on studies of broader sets of firms and
industries (Rumelt, Schendel, & Teece, 1994). As such, strategy researchers began to
90 7 Research Design and Methodology
Table 7.1 Path of methods used in strategic management research (1960–2010s)

1960s and 1970s 1980s 1990s 2000s
Name of field Business policy Strategic Strategic Strategic
or business management management management
planning
Dominant Long-range Structure Resource-based Resource-based
frameworks or planning SWOT conduct view view
perspectives analysis PIMS performance Knowledge Knowledge
studies paradigm based view based view
Evolutionary and
behavioral
perspectives
Type of Qualitative Qualitative Qualitative Qualitative and
methods qualitative
preferably
used
Specific Single case study Statistical Econometric Multiple case
technique(s) analysis analysis study statistical
typically used and econometric
analysed
Discourse
analysis mixed
methods
multilevel
inquiry
Source Dagnino & Cinici (2015, p. 4)
increasingly employ multivariate statistical tools (e.g. multiple regression and cluster
analysis), with large data samples primarily collected from secondary sources to test
theory in the 1980s and 1990s; and depending on the research question under scrutiny,
increasingly diverse approaches were adopted such as multiple case studies, event
studies, event history analysis, multi-dimensional scaling, panel data analysis, and
network analysis (Van deVen, 2007). In the 1990s and 2000s, the development of
the resource-based view and the dynamic capabilities perspective led many strategy
scholars to question the research approaches then. The proponents of the resource-
based view and the dynamic capabilities perspective suggested that each firm has
distinctive traits of resources and capabilities that in turn contribute to achieve and
sustain competitive advantages (Dagnino & Clinici, 2015). Hence, the need for a more
inclusive approach that calls for both inductive qualitative research and deductive
quantitative approaches were recognized (Bergh & Ketchen, 2011; Wang, Ketchen,
& Bergh, 2012). Strategy scholars then advocated that apart from the qualitative
dimension, strategic management needed quantitative research to show relationships
between variables, and the field had to emphasize scientific generalizations based on
study of broader sets of firms (Hitt, Gimeno, & Hoskisson, 1998; Hoskisson, Hitt,
Wan & Yiu, 1999).
7.1 Overview of Research Process 91
Fig. 7.1 Overview of research methodology
Hence, for the purposes of this study, a mixed method research is adopted. Bry-
man and Bell (2007) presented a list of advantages of mixed methods research which
among others, includes: (1) attaining triangulation where the findings from one
method are cross-checked against the results deriving from the other type; (2) quali-
tative research may facilitate the interpretation of the relationship between variables
(where a qualitative study can be used to help explain the factors underlying the broad
relationships that are established in the quantitative part); and last but not least, (3)
studying different aspects of a phenomenon. In conclusion, the survey method, case
study method and expert interviews are adopted for the purposes of this study. The
overview of the research methodology is summarized diagrammatically in Fig. 7.1.
7.2 Survey Method
7.2.1 Sample Identification
It has been stipulated that only contractors registered under BCA can bid for public
sector projects (BCA, 2017c). Furthermore, one can safely assume that the majority
of contractors in Singapore will register under BCA given that public projects can
account for more than 60% of annual construction demand in Singapore (BCA,
2011, 2014a; SingStat, 2017). Hence, the contractors listed under the BCA directory
of registered contractors and licensed builders is used as the population for the survey
questionnaire.
Under the BCA directory of registered contractors and licensed builders, contrac-
tors are categorized into the following: Construction, Construction Related, Mainte-
nance, Mechanical and Electrical, Regulatory, Supply, Trade, General Builders and
Specialist Builders. Given these categorizations, the potential limitation of an inap-
propriate stratum variable is overcome. Hence, a stratified sampling method was used
where the research team randomly selected samples from contractors listed under
the Construction, Construction Related, Maintenance, Mechanical and Electrical,
General Builders and Specialist Builders categories (and excluded contractors listed
under Regulatory, Supply and Trade as these are contractors that are less involved in
the construction project planning and execution phases).
7.2.2 Sample Size
Sample size determination is largely based on judgement rather than precise statistical
computation. This is because in statistically computing sample sizes, one would
require means and standard deviations of variables measured. This is usually not
known where for instance, if one is sampling opinions on the perceived impacts of
economic recessions on firms, there is no mean, standard deviation or error factor to
compute sample sizes statistically (Tan, 2012). Tan (2012) recommends using 10% of
the population in such cases. However, Tan also mentioned that such rule of thumb
should be exercised with caution for if a population is in the million per se, 10%
would imply a sample size of 100,000 which is too large. On the other hand, if the
population size is only 50, one should then consider having the whole population in
the sample size. Burgess (2001) recommended a rule of thumb of looking for about
20–30 responses in each of the major sub-categories of the sample. Considering that
the research team is not comparing between groups in the sample, the research team
adopted the 20–30 responses guide for the survey questionnaire where respondents
were narrowed to only those in higher management of construction firms with more
than ten years of experience in the construction industry. This raises the validity
and reliability of the responses as the survey method seeks to solicit the high level
decisions made by contractor firms in Singapore.
7.2.3 Method of Reaching Out to Survey Respondents
Considering a response rate of 5% for the mass email approach, the research team
would be required to send out 600 questionnaires to obtain 30 responses. Nonetheless,
some of these responses were more efficiently obtained through the aid of connections
and construction related networking sessions.
7.2.4 Survey Questionnaire Design
In relation to the survey layout, Burgess’s (2001) lecture on “A general introduction

to the design of questionnaires for survey research”, Avedian’s (2014) lecture on
“Survey Design” and Fink’s “Seven Skills” (2006) was used to guide the survey
7.2 Survey Method 93
questionnaire development. In addition, the survey questionnaire was piloted with

five survey respondents in order to identify issues with the questionnaire, as well
as to determine the average time taken to complete the questionnaire. This served
to ensure respondents have a good understanding of the factors in the survey and
reduces the chance of misinterpretation. Following the pilot study, the survey ques-
tions were revised in preparation for a full-scale survey. Blank spaces were provided
for respondents to solicit their comments and/or thoughts on issues not covered in the
questionnaire. Apart from the above stated, the review of the survey questionnaire
was conducted on a periodical basis during data collection. Please refer to Appendix
A for the survey questionnaire.
7.2.5 Survey Results Analysis
7.2.5.1 Descriptive Statistical Analysis Methodology
Descriptive statistics is distinguished from inferential statistics, in that descriptive

statistics aim to summarize a sample and what goes on in the data while inferential
statistics make inferences from the data to more general conditions. The following
three broad measures shall be used for the descriptive statistical analysis: (1) distri-
bution (in particular frequency distribution), (2) central tendency (mean, median and
mode) and (3) dispersion (in particular standard deviation) (“Social Research Meth-
ods—Knowledge Base—Descriptive Statistics”, 2017). In short, descriptive statistics
provide an overview of the survey findings where the IBM Statistical Package for
the Social Sciences (SPSS) is used.
7.2.5.2 Inferential Statistical Analysis Methodology
In selecting the inferential statistical analysis technique, the research team proposed
structural equation modeling (SEM) as the statistical analytical tool for interpreting
the data collected from the survey questionnaires as opposed to the use of “traditional”
statistical approaches such as correlation, regression and analysis of variance among
others. SEM differs from traditional approaches in the following areas.
• First, traditional methods specify a default model whereas SEM requires the spec-
ification of a model to be measured and tested; where the hypotheses in the model
needs to be supported with theory or existing research and path relations specified a
priori (Dion, 2008; Suhr, 2010). This implies that SEM is a suitable analytical tool
for studies that wishes to explore complex effects depicted in proposed conceptual
or theoretical frameworks.
• Second, SEM is a multivariate technique incorporating observed (measured) and
unobserved variables (latent constructs) while traditional techniques analyze only
measured variables (Dion, 2008; Suhr, 2010). Hence, studies with variables not
directly measurable should adopt SEM.
• Third, while most traditional methods assume measurement occurs without error,
SEM explicitly specifies error where the assessment of the SEM measurement
model prior to the assessment of the SEM structural model is necessary (Suhr,
2010).
• Fourth, in models where an independent variable becomes a dependent variable in
other relationships in that same model, unlike SEM, traditional regression analysis
cannot handle such situations well where the use of hierarchical regression is often
called for (Dion, 2008). Hence, this implies that SEM is called for when there are
multiple variables that functions as both independent and dependent variables in
the same model.
• Last but not least, traditional statistical methods such as linear regression analysis
or the probit and the logit models may deliver results of poor validity due to a small
number of observations (e.g. less than 50 or 40 observations with more than 30 or
40 factors studied). Such scenario of small number of observations coupled with
relatively large number of factors studied is an inherent characteristic in studies of
such nature (Low and Jiang, 2005). As such, statistical packages able to address
such issues are important considerations.
In summary, SEM has been described as a combination of exploratory factor
analysis and multiple regressions (Schreiber, Nora, Stage, Barlow & King, 2006;
Ullman, 2001). The measurement model of SEM is the confirmatory factor analy-
sis and depicts the pattern of observed variables for those latent constructs in the
hypothesized model. Apart from fulfilling a major component of confirmatory fac-
tor analysis in testing of the reliability of observed variables, the SEM measurement
model is able to disclose the extent of interrelationships and covariation among latent
variables. The structural model on the other hand, displays the interrelations among
latent variables and observable variables in the proposed model as a succession of
structural equations; which is largely similar to running several regression equations
(Hair, 2017; Schreiber et al., 2006; Templin, 2011). As such, SEM is an amalgamation
of various portions of established statistical techniques (Templin, 2011).
In conclusion, with this study involving the proposition of a conceptual frame-
work that seeks to define the effects of macroeconomic conditions on firm level
performances with variables that cannot be directly observed, a multivariate statis-
tical approach that takes into account both observed and unobserved variables is
necessary to better guide the interpretation of data collected. This justifies the use of
SEM as the inferential statistical tool used for this study.
CB-SEM or PLS-SEM
There are two main types of SEM: Covariance-based SEM (CB-SEM) and Partial
Least Squares SEM (PLS-SEM). While SEM is a general term encompassing a
variety of statistical models, CB-SEM is the more widely used approach in SEM.
However, in recent years, partial least squares (PLS) have been increasingly applied
to examine structural equation models (Hair, Sarstedt, Ringle, & Mena, 2012).
CB-SEM estimates parameters such that the differences between the sample
covariance and those predicted by the conceptual model are minimized while PLS-
SEM aims at maximizing the explained variance of the dependent constructs (Hair
et al., 2012). Having said that, the most important reason to select CB-SEM or PLS-
SEM is the research goal (“PLS-SEM Compared With CB-SEM”, 2018). Hair et al.
(2011) recommended that if the goal is predicting or identifying constructs, one
should select PLS-SEM. CB-SEM should be adopted if the goal is for theory test-
ing, theory confirmation, or comparison of alternative theories. Furthermore, Hair
(2014) stated that if the research is exploratory or an extension of an existing the-
ories, PLS-SEM would be a recommended choice. Last but not least, PLS-SEM
allows analysis of sample sizes below 100 and has the ability to support single item
in a construct (Hair, 2017; Kim, 2016). Jannoo, Yap, Auchoybur, & Lazim (2014)
also found that for normal distributions, CB-SEM estimates were found to be inac-
curate for small sample size while PLS-SEM could produce otherwise. Astrachan,
Patel, and Wanzenreid (2014) further presented the advantages of PLS-SEM over
CB-SEM PLS; stating that PLS-SEM is able to better handle small sample sizes,
complex models, and/or non-normal data distributions while still producing viable
results.
Since this study is largely exploratory with a goal of predicting and identifying
constructs, coupled with the fact that the responses to the survey questionnaire for this
study was relatively small (N 30), PLS-SEM is deemed the appropriate statistical
method for this study.
The SEM Process
The SEM process may be summarized with the nine steps as follows:
I. Review existing theories and literatures to support specification of SEM model
II. Specify model with latent variables (i.e. variables that cannot be measured
directly) and observed variables (i.e. variables used to measure latent variables
which are usually factors suggested by existing theories and literature (Hair,
2017))
III. Collect data
IV. Conduct preliminary descriptive statistical analysis to identify issues such as
scaling, missing data, collinearity issues, and outlier detection
V. Respecify the model if necessary
VI. Estimate parameters in the model
VII. Assess model fit
VIII. Respecify the model if meaningful
IX. Interpret and present results
SEM Model
As seen from the SEM process mentioned earlier, one has to specify the SEM model
(in step II). In doing so, the research team translated the conceptual framework
depicted in Chap. 6 into a SEM model as shown in Fig. 7.2; where the reflective
indicators for each latent variable in the SEM model are proposed in Table 7.2.
With reference to Fig. 7.2, GPP_1, GPP_2, GPP_3, ER_1&2, ER_3, ER_4, FC,
FS and QTO are latent constructs (represented by the grey circles) in the SEM model
as they are subjective variables that cannot be directly measured. The reflective indi-
cators for the latent constructs which essentially constitute the SEM measurement
model are represented by the grey rectangles as shown in Fig. 7.2. Each of the yel-
low rectangular boxes in Fig. 7.2 represents the hypotheses set out in the proposed
conceptual framework as discussed in Chap. 6 earlier. One may ask why there are
repeated yellow rectangular boxes for Hypotheses 4a−4b, 5a, and 5b in Fig. 7.2.
The reason is because for these hypotheses, there should be more than one represen-
tation of the variable measured in the hypothesized relationship. For the effects of
government pump-priming (or other government efforts) in reducing the extent of
recessionary impacts on firms per se, one can break down the recessionary effects into
those on the (1) bidding phase, (2) construction phase and (3) prices of construction
resources. As such, Hypotheses 4a–4b are depicted by these three representations as
shown in the SEM model. Similarly for Hypotheses 5a and 5b, where it is suggested
H1a, b, d
H4a-b
H2
H1c, e
H4a-b
H3a
H5b
H5a
H1f-m
H4a-b
H3b
H5a
H5b
H3c
H4a-b
H1n-p
Fig. 7.2 SEM model (Legend H means hypothesis) (Moderating effect 1: FC moderates the effect
of BID_PRICE on QTO. Moderating effect 2: FS moderates the effect of BID_PRICE on QTO.
Moderating effect 3: FC moderates the effect of ER_3 on QTO. Moderating effect 4: FS moderates
the effect of ER_3 on QTO)
Table 7.2 Indicators for each latent variable

Latent variable (i.e. Reflectively measured indicators with the respective
constructs) survey questions asked on a Likert scale of 1 to 5
GPP_1 (effects of gpp_1 The number of projects available in the market for my
government company rises as compared to times of economic
pump-priming (or other recession without government pump-priming (or other
government efforts) in government efforts)
times of recession on gpp_2 My company feels relatively less pressure to secure new
bidding phase of projects as compared to times of economic recession
projects) without government pump-priming (or other government
efforts)
gpp_3 My company make less aggressive assumptions in
estimating bid prices for new projects as compared to
times of economic recession without government
pump-priming (or other government efforts)
gpp_4 Number of bidders per project becomes lesser as
compared to times of economic recession without
government pump-priming (or other government efforts)
gpp_5 Bidding competition fall as compared to times of
economic recession without government pump-priming
(or other government efforts)
GPP_2 (effects of gpp_6 My company see less change requests in our projects as
government compared to times of economic recession without
pump-priming (or other government pump-priming (or other government efforts)
government efforts) in gpp_7 Employee motivation becomes relatively higher as
times of recession on compared to times of economic recession without
construction phase of government pump-priming (or other government efforts)
projects)
gpp_8 My company sees a more reliable supply chain (which
includes subcontractors and suppliers) as compared to
times of economic recession without government
gpp_9 My company experiences lower costs of overheads as
gpp_10 My company experiences a lower likelihood in
clients/pay masters defaulting on payment as compared
to times of economic recession without government
gpp_11 The availability of loans from banks for my firm is higher
as compared to times of economic recession without
gpp_12 The costs of borrowing is lower as compared to times of
economic recession without government pump-priming
(or other government efforts)
gpp_13 The extent of the fall in property prices becomes lesser
as compared to times of economic recession without
(continued)

GPP_3 (effects of gpp_14 Fluctuations in prices of materials become lesser as
government compared to times of economic recession without
pump-priming (or other government pump-priming (or other government efforts)
government efforts) in gpp_15 Fluctuations in prices of manpower become lesser as
times of recession on compared to times of economic recession without
fluctuations in prices of government pump-priming (or other government efforts)
materials, manpower and
machinery) gpp_16 Fluctuations in prices of machinery become lesser as
ER_1 (Economic F_1 In times of economic recession, there is a fall in the
recession impacts on number of projects available in the market for my
average number of company
bidders per project) F_2 In times of economic recession, my company feels more
pressured to secure new projects
F_3 In times of economic recession, my company make more
aggressive assumptions in estimating bid price in order
to be more competitive
ER_2 (Economic F_4 In times of economic recession, my company sees a
recession impacts on higher number of changes requests in our projects
bidding competition) F_5 Bidding competition for construction projects rises as a
result of worsening economic conditions
BID_PRICE (Bid price Bid_1 The worst an economic recession, the lower the profit
is low in times of margin in my company’s bid price in order to win a
economic recessions) project (Strongly agree implies a point of 5 while
strongly disagree implies a point of 1)
Bid_2 The more government support during an economic
recession, the less likely a firm will bid at low profit
margins (Strongly disagree implies a point of 5 while
strongly agree implies a point of 1)
recession impacts on higher number of change requests in our projects
construction phase of F_7 In times of economic recession, the motivation of my
projects) company’s employees falls
F_8 In times of economic recession, my company experiences
a higher costs of overheads (i.e. office and administration
cost etc.) In times of economic recessions, my company
sees a lower reliability in my company’s supply chains
(due to reasons such as bankruptcy of supply chain
partners, default on quality, default on shipment etc.)
F_9 In times of economic recession, my company
experiences a higher costs of overheads (i.e. office and
administration cost etc.)
F_10 In times of economic recession, my company
experiences a higher likelihood in clients/pay masters
defaulting on payment
(continued)

F_11 In times of economic recession, the harder it is for my
company to get loans from banks
F_12 In times of economic recession, my firm sees a higher
costs of burrowing
F_13 In times of economic recession, there is a fall in property
prices
recession impacts on higher fluctuation in the prices of materials
prices of construction F_15 In times of economic recession, my company sees a
resources) higher fluctuation in the prices of manpower
F_16 In times of economic recession, my company sees a
higher fluctuation in the prices of machinery
FC (positive firm Fc_1 My firm performs specialized services
characteristics (FC) that Fc_2 My firm is well connected in the industry
upholds construction
quality) Fc_3 My firm has a cost advantage in terms of the intellectual
property we own and/or value adding technologies we
adopt as compared to my competitors
Fc_4 My firm has a good reputation in the industry for
producing high quality works
Fc_5 My firm is financially strong relative to other firms
Fc_6 My firm has sufficient relevant technical personnel
Fc_7 My firm has a strong culture for quality and/or high
management commitment for quality works
FS (firm strategies (FS) Fs_1 During an economic recession, my company adopts
that weather recessions) diversification strategies and/or enter into new markets
Fs_2 During an economic recession, my company adopts
divestiture strategy and/or places greater emphasis on
niche areas
Fs_3 My company emphasizes on pre-planning for recessions
and adopts crisis management strategies
Fs_4 During an economic recession, my company puts an
emphasis on developing strong relationships with clients
Fs_5 During an economic recession, my company puts an
emphasis on developing strong relationships with
subcontractors and suppliers
Fs_6 During economic recessions, my company actively looks
for innovations, new technologies and research and
development (R&D) to be more competitive
Fs_7 During economic recessions, my company actively look
for ways to reduce redundancy, streamline operations
and adopts a leaner approach
(continued)

Fs_8 During economic recessions, my company adopts a cost
reduction strategy by means of laying off employees,
freezing bonuses, pay-cuts, converting permanent
employees into temporary placements and/or hiring on a
contract basis
Fs_9 During economic recessions, my company places an
emphasis on marketing efforts to better position the
company in the market
Fs_10 During economic recessions, my company emphasize
heavily on risk management
Fs_11 My company actively document lessons learnt from past
economic recessions
Fs_12 During economic recessions, my company negotiates for
alternative loan services to finance debt and raise
working capital
Fs_13 During economic recessions, my company enter into
joint ventures, adopts merger and acquisitions concepts,
partnerships and/or collaborations
QTO ((further) quality QTO_1 My firm reduces the priority of quality in the
tradeoff in light of time-cost-quality tradeoff equation in times of economic
economic recession) recession (by importance rating)
QTO_2 My firm reduces the priority of quality in the
time-cost-quality tradeoff equation in times of economic
recession (by priority ranking)
that firm characteristics and firm strategies moderate the extent of quality tradeoff in
recessionary times, one ought to realize that quality tradeoff is resulted from impacts
of economic recessions on the bidding phases of projects as well as the construction
phases of projects. As such, there ought to be two representations of Hypotheses 5a
and 5b in the SEM model as shown in Fig. 7.2.
PLS-SEM Results Analysis
Empirical measures enable one to compare the theoretically established measurement

model and the structural model with reality represented by the sample data. In other
words, with the use of SEM, one can determine how well the theory would fit the
data. The goal of PLS SEM is maximizing the explained variance (i.e. the R2 value)
of the dependent latent variables depicted in the PLS-SEM path model (Hair, 2017).
Table 7.3 summarizes all the measures used for analyzing the reflective measurement
model and structural model respectively.
Table 7.3 Table of summary of PLS-SEM results analysis methods

Evaluation of SEM reflective measurement model
• Internal consistency (Cronbach’s alpha, composite reliability)
• Convergent validity (indicator reliability, average variance extracted)
• Discriminant validity
Evaluation of SEM structural model
• Collinearity assessments
• Size and significance of path coefficients
• Coefficients of determination (R2 )
• f2 effect sizes
• Predictive relevance (Q2 )
• q2 effect sizes
Source Hair (2017)
The Smart Partial Least Squares 3 (SmartPLS 3) statistical software was used
to carry out the statistical analysis because it has been established since 2014 with
multiple versions of the software released. Furthermore, there are readily available
reference materials and online sources to guide the research team in the statistical
analysis.
One-Sample T-Test for the Sixteen Impacts of Economic Recessions
Based on the reflection of the SEM model from the conceptual framework proposed
in Chap. 6, one cannot test Hypotheses 1a–1p because it is represented by factors
F_1 to F_16 which are observed variables (i.e. represented by the grey rectangles) in
the SEM model. Since SEM can only test hypotheses for the path relations between
latent variables (i.e. those represented by the grey circles in the SEM model), a one-
sample t-test with the aid of the IBM Statistical Package for the Social Sciences
(SPSS) is required to test Hypotheses 1a–1p.
7.3 Case Study Method
7.3.1 The Selection Between Single and Multiple Case Study

Design
The justification for the decision to adopt a single case study design or a multiple
case study design is well documented in Yin (1994). Single case study design is
usually adopted when the study in question is very specific or when the phenomenon
observed is localized (such as studies conducted on the Toyota production system).
However, if the study seeks to generate results that would represent a considerable
population size, the multiple case study design provides more credibility, reliability
and validity in the qualitative findings. Hence, given the nature of the study adopted
for this study, the multiple case study design was adopted.
7.3.2 The Selection of Cases and Sample Size
In relation to which case to select, Patton (1990) suggests that there are five ways
of sampling cases; extreme cases that exemplifies extreme or unusual value, typical
cases that provides a cross section of a larger group, minimum variation case sampling
(which selects cases that are able to adapt to different kinds of contexts and conditions,
critical case sampling (which looks for cases that are most relevant for transferring
of findings to other related cases) and sensitive cases used to investigate important
issues through the use of individuals or groups with particular viewpoints.
The critical case sampling is the most appropriate sampling method. This is
because, to study the impacts of economic recessions on firms and how firms cope
with those impacts, one ought to study firms that have exhibited a track record of
high construction quality performances in order to make conclusions with consider-
able confidence because these are the firms that have proven results in the industry.
As such, the research team examined the CONQUAS scores of contractor firms in
Singapore and identified those with consistently high CONQUAS scores at 90 and
above; where the research team secured three contractor firms to participate in the
case study method.
7.3.3 Case Study Design for Generalization, Validity

and Reliability
The method of generalization for case studies is not statistical generalization, but
analytical generalization in which a framework supported by existing theories is
used to compare the empirical results of the case study. If two or more cases are
shown to support the same phenomenon, replication is established. The higher the
number of case studies that display replication, the greater the rigour with which a
relation has been established (Rowley, 2002). Table 7.4 sets out aspects of the case
study design used to achieve validity and reliability for the case study findings.
7.3 Case Study Method 103
Table 7.4 Aspects of case study design to attain validity and reliability for findings
Tests Definition Case study tactic Phase of research
Construct Correct operational • Use multiple sources • Data collection
validity measure for concepts of evidence • Data collection
• Establish chain of • Composition
events
• Have key informants
review draft case study
report
Internal Establishing a non- • Address rival • Data collection
validity spurious causal explanation (general • Data collection
relationship analytic strategy)
• Pattern matching
(specialized analytic
technique)
External Establishing the domain • Use replication logic • Research design
validity for generalization in multiple case
studies design
Reliability Repeatability of • Use case study • Data collection
operations of the case protocol • Data collection
study • Develop case study
database
Source Yin (1994)
7.3.4 Case Study Data Collection Protocol
7.3.4.1 Principles of Data Collection to Be Observed
There are three key principles of data collection that need to be observed. Firstly, tri-
angulation uses evidence from different sources to support the same fact or finding.
In this case study, archival records, company websites and semi-structured interviews
shall contribute towards the corroboration of the same fact or finding. Secondly, a case
study database of the evidence gathered needs to be established to strengthen the
repeatability of the research and transparency of the findings. As such, one should
have a well-organized collection of the evidence base; which should include case
study documents that are collected during a case study, interview notes or transcripts,
and analysis of the evidence. Last but not least, having a chain of evidence refers to
the need to make clear the sections on the case study databases that the study draws
upon by appropriate citation of the documents and/or interviews (Rowley, 2002).
7.3.4.2 Field Procedures
The field procedure for the collection of data is shown in Table 7.5.
Table 7.5 Field procedures for data collection

Research method i.e. Data collected Remarks on access
source of information arrangements
Archival method • CONQUAS trend of firm • These data are available on
• Structural CONQUAS score IQUAS, Construction Info-net
trend of the firm and the respective company
• Architectural CONQUAS websites of the case study
score trend of the firm respondents
• M&E CONQUAS score trend
of the firm
• Quality Mark Scores
• Company website information
Interview • Please refer to Appendix G, H • These data are obtained from
and I for the case study semi-structured interviews
interview verbatim reports with respondents
• The case study participants are
accessed by mass email to
contractor firms with a track
record of consistent and high
CONQUAS scores
7.3.4.3 Case Study Questions Design
The heart of the protocol is a set of substantive questions reflecting the actual line of
inquiry. These questions can be categorised into five levels and are those that the case
study researcher needs to keep in mind when collecting data; which may be used to
guide the formulation of questions to interviewees as well as to serve as reminders
regarding the information to be collected and why (Yin, 2014).
• Level 1: questions posed to interviewees i.e. the verbal line of inquiry (for instance,
in a crime investigation, level 1 question are the actual questions posed to a wit-
ness/suspect).
• Level 2: questions in relation to each individual case posted to the researcher i.e.
the mental line of inquiry. For instance, in a crime investigation, a level 2 question
pertains to the validity for a conjecture on what the course of events in a crime
might have been.
• Level 3: questions asked of the pattern of findings across multiple cases. For
instance, a level 3 question could be asking whether larger school districts are
more responsive than smaller school districts. Hence, level 3 questions cannot be
addressed until the data from all the single cases in a multiple case study design
are examined. Thus, only the multiple case analyses can address level 3 questions.
• Level 4: questions in relation to the entire study. For instance, calling on infor-
mation beyond the case study evidence and including other literature or published
data.
• Level 5: normative questions about policy recommendations and conclusions
where one seeks to ask questions pertaining to generalization of findings.
In short, when thinking of case study questions, one should not only include the
actual questions posted to the interviewees but questions asked to address the entirety
of the case study method. Having said that, these questions serve only as a reminder
for the research team throughout the execution of the case study method. Level 1
questions are that posted to the case study respondents and they can be found in
Appendix G, H and I where the questions are aligned to a semi-structured interview
format with a key purpose of soliciting the respondents’ experiences with projects
in recessionary periods specific to their respective companies.
7.3.5 Case Study Analysis Protocol
Case studies either produce similar results (i.e. literal replication), or produce con-
trasting results but for predictable reasons (i.e. theoretical replication) (Rowell,
2002). If, the cases reveal a variety of different outcomes, the protocol will be to
consider conducting further research where additional cases will have to be added
into the analysis until a definite outcome can be derived through the general analytic
strategy and the specialized analytic technique (Rowell, 2002). The general analytic
strategy guides the researcher in treating evidences from a guided perspective while
at the same time serving to rule out alternative interpretations henceforth producing
a compelling analytic conclusion. The specialized analytic technique is used as part
of and along with the general analytic strategy to further the robustness of the case
study findings by dealing with issues of internal and external validity (Yin, 1994).
7.3.5.1 The General Analytic Strategy
Yin (2014) suggested three general analytic strategies namely (1) relying on theo-
retical propositions, (2) thinking about rival explanations and (3) developing a case
description. The third method is the least preferable among the three and serves as
an alternative when either of the former two is not doable. Relying on theoretical
propositions (i.e. hypotheses) that were used to derive at our proposed conceptual
framework is the most preferred strategy as suggested by Yin. The propositions (i.e.
hypotheses) help to narrow in on the relevant data; serving to organize the case study
and help define alternative explanations to be examined. The following sets out the
broad propositions underlying the proposed conceptual framework.
• Proposition 1: When an economy falls towards a recession, the sixteen impacts
to construction firms are as suggested by Hypotheses 1a–1p.
• Proposition 2: The worst an economic recession, the lower the firm’s bid price to
win projects as suggested by Hypothesis 2.
• Proposition 3: Not considering the presence of moderating factors, the impacts
of economic recessions on firms will result in a higher quality tradeoff by the firm
as suggested by Hypotheses 3a and 3b.
• Proposition 4: Not considering the presence of moderating factors, the higher

the fall in the prices of materials, manpower and machinery, the lower the quality
tradeoff by the firm as suggested by Hypothesis 3c.
• Proposition 5: In times of economic recession, there is a relationship between
governmental efforts in nurturing a high quality built environment and the sixteen
impacts of economic recessions on firms as suggested by Hypothesis 4a.
• Proposition 6: Despite government initiatives in nurturing a high quality built
environment in Singapore, these initiatives are weak in persuading firms to uphold
construction quality in times of recession as suggested by Hypothesis 4b.
• Proposition 7: There is a set of seven firm characteristics (that assist firms in
weathering recessions and/or uphold quality works) and thirteen firm strategies
(that firms respond with to weather recessions). These characteristics and strategies
moderate the quality tradeoff outcome of a project during recessionary times as
suggested by Hypotheses 5a and 5b.
Having set out the propositions, the subsequent step in the general analytic strategy
is to develop rival explanations for each of these propositions. Rival explanations
are at the core of robust analysis in case study research. Stake (2010) explains that
good quality rival analysis is achieved when (1) the researcher has shown that the
evidence does not suggest something else, (2) the evidence is sufficient to suggest
the observed phenomenon, and (3) the explanation of the finding could not have
been produced by any other factors. An example of a rival explanation is when one
may makes a conjecture that one may have been interviewing extraordinarily naive
managers but swiftly follows up with information that those managers were well
educated, thoughtful and had experience in a variety of organizations; decreasing the
explanatory power of the rival explanation brought up (Mills, Durepos, & Wiebe,
2010).
To develop rival explanations, Yin (2000) suggests nine types of rival as follows;
(1) the null hypothesis (i.e. hypothesis suggesting that there is no effect) (2) threats
to validity (i.e. the observation is a result of chance circumstances only) (3) inves-
tigator bias (i.e. the experimenter effect) (4) direct rival (i.e. an intervention other
than the target intervention accounted for the results) (5) commingled rival (i.e. other
interventions and the target intervention both contributed to the results) (6) imple-
mentation rival (i.e. the implementation process, not the substantive intervention,
accounted for the results) (7) rival theory (i.e. a theory different from the original
theory explains the results better) (8) super rival (i.e. a force larger than but including
the intervention accounted for the results) and (9) societal rival (i.e. social trends, not
any particular force or intervention, accounted for the results. Table 7.6 sets out the
rival explanations to each proposition; where upon the completion of data collection,
evidences are sieved to counter the rival explanations.
Table 7.6 Rival explanations analysis template upon the completion of data collection
Proposition Rival type Rival explanation
Proposition 1: When an Type (1) null hypothesis Those sixteen impacts to
economy falls towards a firms are not present
recession, the sixteen impacts economic recessions
to construction firms are as Type (4) direct rivals Those sixteen impacts to
suggested by Hypotheses firms are independent of
1a–1p economic recessions
Type (5) commingled rival There are reasons other than
economic recessions that
accounted for the presence of
those sixteen impacts
Proposition 2: The worst an Type (1) null hypothesis Firms do not bid at low bid
economic recession, the prices to win projects in times
lower the firm’s bid price to of economic recession
win projects as suggested by Type (4) direct rivals Firms bidding at low bid
Hypothesis 2 prices were independent of
economic recessions
accounted for firms bidding
at low bid prices
Type (7) rival theory Higher risks forecasted
during recessionary times
suggest firms will bid higher
to account for premium to
undertake higher downstream
risk
Proposition 3: Not Type (1) null hypothesis Albeit the absence of
considering the presence of moderating factors, firms do
moderating factors, the not compromise on quality
impacts of economic despite recessionary times
recessions on firms will result Type (4) direct rivals Firms’ quality tradeoff
in a higher quality tradeoff by decisions were independent
the firm as suggested by of the impacts of economic
Hypotheses 3a and 3b recessions
Type (5) commingled rival There are other factors (such
as business strategies
independent of recessionary
times) that caused the quality
tradeoff
Proposition 4: Not Type (1) null hypothesis The fall in the prices of
considering the presence of materials, manpower and
moderating factors, the machinery, have no effects on
higher the fall in the prices of the quality tradeoff by the
materials, manpower and firm
machinery, the lower the
quality tradeoff by the firm as
suggested by Hypothesis 3c
(continued)

Proposition 5: In times of Type (1) null hypothesis Existing governmental efforts
economic recession, there is a in nurturing a high quality
relationship between built environment have no
governmental efforts in impact on (any one of) the
nurturing a high quality built sixteen impacts of economic
environment and the sixteen recessions
suggested impacts of
economic recessions as
suggested by Hypothesis 4a
Proposition 6: Despite Type (1) null hypothesis Existing governmental efforts
government initiatives in in nurturing a high quality
nurturing a high quality built built environment have a
environment in Singapore, notable impact on firms’
the initiatives are weak in quality tradeoff decisions
persuading firms to uphold
construction quality during
recessionary times as
suggested by Hypothesis 4b
Proposition 7: There is a set Type (1) null hypothesis The extent of quality tradeoff
of seven firm characteristics is not reduced in light of (any
(that assist firms in of) the firm characteristics or
weathering recessions and/or strategies
upholding quality works) and Type (4) direct rival The reduction in quality
thirteen firm strategies (that tradeoff is independent of the
firms respond with to weather firm characteristics or
recessions). These strategies
characteristics and strategies
reduce the extent of the Type (5) commingled rival There are other firm
quality tradeoff outcome of a characteristics or strategies
project during recessionary resulting in the quality
times as suggested by tradeoff reduction
Hypotheses 5a and 5b
7.3.5.2 The Specific Analytic Technique
There are five specific analytic techniques suggested by Yin (1994) namely pattern
matching, explanation building, time series analysis, logic models and cross case
synthesis. For case study analysis, one of the most desirable techniques is using a
pattern matching logic (Yin, 1994) where Trochim (1989) suggests that such logic
compares an empirically based pattern with a predicted one. Matching patterns would
proceed to strengthen the internal validity of the case study. In conducting pattern
matching among the cases, when the case studies have similar contexts and produces
similar results, one is said to have achieved literal replication. If the case studies have
different contexts and yet the findings for each case is aligned with the propositions
suggested by the conceptual framework, one is said to have drawn an even stronger
Table 7.7 Template for case study analysis using pattern matching and replication logic
Predicted patterns (i.e. the Actual Actual Actual Replication
hypotheses within each patterns from patterns from patterns from logic (lit-
proposition) case study 1 case study 2 case study 3 eral/theoretical
(aligned with (aligned with (aligned with replication)
predicted predicted predicted
pattern pattern pattern
(Yes/No)) (Yes/No)) (Yes/No))
P1 Hypothesis 1a
Hypothesis 1b
Hypothesis 1c
Hypothesis 1d
Hypothesis 1e
Hypothesis 1f
Hypothesis 1g
Hypothesis 1h
Hypothesis 1i
Hypothesis 1j
Hypothesis 1k
Hypothesis 1l
Hypothesis 1m
Hypothesis 1n
Hypothesis 1o
Hypothesis 1p
P2 Hypothesis 2
P3 Hypothesis 3a
Hypothesis 3b
P4 Hypothesis 3c
P5 Hypothesis 4a
P6 Hypothesis 4b
P7 Hypothesis 5a
Hypothesis 5b
conclusion about the propositions suggested by the conceptual framework; achieving

theoretical replication. The research team notes that the use of pattern matching as
an analytic technique is solely qualitative where it involves no statistical or quantita-
tive criteria as the available statistical techniques are irrelevant because none of the
variables in the pattern will have a variance where each variable only has a single
data point (Yin, 1994). Table 7.7 summarizes the template that will be used for the
analysis of the case study findings using pattern matching and eventual attainment
of replication logic.
7.4 Expert Interviews for Validation of Research Findings
Interviews with three experts in the construction industry and a government repre-
sentative were conducted to validate the research findings derived from the survey
method and case study method. The key purpose of the expert interviews is to find
consistent answers to standardized questions (Blaxter et al., 2010). Please refer to
Appendix J, K, L and M for the expert interview verbatim reports.
7.4.1 Interview Approach
In relation to the interview approach, a structured approach was adopted, aiming

to expose each interviewee to exactly the same interview experience (Fontana &
Frey, 2005). This is so that any differences in responses would be more likely due
to variations among participants rather than the interview process itself (Singleton
& Straits, 2002). Furthermore, in a structured approach, the interview process itself
is highly regulated such that researchers would be neutral and consistent throughout
all interviews (Fontana & Frey, 2005). In effect, “the goal is nothing less than the
elimination of the interviewer as a source of measurement error” (Groves, 1989,
p. 358). The disadvantage of a structured interview protocol is that there is a high
likelihood that the interview will inhibit the respondent’s rich experiences, beyond the
boundaries of the interview questions or the interviewer. Nonetheless, this concern
is not valid because the purpose of this interview is to validate a well derived set of
findings as opposed to an exploratory one.
In summary, the format of the validation interview, unlike the case study inter-
view, is a fully structured interview because the purpose of this interview is to seek
only three possibilities in response from the interviewees; confirmation of findings,
disagreements and/or further insights.
7.4.2 Method of Expert Interview Results Analysis
The validation interview findings underwent a straightforward content analysis; siev-

ing out three distinct responses (confirmation of the findings, disagreement with the
findings and/or further insights) from the industry experts. As the interview with
the government representative was carried out at an earlier phase, a semi-structured
interview format was used then. As such, the contributions from the interview with
the government representative does not come in the form of “confirmation, disagree-
ment and/or further insights” but in the form of seeking inconsistencies between the
government representative’s responses and the research findings.
7.5 Summary 111
7.5 Summary
This chapter has provided an overview of the research design for this study where a
mixed method research design consisting of the survey method which is quantitative
in nature and the case study method which is qualitative in nature will be adopted.
In addition, expert interviews will be used to validate the triangulated findings of the
survey method and the case study method. This chapter also laid out the detail design
and methodology for each research method; ranging from the sampling methods and
data collection protocols to the data analysis strategy. The following chapters shall
proceed to evaluate, analyze and discuss the research findings.
Chapter 8
Survey Results Analysis and Discussion
The survey was conducted with 30 respondents representing main contractors, sub-
contractors and consultants in Singapore with 24 participants in higher management
(directorial level and above) and six in mid management (project manager and above).
Of the 30 respondents, there are thirteen A1 contractors, five A2-B1 contractors, six
B2-C grade contractors and six consultants. Please refer to Appendix A for the ques-
tionnaire. This chapter provides a descriptive statistical analysis as shown in Sect. 8.1
and an inferential statistical analysis as shown in Sects. 8.2 and 8.3. Section 8.4 pro-
vides a summary of the quantitative findings.
8.1 Descriptive Statistical Analysis
8.1.1 Indicators Measuring the Effects of Governmental

Efforts (GPP)
Table 8.1 shows the descriptive statistics for the indicators measuring the effects of
Government Pump-priming (or other government efforts in nurturing a high quality
built environment); represented by indicators with a prefix gpp. The indicators are
measured on a Likert scale as follows: 1.000 strongly disagree; 2.000 disagree;
3.000 neutral; 4.000 agree; 5.000 strongly agree.
Gpp_1 to gpp_5 are effects of government pump-priming (or other government
efforts) on the bidding phases of projects during recessionary times. With gpp_2 to
gpp_5 having mean values ranging from 2.400 to 2.667 and median values of 2.000
(disagree), on average, respondents disagreed with these effects of government pump-
priming (or other government efforts). Gpp_1 on the other hand, have a mean value
of 3.300 and a median value of 4.000 (strongly agree) which suggest that gpp_1 is a
relatively strong effect of government pump-priming (or other government efforts).

114 8 Survey Results Analysis and Discussion
Table 8.1 Descriptive statistics for indicators with prefix gpp

Indicators for the effects of government N Mean Median Min. Max. Std.
pump-priming (or other government dev.
efforts) on firms in times of economic
recession
gpp_1—construction demand is higher 30 3.300 4.000 1.000 5.000 1.159
as compared to recessionary times
without government pump-priming (or
other government efforts)
gpp_2—firm’s pressure to secure bids is 30 2.400 2.000 1.000 4.000 0.917
lower as compared to recessionary times
gpp_3—less aggressive bid assumptions 30 2.6 2.000 1.000 4.000 0.987
gpp_4—number of bidders per project is 30 2.533 2.000 1.000 4.000 0.846
gpp_5—bidding competition is lower as 30 2.667 2.000 1.000 4.000 1.075
compared to recessionary times without
government pump-priming (or other
government efforts)
gpp_6—changes in scope of works is 30 2.823 4.000 1.000 5.000 0.959
gpp_7—staff productivity is higher as 30 2.933 3.000 1.000 5.000 0.964
government efforts)
gpp_8—supply chain reliability is higher 30 2.9 3.000 1.000 4.000 0.87
gpp_9—overhead costs is lower as 30 2.7 3.000 1.000 4.000 0.823
government efforts)
gpp_10—defaults in payment is lower as 30 2.867 3.000 1 4.000 0.957
government efforts)
gpp_11—more sources of fund as 30 2.667 3.000 1.000 4.000 0.869
government efforts)
(continued)
8.1 Descriptive Statistical Analysis 115

Indicators for the effects of government N Mean Median Min. Max. Std.
pump-priming (or other government dev.
efforts) on firms in times of economic
recession
gpp_12—lending rates are lower as 30 2.867 3.000 1.000 5.000 0.957
government efforts)
gpp_13—property prices is higher as 30 2.4 2.000 1.000 4.000 0.917
government efforts)
gpp_14—prices of materials fluctuates 30 2.967 3.000 1.000 4.000 0.875
less as compared to recessionary times
gpp_15—prices of manpower fluctuates 30 2.933 3.000 1.000 4.000 0.892
without govern government
pump-priming (or other government
efforts)
gpp_16—prices of machinery fluctuates 30 3.000 3.000 1.000 4.000 0.894
Legend 1.000 strongly disagree; 2.000 disagree; 3.000 neutral; 4.000 agree; 5.000
strongly agree
Gpp_6 to gpp_13 are effects of government pump-priming (or other govern-

ment efforts) on the construction phases of projects during recessionary times with
mean values ranging from 2.400 to 2.993. The mean values suggest that on aver-
age, respondents disagree with these effects of government pump-priming (or other
government efforts). Nonetheless, gpp_6 have a median value of 4.000 (strongly
agree) while gpp_7 to gpp_12 have median values of 3.000 (neutral). This suggests
that the respondents saw lesser changes in the scope of work in light of government
pump-priming (or other government efforts).
Gpp_14, gpp_15 and gpp_16 are effects of government pump-priming (or other
government efforts) on prices of materials, manpower and machinery whose effects
stretch across the bidding and construction phases. Gpp_14, gpp_15 and gpp_16
have mean values of 2.967, 2.933 and 3.000 which are relatively high where the
median is 3.000 (neutral).
However, one should note that the indicators have a wide range of responses from
1.000 (strongly disagree) to 4.000/5.000 (agree/strongly agree). This wide range in
response may imply that government pump-priming (or other government efforts)
may benefit only selected segments of the construction industry; explaining the dif-
fering views.
8.1.2 Indicators Measuring the Impacts of Economic

Recessions (F)
Table 8.2 shows the descriptive statistics for the indicators measuring the impacts of
economic recessions; represented by indicators with a prefix F. The indicators are
F_1 to F_5 are impacts of economic recessions on the bidding phases of projects.
Table 8.2 shows that firms perceived F_1 to F_5 as the largest impacts of economic
recessions on them with mean values ranging from 3.933 to 4.533 and median values
of 4.000 and 5.000. F_6 to F_13 on the other hand, are impacts of economic recessions
on the construction phases of projects with mean values ranging from 2.600 to 3.867.
Falling sources of fund (F_11) is seen as a relatively large impact with a mean value of
3.867. Following which, falls in supply chain reliability (F_8), pay masters defaulting
on payments (F_10) and increased costs of burrowing (F_12) have relatively high
mean values as well; with values of 3.600, 3.633 and 3.533 respectively. F14, F15
and F16 are impacts of economic recessions on prices of materials, manpower and
Table 8.2 Descriptive statistics for indicators with prefix F

Indicators for the perceived impacts of N Mean Median Min. Max. Std.
economic recessions on firms dev.
F_1—Construction demand falls 30 3.933 4.000 1.000 5.000 1.123
F_2—Firm’s pressure to secure bids 30 4.333 5.000 2.000 5.000 0.789
rises
F_3—Aggressive bid assumptions rises 30 4.233 4.000 3.000 5.000 0.667
F_4—Number of bidders per project 30 4.533 5.000 2.000 5.000 0.718
rises
F_5—Bidding competition rises 30 4.367 5.000 1.000 5.000 0.912
F_6—Changes in scope of works rises 30 3.333 3.000 1.000 5.000 0.869
F_7—Staff productivity falls 30 3.167 3.000 2.000 5.000 1.003
F_8—Reliability of supply chain falls 30 3.600 4.000 2.000 5.000 0.841
F_9—Overhead costs rises 30 2.633 2.000 2.000 5.000 0.836
F_10—Defaults in payment 30 3.633 4.000 1.000 5.000 0.948
F_11—Sources of funds fall 30 3.867 4.000 2.000 5.000 0.763
F_12—Lending rates rises 30 3.533 4.000 2.000 5.000 0.884
F_13—Property prices fall 30 2.600 3.000 1.000 4.000 0.917
F_14—Prices of materials fall 30 3.300 4.000 1.000 5.000 1.005
F_15—Prices of manpower fall 30 2.967 3.000 1.000 5.000 0.912
F_16—sPrices of machinery fall 30 3.133 3.000 2.000 5.000 0.884
strongly agree
machinery which stretch across the bidding and construction phases of projects. The
mean values are 3.300, 2.967 and 3.133 with median values of 4.000, 3.000 and
3.000 respectively; erring towards an agreement with the presence of these impacts
in times of economic recessions.
Lastly, by examining the minimum and maximum rating, most questions received
a wide spectrum of responses indicating some level of subjectivity with ranges from
1.000/2.000 (strongly disagree/disagree) to 5.000 (strongly agree). With all firms
surveyed being local companies, the findings may suggest that the unique character-
istics of each firm may have resulted in different firms experiencing different level
of impacts arising from economic recessions. Worth mentioning is the minimum and
maximum rating of F_3 as it achieved a relatively high rating of minimum 3 and
maximum 5; suggesting that most firms agreed that in times of economic recession,
firms make aggressive assumptions in deriving their bid prices in order to be more
competitive to win projects.
8.1.3 Indicators Measuring Bid Price Decisions (BID)
Table 8.3 shows the descriptive statistics for the indicators measuring firms’ bid price
decisions; represented by indicators with a prefix BID. The indicators are measured
on a Likert scale as follows: 1.000 strongly disagree; 2.000 disagree; 3.000
neutral; 4.000 agree; 5.000 strongly agree.
BID_1 and BID_2 have mean values of 4.433 and 3.100 respectively indicating
that firms bid at low bid prices in order to be more competitive to win projects in
times of economic recessions. The minimum and maximum rating for BID_1 and
BID_2 are 3.000 to 5.000 and 2.000 to 4.000 respectively which means a relatively
Table 8.3 Descriptive statistical measures for indicators with prefix BID
Indicators N Mean Median Min. Max. Std.
dev.
BID_1—the worst an economic 30 4.433 5.000 3.000 5.000 0.616
recession, the lower the profit margin in
my company’s bid price in order to win a
project (Strongly agree implies a point
of 5 while strongly disagree implies a
point of 1)
BID_2—the more government support 30 3.100 3.000 2.000 4.000 0.746
during an economic recession, the less
likely a firm will bid at low profit
margins (Strongly disagree implies a
point of 5 while strongly agree implies a
point of 1)
strongly agree
low dispersion in the response given. This indicates a level of certainty that firms
bid at low prices to win projects in times of economic recession as suggested by the
mean values.
8.1.4 Indicators Measuring Quality Tradeoff Decisions

(QTO)
Table 8.4 shows the descriptive statistics for the indicators measuring firms’ quality
tradeoff decisions; represented by indicators with a prefix QTO. The indicators are
With reference to Table 8.4, QTO _1 and QTO_2 show a low mean value of 2.233
and 2.067 respectively implying that on average, the compromise on quality by firms
is only to a small extent despite times of economic recessions. However, one should
note that although the mean value is low and median is at 2.000 for both indicators,
the survey respondents have A1 contractors accounting for 13 out of 30 respondents.
This could imply that A1 contractors have a set of characteristics and strategies that
allow them to not on compromise quality; in alignment with the proposed conceptual
framework in Chap. 6. Furthermore, one should also note that QTO_1 and QTO_2
received a wide spectrum of responses from a rating of 1.000 (strongly disagree)
to 5.000 (strongly agree); further substantiating that quality tradeoff decisions vary
among firms during recessionary times and there must be a set of factors moderating
the extent of quality tradeoffs as suggested by Hypotheses 4 and 5.
Table 8.4 Descriptive statistical measures for indicators with prefix QTO
dev.
QTO_1—My firm reduces the priority of 30 2.233 2.000 1.000 5.000 1.453
quality in the time-cost-quality tradeoff
equation in times of economic
recessions (by TCQ importance rating)
QTO_2—My firm reduces the priority of 30 2.067 2.000 1.000 5.000 1.209
quality in the time-cost-quality tradeoff
equation in times of economic
recessions (by TCQ priority ranking)
strongly agree
8.1.5 Indicators Measuring the Extent of Firm

Characteristics in a Firm (FC)
Table 8.5 shows the descriptive statistics for the indicators measuring the extent of
firm characteristics (favorable for weathering recessions) in a firm; represented by
indicators with a prefix FC. The indicators are measured on a Likert scale as follows:
1.000 strongly disagree; 2.000 disagree; 3.000 neutral; 4.000 agree; 5.000
strongly agree.
Chapter 4 sets out Hypothesis 5a that the firm characteristics listed in Table 8.5
moderates the extent of firms’ quality tradeoff decisions. Fc_4, Fc_2_ and Fc_5 are
characteristics that are largely prevalent among firms with mean values of 4.133,
3,833 and 3.800 respectively. These three characteristics are the only ones among
the seven that have a narrower spectrum in responses with a minimum rating of
2.000 and a maximum rating of 5.000. The remaining characteristics see a wider
range of responses with minimum rating of 1.000 and a maximum rating of 5.000.
Furthermore, Fc_3 has a low mean value of 2.900, suggesting that this characteristic
is less seen among Singapore contractor firms. All in all, the spectrum of responses
suggest that, except for Fc_2, Fc_4 and Fc_5, the characteristics (that upholds qual-
Table 8.5 Descriptive statistical measures for indicators with prefix FC

dev.
Fc_1—My firm have core niche areas 30 3.367 4.000 1.000 5.000 1.354
and/or specialized services
Fc_2—My firm have relatively high 30 3.833 4.000 2.000 5.000 0.898
bargaining power in the industry and/or
a good network in the industry
Fc_3—My firm has cost advantage from 30 2.900 3.000 1.000 5.000 1.136
technology know-how, high R&D
capability and/or possession of value
adding intellectual property
Fc_4—My firm has relatively good 30 4.133 4.000 2.000 5.000 0.884
reputation, track record and management
certifications
Fc_5—My firm has relatively strong 30 3.800 4.000 2.000 5.000 0.872
financial standing
Fc_6—My firm has relevant technical 30 3.467 4.000 1.000 5.000 1.284
personnel
Fc_7—My firm has a relatively strong 30 3.767 4.000 1.000 5.000 0.883
culture of quality with strong
management commitment to quality
works
strongly agree
ity work and/or weather recessions) found in construction firms in Singapore vary
considerably. Having said that, to shed even the slightest of insights for Hypothesis
5a, an inferential statistical method, in particular SEM is required. Hence, one should
understand that the above seek only to shed insights on the prevalence of the listed
firm characteristics among Singapore contractors.
8.1.6 Indicators Measuring the Extent of Firm Strategies

in a Firm (FS)
Table 8.6 shows the descriptive statistics for the indicators measuring the extent
of firm strategies (favorable for weathering recessions) in a firm; represented by
indicators with a prefix FS. The indicators are measured on a Likert scale as follows:
1.000 strongly disagree; 2.000 disagree; 3.000 neutral; 4.000 agree; 5.000
strongly agree.
Chapter 5 sets out Hypothesis 5b that the firm strategies listed in Table 8.6 mod-
erate the extent of firms’ quality tradeoff decisions. With high mean values ranging
from 3.867 to 4.067, one may suggest that Fs_3, Fs_4, Fs_5, Fs_6, Fs_7 and Fs_9 are
response strategies that are largely adopted by construction firms in Singapore during
recessionary times. The remaining indicators have mean values ranging from 3.033
to 3.700. Despite relatively high mean values at 3.000 and above for all indicators,
there is a wide spectrum of responses received with minimum ratings of 1.000/2.000
to maximum ratings of 5.000 (where 1.000 indicates strongly disagree and 5.000
indicates strongly agree). Hence, it can be said that the response strategies of Singa-
pore contractor firms in times of economic recessions vary considerably. Having said
that, to shed even the slightest of insight on Hypothesis 5b, SEM is required. Hence,
one should understand the above seeks only to shed insights on the prevalence of the
listed firm strategies among contractor firms in Singapore.
8.2 Inferential Statistical Analysis
8.2.1 Evaluation of (SEM) Reflective Measurement Model
The purpose of this section is to establish reliability and validity of the SEM measure-
ment model before proceeding to evaluate the structural model in the next section.
This is because the evaluation of the structural model no longer considers the relia-
bility and validity of measured variables but examines the path significance between
latent variables.
8.2 Inferential Statistical Analysis 121
Table 8.6 Descriptive statistical measures for indicators with prefix FS

dev.
Fs_1—During times of recession, my 30 3.467 4.000 1.000 5.000 0.806
firm adopts diversification and/or new
market entry strategies
firm adopts divestiture strategies and
place greater emphasis on niche
Fs_3—My firm adopts crisis 30 3.933 5.000 1.000 5.000 1.389
management and pre-planning prior to
the recession
Fs_4—(During times of recession), my 30 4.067 4.000 2.000 5.000 0.680
firm emphasizes on the importance of
establishing strong client relationships
firm emphasizes on the importance of
establishing good relationships with
subcontractors and suppliers etc.
firm invests in technology, innovation
and/or R&D
firm adopts strategies that streamline
operations and/or achieve leaner
management
firm carries out cost reduction through
human resource alterations
firm places emphasis on special
marketing efforts
firm invests heavily in risk management
Fs_11—My firm document lessons from 30 3.600 4.000 1.000 5.000 0.800
past recessions
firm negotiates for special loan services
firm enters into JV, M&A, partnerships
and/or collaborations
strongly agree
8.2.1.1 Step 1: Assess Internal Consistency Reliability
Internal consistency measures whether the items proposed to measure the same gen-
eral construct produce similar scores. For example, if a respondent expressed agree-
ment with the statements “I like to ride bicycles” and “I’ve enjoyed riding bicycles
in the past”, and disagreement with the statement “I hate bicycles”, this would be
indicative of good internal consistency of the test. Cronbach’s alpha is a conservative
measure of reliability which results in relatively low reliability values. Composite
reliability on the other hand, tends to overestimate the internal consistency reliability
resulting in relatively higher estimates. Hence, when analyzing indicator’s internal
consistency reliability, the true reliability usually lies between Cronbach’s alpha
(i.e. the lower bound) and composite reliability (i.e. the upper bound) (Hair, 2017).
Table 8.7 shows the internal consistency reliability measures of all indicators in the
SEM model.
With reference to Table 8.7, apart from GPP_2, GPP_3, FS, ER_1 and ER_2, all
remaining constructs have a true reliability score of between the 0.60–0.90 accep-
tance region for internal consistency reliability. GPP_2, GPP_3 and FS have reliabil-
ity scores above the acceptance region at 0.905, 0.973 and 0.907 respectively. Values
Table 8.7 Measures of internal consistency reliability of indicators

Latent variables Indicators Internal consistency reliability
Cronbach’s Composite True reli-
Alpha reliabil- ability (A
(lower ity + B)/2
bound) (upper
(A) bound)
(B)
0.60–0.90 0.60–0.90 0.60–0.90
GPP_1—effects of gpp_1 0.787 0.857 0.822
government gpp_2
pump-priming (or other
government efforts) on gpp_3
bidding phase of projects gpp_4
gpp_5
government gpp_7
government efforts) in gpp_8
times of recession on gpp_9
construction phase of gpp_10
projects
gpp_11
gpp_12
gpp_13
(continued)

(lower ity + B)/2
bound) (upper
(A) bound)
(B)
0.60–0.90 0.60–0.90 0.60–0.90
government gpp_15
government efforts) in gpp_16
times of recession on
fluctuations in prices of
machinery
ER_1—Economic F_1 0.361 0.683 0.522
recession impacts on F_2
average number of
bidders per project F_4
ER_2—Economic F_3 0.391 0.764 0.578

bidding competition
BID_PRICE—Bid price Bid_1 0.328 0.577 0.748
is low in times of Bid_2
economic recession
ER_3—Economic F_6 0.768 0.727 0.763
construction phase of
projects F_8
F_9
F_10
F_11
F_12
F_13
ER_4—Economic F_14 0.865 0.916 0.891
prices of materials.
manpower and F_16
machinery
(continued)

(lower ity + B)/2
bound) (upper
(A) bound)
(B)
0.60–0.90 0.60–0.90 0.60–0.90
FC—firm characteristics Fc_1 0686 0.651 0.669
(FC) that upholds Fc_2
construction quality
and/or assist firms in Fc_3
weathering recessions Fc_4
Fc_5
Fc_6
Fc_7
FS—firm strategies (FS) Fs_1 0.898 0.915 0.907
that assist firms in Fs_2
weathering recessions
Fs_3
Fs_4
Fs_5
Fs_6
Fs_7
Fs_8
Fs_9
Fs_10
Fs_11
Fs_12
Fs_13
QTO—(further) quality QTO_1 0.580 0.826 0.703
tradeoff in light of QTO_2
economic recessions
above 0.90 are not desirable as they imply that the indicator variables are measuring
the same phenomenon and hence, likely to be not a valid measure of the construct
(Hair, 2017). On the other hand, ER_1 and ER_2 have reliability scores below the
acceptance region at 0.524 and 0.578 respectively; indicating a lack of internal consis-
tency reliability. Nonetheless, GPP_2, FS, ER_1 and ER_2 have indicator reliability
values that are considerably close to the acceptance region of 0.60–0.90. Hence, the
indicators of these constructs should be further reviewed and a conclusion made at
the end of the measurement model evaluation.
8.2.1.2 Step 2 Assess Convergent Validity
Convergent validity refers to the degree in which two measures of constructs that
theoretically should be related are in fact related. Convergent validity, along with dis-
criminant validity (discussed later), is a subtype of construct validity where construct
validity is the degree to which a test measures what it purports to be measuring.
In assessing convergent validity, one examines the significance of the outer load-
ing, the indicator reliability and the Average Variance Extract (AVE). The rule of
thumb for the size of the outer loadings should be that of more than 0.7. The ratio-
nale is that the square of a standardized indicator’s outer loading represents how
much of a variation in an item is explained by the construct. An established rule
of thumb is that a latent variable should explain at least 50% of each indicator’s
variance. With 0.7082 equating to 0.5, the rule of thumb as such is for the outer
loadings to be greater than 0.70 and the indicator reliability (i.e. the square of outer
loadings) and the AVE (defined as the overall mean value of the squared loadings of
the reflective indicators measuring the construct) to be more than 0.5. Indicators that
have outer loadings less than 0.70 but more than 0.40 should be further evaluated
before making the decision to delete the indicator. Figure 8.1 illustrates the decision
making process as suggested by Hair (2017). Note that indicators with very low outer
Fig. 8.1 Outer loading relevance testing (Hair, 2017)

loadings, however, at less than 0.40 should always be eliminated from the construct
(Hair et al., 2011). Table 8.8 is a summary of the outer loading, indicator reliability
and AVE results generated from the SmartPLS 3 software in measuring convergent
validity.
As shown in Table 8.8, the outer loadings and indicator reliability values demarked
italic pertains to those indicators that have failed to have their variances substantially
explained by their respective constructs. With outer loadings below 0.400, Bid_2,
F_6, F_10, F_13, Fc_3, Fc_4, Fc_5, Fs_3 and Fs_8 have to be deleted in alignment
with the decision making process established in Fig. 8.1. In relation to indicators that
have outer loading values between 0.40 and 0.70, these indicators have been respec-
tively deleted from the PLS-SEM model and their effects observed. The findings
show that none of the deletion of these indicators results in an increase in neither the
composite reliability nor AVE values above the threshold. As such, these indicators
are significant and should be retained. Last but not least, as with the decision making
Table 8.8 Summary of outer loading, indicator reliability and AVE results for convergent validity
Latent variable Indicator Convergent validity
outer Indicator Average variance
loading reliability extracted (AVE)
(loading) (loading2 )
>0.70 >0.50 >0.50
government gpp_2 0.820 0.672
government efforts) on gpp_3 0.874 0.764
bidding phase of projects gpp_4 0.655 0.429
gpp_5 0.817 0.667
government efforts) in gpp_8 0.903 0.815
times of recession on gpp_9 0.744 0.554
construction phase of gpp_10 0.953 0.908
projects
gpp_11 0.604 0.365
gpp_12 0.581 0.338
gpp_13 0.469 0.220
government efforts) in gpp_16 0.986 0.972
times of recession on
fluctuations in prices of
machinery
(continued)

>0.70 >0.50 >0.50
ER_1—Economic F_1 0.512 0.262 0.424
recession impacts on F_2 0.670 0.449
average number of
bidders per project F_3 0.748 0.560
ER_2—Economic F_4 0.837 0.701 0.620

bidding competition
BID_PRICE—Bid price Bid_1 0.999 0.998 0.511
is low in times of Bid_2 0.155 0.024
economic recession
ER_3—Economic F_6 0.225 0.050 0.328
construction phase of
projects F_8 0.643 0.413
F_9 0.455 0.207
F_10 0.389 0.151
F_11 0.806 0.650
F_12 0.691 0.477
F_13 −0.217 0.047
ER_4—Economic F_14 0.836 0.699 0.786
prices of materials,
manpower and F_16 0.874 0.764
machinery
FC—firm characteristics Fc_1 0.596 0.355 0.246
(FC) that upholds Fc_2 0.542 0.294
construction quality
and/or assist firms in Fc_3 0.325 0.106
weathering recessions Fc_4 0.045 0.002
Fc_5 0.354 0.125
Fc_6 0.525 0.276
Fc_7 0.750 0.563
FS—firm strategies (FS) Fs_1 0.789 0.623 0.483
that assist firms in Fs_2 0.895 0.801
weathering recessions
Fs_3 0.193 0.037
Fs_4 0.750 0.563
Fs_5 0.802 0.643
Fs_6 0.759 0.576
(continued)

>0.70 >0.50 >0.50
Fs_7 0.656 0.430
Fs_8 0.180 0.032
Fs_9 0.858 0.736
Fs_10 0.922 0.850
Fs_11 0.736 0.542
Fs_12 0.464 0.215
Fs_13 0.487 0.237
QTO—(further) quality QTO_1 0.835 0.697 0.704
tradeoff in light of QTO_2 0.843 0.711
economic recessions
process set out in Fig. 8.1, all indicators with outer loading above 0.70 are significant
and are to be kept in the SEM model.
In relation to the AVE values, constructs GPP_1, GPP_2, GPP_3, ER_2 and QTO
have AVE values above 0.500. This implies that, on average, variances are largely
explained by the construct with few resulting from the error of the indicators. ER_1,
ER_3, FC and FS on the other hand, have AVE values below the threshold point of
0.500; at 0.424, 0.328, 0.246 and 0.483 respectively. This implies that, on average,
more variance remains in the error of the indicators than in the variance explained
by the construct. To address these AVE issues, one must examine and revise the
indicators comprising the respective constructs; while still keeping in mind the threats
to content validity when decisions are made to remove indicators. Similarly, upon
review of the modifications, a conclusion will be made at the end of the measurement
model evaluation section.
8.2.1.3 Step 3: Assess Discriminant Validity
Discriminant validity refers to the extent to which a construct is unique and captures
phenomena not represented by other constructs in the model. While examining cross
loadings and the Fornell-Larcker criterion has been the traditional approach of estab-
lishing discriminant validity, recent research has found that these two methods do
not reliably identify discriminant validity issues (Henseler, Ringle, & Sarstedt, 2015;
Hair, 2017). Henseler et al. (2015) proposed assessing the heterotrait-monotrait ratio
(HTMT) of the correlations between constructs and established that the threshold
value should be below 1.00 to establish discriminant validity. Table 8.9 shows the
HTMT values between each construct in the SEM model. In addition to observing
the HTMT values between constructs, bootstrapping should be conducted with 5000
bootstrap samples where the HTMT confidence interval should be examined to test
whether the HTMT values are significantly below 1. The output of the bootstrap will
provide the HTMT values at 2.5% (lower bound) and 97.5% (upper bound) of the
95% confidence interval. The confidence intervals should not include 1.0.
From Table 8.9, one observes a lack of discriminant validity between the constructs
[ER_1 and BID_PRICE], [ER_1 and ER_2], [GPP_1 and ER_1], [GPP_2 and ER_2]
and [GPP_2 and GPP_3] with HTMT values of 1.040, 2.057, 0.986, 0.967 and 1.087
respectively; suggesting that the extent to which the constructs are truly distinct from
one another is not high.
Nonetheless, the HTMT values of 1.040, 0.986, 0.967 and 1.087, the values are
close to the threshold value of 1.000. [ER_1 and ER_2] on the other hand, have
an abnormally high HTMT value of 2.057. The research team makes a judgement
that most of the discriminant validity issues must have arisen because ER_1 (No.
of bidders per project during economic recessions) is conceptually similar to ER_2
(bidding competition in times of economic recessions). Although the number of bid-
ders and competition are not necessarily the same, Auction theory does not explicitly
specify that these two constructs are separate concepts where certain literatures have
interchangeably used the concepts in predicting auction outcomes. For instance, De
Silva et al. (2007) specified that a smaller number of bidders entering an auction will
weaken competition; suggesting a causal and positive relationship between the two.
As such, the modifications to the SEM model arising from this section of analysis
shall translate to a combination of the construct ER_1 and ER_2.
8.2.1.4 Summary of PLS-SEM Measurement Model Results After

Modification
Upon evaluation of the measurement model, the changes to be made to the SEM
model are the removal of the indicators Bid_2, F_6, F_10, F_13, Fc_3, Fc_4, Fc_5,
Fs_3 and Fs_8 on account that their outer loadings are not significant. An assess-
ment of the discriminant validity further suggest that ER_1 and ER_2 constructs
should be combined due to an abnormally high HTMT value of 2.057 between the
two constructs; suggesting that the two constructs are not sufficiently distinct from
one another. Figure 8.2 illustrates SEM model revision 1. Table 8.10 tabulates the
recalculated values for measuring internal consistency reliability, construct validity
and discriminant validity based on the SEM model revision 1.
The modifications to the SEM model have produced largely positive results in
establishing reliability and validity for the SEM measurement model. In terms of
internal consistency reliability, the number of indicators that fall out of the reliability
acceptance region of 0.60–0.90 reduced considerably. Before the modification, there
were five constructs (GPP_2, GPP_3, ER_1, ER_2 and FS) that had reliability values
not within the 0.60–0.90 acceptance region. After the modification however, only
two constructs (GPP_3 and FS) do not fall within the 0.60–0.90 acceptance region;
130
Table 8.9 SmartPLS 3 software output for HTMT values in establishing discriminant validity
B_P E1 E2 E3 E4 FC FS G1 G2 G3 M1 M2 M3 M4 Q
B_P
E1 1.040
E2 0.843 2.057
E3 0.667 0.648 0.755
E4 0.447 0.494 0.479 0.684
FC 0.585 0.619 0.367 0.519 0.261
FS 0.532 0.559 0.568 0.420 0.342 0.471
G1 0.618 0.986 0.967 0.309 0.174 0.380 0.391
G2 0.473 0.844 0.760 0.254 0.197 0.280 0.343 1.087
G3 0.343 0.580 0.463 0.197 0.158 0.192 0.237 0.859 0.806
M1 0.388 0.207 0.102 0.357 0.201 0.187 0.394 0.142 0.108 0.065
M2 0.477 0.537 0.381 0.373 0.166 0.358 0.233 0.186 0.129 0.044 0.345
M3 0.317 0.435 0.396 0.147 0.066 0.584 0.191 0.210 0.212 0.199 0.104 0.011
M4 0.227 0.582 0.668 0.191 0.223 0.478 0.231 0.382 0.334 0.408 0.019 0.187 0.388
Q 0.490 0.317 0.321 0.426 0.405 0.471 0.460 0.477 0.424 0.238 0.093 0.433 0.149 0.186
8 Survey Results Analysis and Discussion
Table 8.10 Summary of PLS-SEM measurement model results from SmartPLS 3 after modification
Latent Variable Indicators Internal consistency reliability Convergent validity Discriminant
validity
Cronbach’s Composite True reliability Outer loadings Indicator AVE HTMT
Alphas (lower reliability (A + B)/2 reliability confidence
bound) (A) (upper bound) interval does
(B) not include 1
0.60–0.90 0.60–0.90 0.60–0.90 >0.70 >0.50 >0.5 (Yes/No)
conditional conditional
acceptance for acceptance for
values between values between

0.40–0.70 0.16–0.50
GPP_1 gpp_1 0.787 0.858 0.823 0.494 0.244 0.555 Yes
gpp_2 0.820 0.672
gpp_3 0.873 0.762
gpp_4 0.657 0.432
gpp_5 0.816 0.666
GPP_2 gpp_6 0.917 0.882 0.900 0.719 0.517 0.495 No (1.087 with
gpp_7 0.431 0.186 a confidence
interval of
gpp_8 0.644 0.415 1.025–1.186)
gpp_9 0.881 0.776
gpp_10 0.721 0.520
gpp_11 0.946 0.895
gpp_12 0.578 0.334
gpp_13 0.567 0.321
(continued)
131
132

validity
(B) not include 1
0.60–0.90 0.60–0.90 0.60–0.90 >0.70 >0.50 >0.5 (Yes/No)
0.40–0.70 0.16–0.50
GPP_3 gpp_14 0.971 0.975 0.973 0.909 0.826 0.928 No (0.859 with
gpp_15 0.994 0.988 a confidence
interval of
gpp_16 0.986 0.972 0.621–1.026)
ER_1 &2 F_1 0.696 0.803 0.750 0.473 0.224 0.456 Yes
F_2 0.684 0.468
F_3 0.826 0.682
F_4 0.690 0.476
F_5 0.657 0.432
BID_PRICE Bid_1 – – – – – – –
ER_3 F_7 0.772 0.844 0.808 0.781 0.610 0.524 Yes
F_8 0.681 0.464
F_9 0.573 0.328
F_11 0.818 0.669
(continued)
validity
(B) not include 1
0.60–0.90 0.60–0.90 0.60–0.90 >0.70 >0.50 >0.5 (Yes/No)

0.40–0.70 0.16–0.50
F_12 0.740 0.548
ER_4 F_14 0.865 0.916 0.891 0.836 0.699
F_15 0.945 0.893
F_16 0.874 0.764
FC Fc_1 0.522 0.705 0.614 0.601 0.361 0.786 Yes
Fc_2 0.571 0.326
Fc_6 0.526 0.277
Fc_7 0.741 0.549
FS Fs_1 0.919 0.933 0.926 0.791 0.626 0.569 Yes
Fs_2 0.903 0.815
Fs_4 0.738 0.545
Fs_5 0.802 0.643
(continued)
133
134

validity
(B) not include 1
0.60–0.90 0.60–0.90 0.60–0.90 >0.70 >0.50 >0.5 (Yes/No)
0.40–0.70 0.16–0.50
Fs_6 0.774 0.599
Fs_7 0.661 0.437
Fs_9 0.864 0.746
Fs_10 0.925 0.856
Fs_11 0.738 0.545
Fs_12 0.463 0.214
Fs_13 0.476 0.227
QTO QTO_1 0.580 0.826 0.703 0.822 0.676 0.704 Yes
QTO_2 0.856 0.733
H1a-e
H2
H4a-b
H3a
H5a
H5b
H1g, h, I, k, l
H3b
H4a-b H5a
H5b
H3c
H4a-b
H1n-p
Fig. 8.2 SEM model revision 1 (Moderating effect 1: FC moderates the effect of BID_PRICE on
QTO. Moderating effect 2: FS moderates the effect of BID_PRICE on QTO. Moderating effect 3:
FC moderates the effect of ER_3 on QTO. Moderating effect 4: FS moderates the effect of ER_3
on QTO)
with total reliability values above the 0.60–0.90 acceptance region at 0.973 and
0.926 respectively. Since the values are relatively close to the acceptance region, the
research team carried out no further action to increase the reliability score of the
GPP_3 and FS construct.
In terms of establishing convergent validity, as opposed to the SEM model prior to
adjustments (which had eight indicators showing issues of convergent validity), all
indicators after the modification to the SEM model have an outer loading above 0.40.
Subjecting indicators with outer loading that are 0.40–0.70 to the test of deleting the
indicators individually to observe their effects, none of the deletion of these indicators
resulted in an increase in composite reliability or AVE values above the threshold. As
such, these indicators were retained. In relation to the AVE values, there were four
constructs with AVE values below 0.500. After modification, ER_1&2 and GPP_2
remain as the two constructs with AVE values less than 0.500. Nonetheless, the
AVE values of both constructs are relatively close to the >0.500 acceptance region
with AVE values of 0.456 and 0.495 respectively. Once again, being considerably
close to the acceptance region of >0.500, there is insufficient justification to remove
ER_1&2 and GPP_2 constructs from the model except to bear in mind that more
variance remains in the error of the indicators of ER_1&2 and GPP_2 than in the
variance explained by the construct themselves.
Last but not least, there is a marked improvement in the discriminant validity of
the SEM model where there were six constructs that did not establish discriminant
validity before modification as opposed to two constructs after modifications. The

construct that failed to established discriminant validity pertains to GPP_2 and GPP_3
with HTMT values of 1.087 (with a confidence interval of 1.025 to 1.186) and 0.859
(with a confidence interval of 0.621 to 1.026) respectively. GPP_3 has a HTMT
value that is well below the threshold of 1.000 at 0.859 albeit with a confidence
interval containing the value 1.000 of 0.446 to 1.070. As such, no further action
will be taken to address the HTMT value of GPP_3. On the other hand, GPP_2
requires more evaluation given that it has a HTMT value of 1.087 with confidence
interval of 1.025 and 1.186. The likely reason for the relatively high HTMT value
between GPP_1 and GPP_2 must have been because these are fundamentally a
reflection of the effects of government pump-priming (or other government efforts).
Albeit two separate constructs, the separation is made only to ensure the effects
of government pump-priming (or other government efforts) are catered specifically
to the right impacts of economic recessions (i.e. effects on the bidding stages and
effects on the construction stages). Hence, conceptually, there is no concern with the
slight similarities between GPP_1 and GPP_2. Considering that 1.044 is exceeding
the threshold value marginally and that maintaining GPP_1 and GPP_2 as separate
constructs is ideal from a content validity point of view, no further action was taken
in relation to the HTMT value between GPP_1 and GPP_2.
All in all, with reliability and validity largely established for the SEM measure-
ment model, the evaluation of the SEM structural model may proceed accordingly.
8.2.2 Evaluation of (SEM) Structural Model
PLS-SEM estimates parameters such that the explained variance of each endogenous
latent variable is maximized whereas CB-SEM estimates parameters such that the
differences between the sample covariance and those predicted by the conceptual
model are minimized. As such, one must understand that the idea of Goodness-of-fit
measures such as the chi-square statistic or the various fit indices associated with
CB-SEM are not fully transferable to PLS-SEM. It is argued that the assessment
criteria for the structural model used by PLS-SEM do not allow for testing of the
overall goodness of the model fit as with CB-SEM. Instead, the model is assessed in
terms of how well it predicts the constructs with six steps as follows (Hair, 2017).
Step 1 reviews collinearity issues while step 2 addresses the statistical significance of
path relationships representing the hypotheses proposed. It is only upon establishing
statistical significance that step 3 addresses the R2 values and steps 4, 5 and 6 address
the effect sizes and predictive relevance of the path relations.
8.2.2.1 Step 1: Assess Structural Model for Collinearity Issues
Collinearity issues pertaining to the SEM structural model is examined using the
Variation Inflation Factor (VIF) where Fig. 8.3 illustrates the decision making pro-
Fig. 8.3 Using VIF to assess collinearity (Source Hair, 2017)
cess in using VIF and Table 8.11 shows the VIF values retrieved from SmartPLS 3
statistical software.
With reference to Table 8.11, all the VIF values of the predictor constructs are well
below the threshold value of 5.000; with VIF values ranging from 1.000 to 2.390.
Hence, there is no collinearity issue in the structural model.
8.2.2.2 Step2: Assess Significance and Relevance of Structural Model

Relationships
The path coefficients represent the hypothesized relationship among the constructs in
the model. Estimated path coefficients close to +1 represent strong positive relation-
ship while coefficients close to −1 represent strong negative relationship between
constructs. The coefficients will have to be examined for their statistical significance
using their p-value (i.e. the significance level).
Significance levels of 1, 5, 10, 25 and 50% are commonly used by researchers
(Stats: Introduction to Estimation, n.d.). The choice of the significance level depends
on the field of study and the study’s objective (Hair, 2017; University of Connecticut,
2017). The rule of thumb for research that is exploratory in nature is to use a 10%
significance level (p 0.100). However, some argued that for complex studies, a
lower confidence interval should be adopted. Professor Gelman (2016), a professor of
statistics and political science at Columbia University, mentioned that adopting a 50%
confidence interval as opposed to a 95% confidence interval per se has advantages
138
Table 8.11 VIF values in assessing collinearity between all sets of predictor constructs
GPP_1 GPP_2 GPP_3 ER_1&2 ER_3 ER_4 BID_PRICE FC FS M. effect 1 M. effect 2 M. effect 3 M. effect 4 QTO
GPP_1 1.000
GPP_2 1.000
GPP_3 1.000 2.390
ER_ 1&2 1.000
ER_3 1.258
ER_4 2.710
BID_PRICE 1.398
FC 2.000
FS 1.497
M. effect 1 1.542
M. effect 2 2.061
M. effect 3 1.508
M. effect 4 1.587
QTO
Legend GPP (Government Pump-Priming (or other government efforts)) ER (Economic Recession Impacts) BID_PRICE (Bid Price) FC (Firm Characteristic)
FS (Firm Strategies) M.effect (Moderating Effects arising from either FC or FS) QTO (Quality tradeoff): please refer to Table 7.2 for further specifications of
each component in the SEM model
Fig. 8.4 Selecting significance level for testing of hypothesis for exploratory studies complex in
nature (Legend N/S means hypothesis not supported and S means hypothesis supported) (Source
author)
for three reasons; (1) computational stability, (2) having a more intuitive evaluation
where half the 50% intervals should contain the true value and (3) it allows one to
get a better sense of where the parameters and predicted values will be as opposed
to attempts of achieving an unrealistic near-certainty. In fact, complex studies have
been made with significance of findings established at 50% confidence intervals.
Bultman (1991) made a quantitative mineral resource assessment of selected mineral
deposits in the Challis National Forest and estimated at a 50% confidence level that
undiscovered mineral deposits in the Challis National Forest contain 35 tonnes of
gold, 7700 tonnes of silver, 12 900 tonnes of copper, 4 970 000 tonnes of lead, 7 888
000 tonnes of zinc, 52 700 tonnes of tungsten, and 221 000 tonnes of molybdenum.
Nickol and Frederic (2013) provided a full cost estimate of 526 million dollars for
a subsonic NASA test bed vehicle at a 50% confidence level based on a proposed
conceptual design and 8-year long programmatic plan. In as recent as 2017, Ene
et al. (2017) looked at the large scale estimation of change in aboveground biomass
in miombo woodlands and provided statistically significant evidence of change in
aboveground biomass over a two year study under model-dependent estimation at
50% confidence level.
Given the nature of this study which involves the prediction of firm behaviors
under complex conditions (i.e. macroeconomic and microeconomic conditions), the
research team advocates a careful selection of significance level to establish statistical
significance to prevent elimination of hypothesized relationships on strict statistical
grounds. As such, the research team proposes a methodology for selecting the sig-
nificance level for testing of hypotheses in exploratory studies complex in nature as
shown in Fig. 8.4.
Having run the SEM model using the SmartPLS 3 software, the findings suggest
that a bulk of the hypotheses represented by the path relationships in the SEM model
are not supported at the 1, 5, 10 and 25% significance level; where the supported
Table 8.12 Effect size of path coefficients and their p-values

Relationship Path Std. dev. t-stat P-value (0.50)
coefficients
GPP_1 to ER_1&2 −0.562 0.115 4.902 0.000
GPP_2 to ER_3 −0.323 0.424 0.761 0.447
GPP_3 to ER_4 −0.197 0.272 0.725 0.468
ER_1&2 to BID_PRICE 0.447 0.167 2.675 0.007
BID_PRICE to QTO 0.243 0.231 1.053 0.193
ER_3 to QTO 0.294 0.408 0.721 0.471
ER_4 to QTO 0.489 0.363 1.350 0.177
M.effect 1 to QTO −0.253 0.263 0.962 0.336
M.effect 2 to QTO −0.421 0.372 1.132 0.258
M.effect 3 to QTO −0.063 0.417 0.152 0.880
M.effect 4 to QTO −0.352 0.403 0.874 0.382
Legend GPP (Government Pump-Priming (or other government efforts)) ER (Economic Recession
Impacts) BID_PRICE (Bid Price) FC (Firm Characteristic) FS (Firm Strategies) M.effect (Mod-
erating Effects arising from either FC or FS) QTO (Quality tradeoff): please refer to Table 7.2 for
further specifications of each component in the SEM model
path relations are shown in Appendix B, C, D, E and F. As such, in alignment with

the methodology set out in Fig. 8.4, the following present the findings supported at
the 50% confidence level. Table 8.12 shows the effect size of path coefficients and
their respective p-values.
With reference to Table 8.12, the path coefficients of [GPP_1 to ER_1&2 at
(−0.562)], [GPP_2 to ER_3 at (−0.323)], [GPP_3 to ER_4 at (−0.197)], [ER_1&2
to BID_PRICE at 0.447], [BID_PRICE to QTO at (0.243)], [ER_4 to QTO at 0.489],
[M.effect 1 to QTO at (−0.253)], [M.effect 2 to QTO at (0.421)] and [M.effect 4 to
QTO at (−0.352)] are found to be statistically significant with p-values lesser than
the alpha value of 0.500. The highest p-value is that of [GPP_3 to ER_4] at 0.468
followed by [GPP_2 to GPP_3] at 0.447 and [M.effect 4 to QTO] at 0.382. These
statistically significant path coefficients can be interpreted as below.
• A path coefficient of −0.562 indicates a negative relationship between GPP_1
and ER_1&2 where the higher government pump-priming (or other government
efforts) are, the lesser the impacts of recession on firms at the bidding phases of a
project.
• A path coefficient of −0.323 indicates a negative relationship between GPP_2 and
ER_3 where the higher government pump-priming (or other government efforts)
are, the lesser the impacts of recession on firms at the bidding phases of a project.
• A path coefficient of −0.197 indicates a negative relationship between GPP_2 and
ER_3 where the higher government pump-priming (or other government efforts)
are, the lesser the impacts of economic recessions on firms at the bidding phases of a
project. All in all, government pump-priming (or other government efforts) has the
strongest effect on the bidding phases of projects (ER_1&2) with a considerably

larger path coefficient of −0.562.
• A path coefficient of 0.447 indicates a positive relationship between ER_1&2 and
BID_PRICE where the worst the economic conditions, the more a firm will bid at
low bid prices in order to win projects.
• A path coefficient of 0.243 indicates a positive relationship between BID_PRICE
and QTO where the more a firm bids at low bid prices, the higher the quality
tradeoff in the project.
• A path coefficient of 0.269 indicates a positive relationship between ER_3 and
QTO where the larger the firm’s perceived impacts of economic recessions on the
construction phase of a project, the higher the quality tradeoff in the project.
• A path coefficient of 0.489 indicates a positive relationship between ER_4 and
QTO where the higher the fluctuations in the price of materials, manpower and
machinery, the higher the quality tradeoff in the project. This is interestingly, in
direct contrary to the relationship hypothesized.
• A path coefficient of −0.251 indicates a negative relationship between Moderating
effect 1 and QTO, whereas the simple effect between BID_PRICE and QTO have a
path coefficient of 0.382. This implies that for higher levels of firm characteristics
as suggested by the indicators of the FC construct (e.g. when FC increases by one
standard deviation unit), the relationship between BID_PRICE and QTO decreases
by the size of moderating effect 1, i.e. 0.382 + (−0.251) 0.131. By examining
the f2 effect size of moderating effect 1 on QTO, one sees the effect size.
• A path coefficient of -0.421 indicates a negative relationship between Moderating
effect 2 and QTO, whereas the simple effect between BID_PRICE and QTO have
a path coefficient of 0.382. This implies that for higher levels of firm strategies
as suggested by the indicators of the FS construct (e.g. when FS increases by one
standard deviation unit), the relationship between ER_1&2 and QTO decreases
by the size of moderating effect 2, i.e. 0.382 + (−0.421) −0.039. By examining
the f2 effect size of moderating effect 2 on QTO, one sees the effect size.
• A path coefficient of −0.352 indicates a negative relationship between Moderating
effect 4 and QTO, whereas the simple effect between ER_3 and QTO have a
path coefficient of 0.294. This implies that for higher levels of firm strategies as
suggested by the indicators of the FS construct (e.g. when FS increases by one
standard deviation unit), the relationship between ER_3 and QTO decreases by
the size of moderating effect 1, i.e. 0.294 + (−0.352) −0.058. By examining
the f2 effect size of moderating effect 1 on QTO, one will tell the effect size on
QTO.
In addition to the testing of significance of the path coefficients, one should assess
the relevance of the significant relationships (Hair, 2017) where the total effects con-
sisting of both direct and indirect effects of an independent variable on a dependent
variable should be considered. By examining total effects, one can examine the indi-
rect effects of GPP_1, GPP_2 and GPP_3 on QTO i.e. the impact of government
pump-priming (or other government efforts) on firms’ quality tradeoff outcomes.
Table 8.13 shows the indirect effects of GPP_1, GPP_2 and GPP_3 on QTO.
Table 8.13 Indirect effects of GPP_1, GPP_2 and GPP_3 on QTO

Relationship Path coefficients Std. dev. t-stat P-value (0.50)
GPP_1 to QTO −0.061 0.115 4.902 0.000
GPP_2 to QTO −0.095 0.424 0.761 0.447
GPP_3 to QTO −0.097 0.272 0.725 0.468
Legend GPP (Government Pump-Priming (or other government efforts)) QTO (Quality tradeoff):
please refer to Table 7.2 for more details of each component in the SEM model
With reference to Table 8.13, the confidence level for the path coefficient between
GPP_1 and QTO is high with a p-value of 0.000 while confidence level of path
coefficients for GPP_2 to QTO and GPP_3 to QTO is low with p-values of 0.447
and 0.468 respectively; albeit all three paths passing the significance test at the 50%
significance level. Negative coefficients suggest a negative relationship; where the
higher government pump-priming (or other government efforts) are, the lower the
quality tradeoff during recessionary times. However, the size of the relationship is
small, indicating support for Hypothesis 4b which will be reiterated in a later section.
8.2.2.3 Step 3: Assess the Level of R2
The coefficient of determination (R2 Value) is the most commonly used measure to
assess structural models. It is a statistical measure of how close the data are to the
fitted regression line. The R2 value ranges from 0 to 1 where the higher the value, the
better the predictive accuracy. Hair (2017) stated that it is difficult to provide rules
of thumb for acceptable R2 values because it depends on the model complexity and
research discipline; where in disciplines such as those of behavioral studies, R2 value
of 0.20 are considered high where in success drivers studies, researchers expect R2
values of 0.75 and above (Hair, 2017). Given the nature of this study that seeks to
predict firm’s behavior in light of macroeconomic and microeconomic conditions,
R2 values of 0.20 and above shall be considered high and values any lower shall still
be accepted and interpreted accordingly. Figure 8.5 illustrates the R2 values output
(along with the path coefficients and outer loadings which has been analysed earlier)
from the SmartPLS 3 software.
• The R2 value between GPP_1 and ER_1&2 is 0.315 indicating that government
pump-priming (or other government efforts) has considerable predictive power in
determining the extent of the impacts of economic recessions on firms during the
bidding phase of a project.
• The R2 value between GPP_2 and ER_3 however, is relatively weaker at 0.140
indicating that the effects of government pump-priming (or other government
efforts) have a relatively weaker predictive power in determining the extent of
the impacts of economic recessions on firms during the construction phase of a
project.
Fig. 8.5 Outer loadings, path coefficients and R2 values of the latent variables for SEM model
revision 1 (Moderating effect 1: FC moderates the effect of BID_PRICE on QTO. Moderating
effect 2: FS moderates the effect of BID_PRICE on QTO. Moderating effect 3: FC moderates the
effect of ER_3 on QTO. Moderating effect 4: FS moderates the effect of ER_3 on QTO)
• The R2 value between GPP_3 and ER_4 however, is weak at 0.039 indicating
that the effects of government pump-priming (or other government efforts) have
little to no predictive power in determining the extent of the impacts of economic
recessions on the prices of materials, manpower and machineries. This suggests
that the relationship between GPP_3 and ER_4 should be removed from the SEM
model.
• The R2 value between ER_1&2 and BID_PRICE is 0.200, similarly indicating
a strong coefficient of determination where the impacts of economic recessions
during the bidding phases have considerable predictive power in determining bid
price decisions of firms (whether it is at low or high bid prices).
• The R2 value between BID_PRICE, ER_3, ER_4 and FS/FC as moderators on QTO
is 0.477. This indicates that the combined effect of BID_PRICE, ER_3, ER_4 and
FS/FC as moderators on QTO have strong predictive power in determining the
extent of quality trade off in a project.
Having presented the R2 values, the next important step is to determine the effect
size of each exogenous latent variable on its respective endogenous latent variable.
In other words, it would be important to know which variable (BID_PRICE, ER_3,
ER_4 and FS/FC as moderators) has the largest effect of QTO and so on by looking
at the f2 effect sizes.
8.2.2.4 Step 4: Assess the F2 Effect Size
The f2 effect size measures the change in R2 value when a specified exogenous
construct is removed from the model henceforth measuring the whether the removed
construct has a substantive impact on the endogenous construct where the formula
is as follows.
R 2 included − R 2 exluded
f2
1 − R 2 included
Research suggests that an f2 value of 0.02 represents a small effect, 0.15 repre-
senting a medium effect with 0.35 representing a large effect (Cohen, 2013; Hair,
2017). Effect size of lesser than 0.02 indicate that there is no effect. Table 8.14 shows
the f2 effect sizes of the respective constructs.
• With reference to Table 8.14, M3 on QTO has a value below 0.02 at 0.005 indicating
an effect too small to be significant. Hence, M3 should be removed from the SEM
model.
• In increasing order of effect sizes FC, GPP_3, ER_3, M1, BID_PRICE, M4, FS,
GPP_2 and M2 have f2 values of more than 0.02 indicating a small effect on their
respective constructs. These constructs, as with those having medium and large
effects, remain in the SEM model.
• ER_1&2 and ER_4 have medium effects on their respective constructs
BID_PRICE and QTO with f2 value of above 0.15 at 0.250 and 0.169 respec-
tively. These constructs remain in the SEM model.
• Observing the results above, GPP_1 has a large effect of 0.461 on ER_1&2 indi-
cating that the effects of government pump-priming (or other government efforts)
in reducing the impacts of economic recessions on firms during the bidding phase
is large. This construct remains in the SEM model.
In conclusion, ER_4 has the largest effect on QTO with effect size of 0.250
followed by BID_PRICE and ER_3 with effect sizes of 0.081 and 0.069 respectively.
FS and FC have small effects in moderating the relationship between BID_PRICE
and ER_3 on QTO.
8.2.2.5 Step 5: Assess the Predictive Relevance Q2
Q2 is a measure of a model’s predictive relevance where if predictive relevance is

exhibited, it implies that the path model accurately predicts data not used in the
model estimation. Q2 values larger than zero in the structural model for a specific
endogenous latent variable indicate the path model’s predictive relevance for that
particular construct (Hair, 2017). Table 8.15 shows the Q2 values of the relevant
constructs.
With reference to Table 8.15, the Q2 values are all above zero (except for ER_3),
indicating the path model’s predictive relevance in predicting (1) firm’s impact during
Table 8.14 f2 effect sizes output from SmartPLS 3 software
GPP_1 GPP_2 GPP_3 ER_1&2 BID_PRICE ER_3 ER_4 FC FS M1 M2 M3 M4 QTO
GPP_1 0.461
GPP_2 0.116
GPP_3 0.041
ER_1&2 0.250
BID_PRICE 0.081
ER_3 0.069
ER_4 0.169
FC 0.022
FS 0.099
M1 0.077
M2 0.118
M3 0.005
M4 0.088
QTO
Legend GPP (Government Pump-Priming (or other government efforts)) ER (Economic Recession Impacts) BID_PRICE (Bid Price) FC (Firm Characteristic)
FS (Firm Strategies) M (Moderating Effects arising from either FC or FS) QTO (Quality tradeoff): please refer to Table 7.2 for further specifications of each
component in the SEM model
145
Table 8.15 Q2 value output

Endogenous latent constructs in SEM model Q2 value
from SmartPLS 3 software
BID_PRICE 0.117
ER_1&2 0.109
ER_3 −0.004
ER_4 0.018
QTO 0.107
Legend BID_PRICE (Bid Price) ER (Economic Recession
Impacts) QTO (Quality tradeoff): please refer to Table 7.2 for
further specifications of each component in the SEM model
recessionary times (ER_1&2 and ER_4), (2) the bidding behavior of firms during
recessionary times and (3) the consequent quality trade off decisions that firms make
i.e. whether there is a resultant quality trade off in times of economic recession (QTO)
(Hair, 2017). The path from ER_3 to QTO has a Q2 value of −0.004 which is less
than zero, indicating a lack of predictive relevance.
8.2.2.6 Step 6: Assess the Q2 Effect Size
The q2 effect size is similar to how the f2 effect size assesses the R2 values; where
the relative impact of predictive relevance can be compared by means of the measure
to the q2 effect size with the formula as follows.
Q 2 included − Q 2 exluded
q
1 − Q 2 included
Similarly, q2 values of 0.02 represent a small effect, 0.15 representing a medium

effect with 0.35 representing a large predictive relevance, respectively for a certain
endogenous construct (Hair, 2017). Effect size of lesser than 0.02 indicate that there is
no effect. To calculate q2 values, one has to calculate them manually by first deleting
the respective construct from the SEM model and observing the revised Q2 value.
Following which, the respective Q2 values can be plucked into the formula above.
• The Q2 value of QTO before removing the ER_3 construct is 0.107 and after
removing the ER_3 construct, the Q2 value falls to 0.077. Hence, the q2 effect size
can be calculated for ER_3 on QTO to be 0.027. With a q2 value of 0.027 for the
effect of ER_3 on QTO, it indicates a value that is slightly above the 0.02 rule of
thumb. Hence, ER_3 has an impact, albeit small, on QTO. This construct remains
in the SEM model.
• The Q2 value of QTO before removing the ER_4 construct is 0.107 and after
removing the ER_4 construct, the Q2 value falls to 0.019. Hence, the q2 effect
size can be calculated for ER_3 on QTO to be 0.080. With a q2 value of 0.080 for
the effect of ER_4 on QTO, it indicates a value that is considerably well above
the 0.02 rule of thumb. Hence, ER_4 has an impact, albeit small, on QTO. This
construct remains in the SEM model.
• The Q2 value of QTO before removing the BID_PRICE construct is 0.107 and
after removing the BID_PRICE construct, the Q2 value falls to −0.043. Hence,
the q2 effect size can be calculated for BID_PRICE on QTO to be 0.1355. Since
the q2 value of BID_PRICE on QTO is 0.1355 which is larger than the 0.02 rule
of thumb and close to the 0.15 mark. Hence, BID_PRICE has a close to medium
effect on QTO. This construct remains in the SEM model.
In conclusion, in this path model, BID_PRICE has the largest predictive relevance
on QTO followed by ER_4 and subsequently ER_3.
8.2.3 One-Sample t-test for the Sixteen Impacts of Economic

Recessions
As discussed earlier, based on the reflection of the SEM model from the conceptual
framework proposed in Chap. 6, one cannot test Hypotheses 1a–1p because it is
represented by factors F_1 to F_16 which are observed variables (represented by
the grey rectangles) in the SEM model. Since SEM can only test hypotheses for the
path relations between latent variables (represented by the grey circles in the SEM
model), a one-sample t-test with the aid of the SPSS statistical software is required
to test Hypotheses 1a–1p. Having said that, the null and alternative hypotheses in
relation to the sixteen impacts of economic recessions on firms are as follows:
• Ho: μ 3 [It indicates neutrality of the particular impact arising from economic
recessions on firms]
• H1: μ 3 [It indicates non-neutrality of the particular impact arising from eco-
nomic recessions on firms]
A 95% level of confidence will be used for this statistical analysis. The results shall
be interpreted through, (1) Comparing the significance test level against the level of
significance This means the level of significance would be compared to the value of
0.05 and (2) Comparing the t-statistics against the critical t value. The critical value
of t at α 0.05 for 29° of freedom (n − 1) is 2.0452.
• If p > 0.05, H0 will not be rejected; indicating that the suggested impact is not a
significant impact affecting firms.
• If p ≤ 0.05, H0 will be rejected. This, however, does not mean that the suggested
impact is significant. A second step of comparing the t-statistics against the critical
value is required. If t > 2.0452, it means that the suggested impact of economic
recession significantly affects firms. However, if t < −2.0452, it indicates that the
suggested impact of economic recession does not significantly affects firms.
Table 8.16 shows the t-values and p-values of each of the sixteen impacts of economic
recessions; where the values are generated from the SPSS statistical software.
In relation to the one-sample t-test results shown in Table 8.16, F_7 (staff pro-
ductivity falls), F_13 (property prices fall) F_15 (prices of manpower fall) and F_16
Table 8.16 One-sample t-test for the sixteen impacts of economic recessions
Indicators N Mean Std. dev. One-sample t-test
Sig. (two-tailed) t-value
F_1—Construction 30 3.933 1.123 0.0001 4.4737
demand falls
F_2—Firm’s pressure to 30 4.333 0.789 0.0000 9.1053
secure bids rises
F_3—Aggressive bid 30 4.533 0.718 0.0000 11.5000
assumptions rises
F_4—Number of bidders 30 4.233 0.667 0.0000 9.9501
per project rises
F_5—Bidding 30 4.367 0.912 0.0000 8.0676
competition rises
F_6—Changes in scope 30 3.333 0.869 0.0003 4.1302
of works rises
F_7—Staff productivity 30 3.167 1.003 0.3781 0.8950
falls
F_8—Supply chain 30 3.600 0.841 0.0006 3.8436
reliability falls
F_9—Overhead costs 30 2.633 0.836 0.0251 −2.3619
rises
F_10—Defaults in 30 3.633 0.948 0.0012 3.5973
payment
F_11—Sources of funds 30 3.867 0.763 0.0000 6.1165
fall
F_12—Lending rates 30 3.533 0.884 0.0029 3.2474
rises
F_13—Property prices 30 2.600 0.917 0.3020 1.0511
fall
F_14—Prices of materials 30 3.300 1.005 0.0000 6.0402
fall
F_15—Prices of 30 2.967 0.912 0.8454 −0.1968
manpower fall
F_16—Prices of 30 3.133 0.884 0.1188 1.6075
machinery fall
(prices of machinery fall) have p-values > 0.05. Hence, the null hypothesis will not
be rejected; indicating that these impacts of economic recessions are not significant
impacts perceived by contractor firms in Singapore. F_9 (overhead costs rises) on the
other hand, has t < −2.0452, indicating that Imp_3–6 does not significantly affect
construction firms in Singapore. The remaining impacts of economic recessions have
proven to be statistically significant with p < 0.0500 and t > 2.0452 indicating that
these impacts of economic recessions on contractor firms are statistically significant.
This provides support for Hypotheses 1a, 1b, 1c, 1d, 1e, 1f, 1h, 1i, 1j, 1k, 1l and 1n.
8.3 Summary of Findings 149
8.3 Summary of Findings
Upon evaluation of the SEM measurement model, the SEM model is revised accord-
ingly as shown in Fig. 8.5. With the validity and reliability established for SEM
model revision 1, the path coefficients, their significance, R2 values, f2 effect sizes,
Q2 values and q2 values proceed to shed light on the extent of support for the research
hypotheses. One should refer to the earlier sections for details such as effect sizes
and predictive relevance. The following summarizes the findings for Hypothesis 1
which is proven at the 95% confidence level by the one-sample t-test and the remain-
ing hypotheses proven at the 50% confidence level by SEM; where the significance
level chosen to test the hypotheses has been well documented and justified using the
methodology set out in Fig. 8.4.
Hypothesis 1
Hypotheses 1a–1p represent the sixteen impacts of economic recessions on con-
struction firms as derived from a review of existing literature. These hypotheses are
represented by the symbols F_1 to F_16. In relation to Table 8.16, except for F_6,
F_13, F_15 and F_16, all remaining impacts of economic recessions have proven to
be statistically significant with p-values <0.0500 and t > 2.0452 indicating that these
impacts of economic recessions on contractor firms are statistically significant at the
95% confidence level; supporting Hypotheses 1a, 1b, 1c, 1d, 1e, 1f, 1h, 1i, 1j, 1k, 1l
and 1n.
Hypothesis 2
Hypothesis 2 suggests that the higher the number of bidders per project and bidding
competition arising from economic recessions, the lower the bid prices in order to
win new projects. This hypothesis is represented by the path relationship ER_1&2
to BID_PRICE. With a path coefficient of 0.447 and a p-value of 0.007, Hypothesis
2 is supported.
Hypothesis 3
Hypothesis 3a suggests that not considering the presence of moderating factors,
the lower the bid price is, the higher the quality tradeoff at the construction stage
to recover losses or profits. This hypothesis is represented by the path relationship
BID_PRICE to QTO. With a path coefficient of 0.243 and a p-value of 0.193, Hypoth-
esis 3a is supported.
Hypothesis 3b suggests that not considering the presence of moderating factors,
the higher the impacts of an economic recession that relates to the construction phase
of a project, the higher the quality tradeoff by the firm. This hypothesis is represented
by path relationship ER_3 to QTO. With a path coefficient of 0.294 and a p-value of
0.471, Hypothesis 3b is supported.
Hypothesis 3c suggests that, not considering the presence of moderating factors,
the higher the fall in the prices of materials, manpower and machinery, the lower the
quality tradeoff by the firm. This hypothesis is represented by the path relationship
ER_4 to QTO. Interestingly Hypothesis 3c is not supported as it has a positive path

coefficient of 0.489; suggesting that contrary to the hypothesized relationship, the
higher the fall in prices, the higher the quality tradeoff in the works carried out by
contractor firms.
In relation to the effect sizes, the SEM results suggest that the effects of fluctuations
in prices of materials, manpower and machinery have the largest effect on the quality
tradeoff outcome, followed by those arising from the impacts of recession on the
construction phase of projects and lastly, those arising from the impacts of recession
on the bidding phase of projects. The case study findings should shed light on this
phenomenon.
Hypothesis 4
Hypothesis 4a suggests that governmental efforts in nurturing a high quality built
environment in Singapore reduce the extent of quality tradeoff arising from economic
recessions. This hypothesis is represented by the path relationship between GPP_1
to ER_1&2, GPP_2 to ER_3 and GPP_3 to ER_4. All these path relationships have a
negative path coefficient at −0.562, −0.323 and −0.197 respectively with p-values
of 0.000, 0.447 and 0.468 respectively. Thus, Hypothesis 4a is supported.
However, although the statistics suggest that government pump-priming (or other
government efforts) have an effect on reducing the impacts of economic recessions
on firms, the effect of governmental efforts on quality tradeoff directly have yet
to be examined. Hypothesis 4b suggests that existing governmental efforts have
weak effects in reducing the extent of quality tradeoff. By looking at the indirect
effect of government pump-priming (or other government efforts) on QTO shown in
Table 8.13, the coefficients of GPP_1 to QTO, GPP_2 to QTO and GPP_3 to QTO are
−0.061, −0.095 and −0.097 with p-values of 0.000, 0.447 and 0.468 respectively.
Thus, Hypothesis 4b is supported.
Hypothesis 5
Hypothesis 5a suggests that there is a relationship between some if not all of the firm
characteristics that either upholds quality work or weather recessionary periods and
the extent of quality tradeoff for a project during recessionary times. This hypoth-
esis is represented by the path relationship between Moderating Effect 1 and QTO
(which moderates the impact of low bid prices on QTO) and Moderating Effect 3 to
QTO (which moderates recessionary impacts on the construction phases of projects
on QTO). With a path coefficient of −0.253 and a p-value of 0.336 for the path of
Moderating effect 1 to QTO, Hypothesis 5a is supported. The path between moder-
ating effect 3 and QTO however, has a path coefficient of −0.0063 and a p-value of
0.880. With a p-value more than 0.500, this representation of Hypothesis 5a is not
supported.
Hypothesis 5b suggests that there is a relationship between some or all of the
strategies adopted by firms to weather recessionary periods and the extent of quality
tradeoff for a project during recessionary times. This hypothesis is represented by
the path relationship between Moderating Effect 2 and QTO (which moderates the
impact of low bid prices on QTO) and Moderating Effect 4 to QTO (which moderates
recessionary impacts on the construction phases of projects on QTO). With path

coefficients of −0.421 and −0.352 and p-values of 0.258 and 0.382 respectively,
Hypothesis 5b is supported.
8.4 Summary
The above summarizes the quantitative findings. Chapter 10 proceeds to provide the
qualitative findings from the case study method.
Chapter 9
Case Study Results Analysis
and Discussion
The selection criteria for the case study respondents as mentioned is a selection of
local contractors that are among the top construction quality performers in Singapore.
Mr. A and Mr. B are representatives of A1 contractor firms that have consistently
achieved high CONQUAS scores with an average scoring of 90 points and above
(except for the 1990s and the early 2000s when CONQUAS was still newly imple-
mented). Their firms have also achieved multiple CONQUAS star rated projects (i.e.
the highest scoring award for the CONQUAS scheme). Furthermore, both main con-
tractors have actively participated in the Quality Mark Scheme and have projects
achieving the highest rating that the scheme has to offer. In addition to these two
contractors, Mr. C who represents an A2 graded main contractor and a recognised
subcontractor in architectural works (based on their track record with LTA) was
roped in as a case study respondent to provide a balanced view to the study. By
studying firms that have achieved commendable construction quality performances,
the research team is able to effectively draw conclusions from their views on the
impacts of economic recessions and how they overcame them; firms that have been
there and done that. Table 9.1 profiles the case study respondents. Please refer to
Appendix G, H and I for the interview details and the respective verbatim reports.
Table 9.1 Profile of case study respondents

Company representative Position in Experience in Company grading
company construction under the BCA
industry contractor
registration scheme
Mr. A Senior QA/QC >20 years A1 contractor
Manager
Mr. B Chief Operating >20 years A1 contractor
Officer
Mr. C General Manager >20 years A2 contractor

154 9 Case Study Results Analysis and Discussion
The case study data has been collected from archives such as IQUAS (2018) for
the respective company’s CONQUAS performances over the years and company
websites and a semi-structured interview with case study respondents. Findings are
analysed using the general analytic strategy through the use of rival explanation
analysis followed by the specialized analytic strategy through pattern matching and
replication logic as explained in Chap. 7.
9.1 Proposition 1
Table 9.2 shows the rival explanations for purposes of the general analytic technique
and Table 9.3 summarizes the pattern matching and replication logic findings for
purposes of the specialized analytic technique.
In relation to Hypothesis 1a, Mr. A, Mr. B and Mr. C expressed as follows.
Mr. A: “economic recession comes, there are not enough projects”.
Mr. B: “you will see a drop in the number of jobs”.
Mr. C: “project volume dropped drastically which is why 2017 is a bad year for the industry.
It is a snowball effect from 2016…. In 2017 many find that there are very few projects to
roll. Many subcontractors and main contractors rolled up”.
These statements made by Mr. A, Mr. B and Mr. C are of similar patterns and as
such achieves literal replication across all three respondents as shown in Table 9.3.
This supports Hypothesis 1a, rejecting the type 1, type 4 and type 5 rivals; over-
throwing the rival explanations suggested in Table 9.2.
In relation to Hypothesis 1b, Mr. A and Mr. B expressed as follows.
Mr. A: “people are not so hungry so they will not resort to cutting costs so much”.
Mr. B: “some feel they need to survive if not if they retrench, they will have to build their
team capability all over again so they will bid even if they lose money”.
These statements made by Mr. A and Mr. B are of similar patterns and as such
achieves literal replication between the respondents as shown in Table 9.3. This
Table 9.2 Rival explanation analysis for proposition 1

P1: when an economy falls Type (1) null hypothesis Those sixteen impacts to
towards a recession, the firms are not present in times
sixteen impacts to of economic recessions
construction firms are as Type (4) direct rivals Those sixteen impacts to
suggested by Hypotheses firms are independent of
1a–1p economic recessions
accounted for the presence of
those sixteen impacts
9.1 Proposition 1 155
Table 9.3 Pattern matching and replication logic for proposition 1

hypotheses within each patterns patterns patterns logic (lit-
proposition) from Mr. A from Mr. B from Mr. C eral/theoretical
in case study in case study in case study replication)
1 (aligned 2 (aligned 3 (aligned
with with with
P1 Hypothesis 1a Yes Yes Yes Literal
Hypothesis 1b Yes Yes – Literal
Hypothesis 1c Yes Yes Yes Literal
Hypothesis 1d – Yes Yes Literal
Hypothesis 1e Yes Yes Yes Literal
Hypothesis 1f – – – –
Hypothesis 1g – – – –
Hypothesis 1h Yes Yes Yes Literal
Hypothesis 1i – – – –
Hypothesis 1j Yes – – –
Hypothesis 1k – – – –
Hypothesis 1l
Hypothesis 1m – – – –
Hypothesis 1n Yes Yes Yes Literal
Hypothesis 1o Yes Yes Yes Literal
Hypothesis 1p Yes Yes Yes Literal
supports Hypothesis 1b, rejecting the type 1, type 4 and type 5 rivals; overthrowing
the rival explanations suggested in Table 9.2.
In relation to Hypothesis 1c, Mr. A, Mr. B and Mr. C expressed as follows.
Mr. A: “when economic recession comes… people cut throat to get projects”.
Mr. B: “because there are so many contractors in the market, there will be fierce competition”.
Mr. C: “we will have to be more conscious about our pricing strategy. We have to find out
our potential competitors”.
These statements made by Mr. A, Mr. B and Mr. C are of similar pattern and as such
achieves literal replication across all three respondents as shown in Table 9.3. This
supports Hypothesis 1c, rejecting the type 1, type 4 and type 5 rivals; overthrowing
In relation to Hypothesis 1d, Mr. B and Mr. C expressed as follows.

Mr. B: “there are so many contractors in the market”.
Mr. C: “to see how bad the market is, you can go to attend any tender briefing. I have never
encountered so many tenderers. 40 over just for a bus interchange project. This is unheard
of but is happening now due to a shortage of projects”.
These statements made by Mr. B and Mr. C are of similar pattern and as such
achieve literal replication between the respondents as shown in Table 9.3. This sup-
ports Hypothesis 1d, rejecting the type 1, type 4 and type 5 rivals; overthrowing the
rival explanations suggested in Table 9.2.
In relation to Hypothesis 1e, Mr. A, Mr. B and Mr. C expressed as follows.
Mr. A: “it is actually a big gap…. That also explains why we run into delay. I myself am
not involved in the bidding but roughly I know the figure and the second position was very
surprised that they didn’t get the job. Because they said already, they tried their best and
lowered their price but we were lower than them”.
Mr. B: “if there are not enough jobs in the market, a lot of people will price it competitively
and they will price it in order to get the jobs”.
Mr. C: “for one of our project, we were the lowest. Because we haven’t got a job for a long
time so we bid at very low price. We are actually two million dollars away from the other
guy”.
These statements made by Mr. A, Mr. B and Mr. C are of similar pattern and as such
achieve literal replication across all three respondents as shown in Table 9.3. This
supports Hypothesis 1e, rejecting the type 1, type 4 and type 5 rivals; overthrowing
In relation to Hypothesis 1i, Mr. A, Mr. B and Mr. C expressed as follows.
Mr. A: “when the pricing is low, you tend to get the subcontractor that is not that compe-
tent. They are not competent, we will be expecting delay. When there is a delay, there will
be a rush. When you rush, I think you study before, time, cost and quality, you should suffer
from quality”.
Mr. B: “smaller contractors always have these difficulties; you can’t find people. For the
Resort World project there are shortage of cranes and crane operators. Every contractor was
scrambling but the big ones were able to pay but the smaller ones end up with nobody. Hence,
there is project delay”.
Mr. C: “being a main contractor of the project, I will say that you are only as strong as your
subcontractors. Sometimes you get a cheap guy your quality may be affected”.
These statements made by Mr. A, Mr. B and Mr. C are of a similar pattern and as
such achieve literal replication across all three respondents as shown in Table 9.3. This
supports Hypothesis 1h, rejecting the type 1, type 4 and type 5 rivals; overthrowing
In relation to Hypothesis 1k, Mr. C expressed as follows.
Mr. C: “we have main contractors owing us money, almost on the verge of bankruptcy until
someone else bought it over. We have to do some commercial settlement to finalize the deal
such as a huge discount to close the contract. Take whatever money then run away better
then taking nothing when they are bankrupt”
Nonetheless, Mr. C also mentioned the following for LTA projects.

Mr. C: “we will never see this kind of problem for LTA projects. LTA project are usually
very prompt in payment”.
Hence, this also suggests that payment defaults depend on who the client is. These
statements made by Mr. C support Hypothesis 1j; rejecting the type 1, type 4 and
type 5 rivals, overthrowing the rival explanations suggested in Table 9.2. However,
no literal replication is established and this may suggest that the support for the
hypothesis is not strong.
In relation to Hypothesis 1n, 1o and 1p, Mr. A, Mr. B and Mr. C expressed as
follows.
Mr. A: “definitely the case. Free market. Depends on the economic conditions”.
Mr. B: “in an economic recession your labor price and materials price comes down”.
Mr. C: “to them (manufacturers) it’s a chain reaction. Manufacturers also realize there are
not enough projects so they want to offload materials so that they can convert materials to
cash. So everybody down the line will be willing to cut depending on how bad the market
is”.
These statements made by Mr. A, Mr. B and Mr. C are of similar pattern and as
such achieve literal replication across all three respondents as shown in Table 9.3.
This supports Hypotheses 1n, 1o and 1p, rejecting the type 1, type 4 and type 5 rivals;
overthrowing the rival explanations suggested in Table 9.2.
9.2 Proposition 2
In relation to Hypotheses 2, Mr. A, Mr. B and Mr. C expressed as follows.
Mr. A: “when economic recession comes there are not enough projects and then people cut
throat to get projects. Actually it’s happening now also…. HDB price keep dropping until
we don’t want to tender so BCA also warning, don’t drop the price like that”.
Mr. B: “if there are not enough jobs in the market, a lot of people will price it competitively
and they will price it in order to get the jobs”.
Mr. C: “for one of our project, we were the lowest. Because we have not got a job for a long
time so we bid at very low price. We are actually two million dollars away from the other
guy.”
These statements made are of similar pattern and as such achieve literal replication
across all three respondents as shown in Table 9.5. This supports Hypothesis 2,
rejecting the type 1, type 4 and type 5 rival explanations as suggested in Table 9.4.
In relation to the type (7) rival theory, when asked if Mr. A would agree that
economic recession leads to larger risks in construction projects, Mr. A disagreed by
suggesting that risks can come from many sources. This suggests that the risks to

P2: The worst an economic Type (1) null hypothesis Firms do not bid at low bid
recession, the lower the firm’s prices to win projects in times
bid price to win projects as of economic recession
suggested by Hypothesis 2 Type (4) direct rivals Firms bidding at low bid
prices were independent of
economic recessions
accounted for firms bidding
at low bid prices
Type (7) rival theory Higher risks forecasted
suggest firms will bid higher
to account for premium to
undertake higher downstream
risk

Predicted patterns (i.e. Actual Actual Actual Replication
the hypotheses within patterns from patterns from patterns from logic (lit-
each proposition) case study 1 case study 2 case study 3 eral/theoretical
P2 Hypothesis Yes Yes Yes Literal
2
construction projects arising from economic recessions may not be as prominent as to

that of needing higher risk premiums in firms’ bid price. Mr. B similarly mentioned:
“Risk may be one of them. As I said, they are worried that the clients cannot pay but (pause)
I don’t think that’s a big risk especially for residential projects”.
Hence, the rival explanation in the form of type (7) rival theory is not supported;
providing further support for Hypothesis 2.
9.3 Proposition 3
In relation to Hypotheses 3a and 3b, Mr. A, Mr. B and Mr. C expressed as
follows.

P3: Not considering the Type (1) null hypothesis Albeit the absence of
presence of moderating moderating factors, firms do
factors, the impacts of not compromise on quality
economic recessions on firms despite recessionary times
will result in a higher quality Type (4) direct rivals Firms’ quality tradeoff
tradeoff in projects as decisions were independent
suggested by Hypotheses 3a of the impacts of economic
and 3b recessions
Type (5) commingled rival There are other factors (such
as business strategies
independent of recessionary
times) that caused the quality
tradeoff

Hypothesis Yes Yes Yes Literal
3b
Mr. A: “whoever got the job in order to make some profit out of it, they will compromise
something”.
Mr. A: “when the pricing is low, you tend to get the subcontractors that are not that compe-
tent. They are not competent, they will be expecting delay. When there is a delay, there will
be a rush. When you rush, I think you study before, time, cost and quality, you should suffer
from quality”.
Mr. B: “when there is economic recession there is no way to counter balance the effects of
recession on their company. For them to survive there are two options: bite the bullet and
the other is to cut corners just to stay afloat”.
Mr. B: “because we are a main contractor, we are going to have material supplier and labor
suppliers…. If let’s say I (the subcontractor) got this job at this price just before recession,
I can still afford to pay but when I price it at this price during an economic recession and
when the market turns around, this materials prices I committed to you at such a low price
in fact I can sell them higher elsewhere so they may turn around. So you may have shortages
and delays in deliveries because they will sell it to people who offer higher prices or their
factory may insist on higher prices because the prices have gone up”.
Hence, literal replication is achieved between Mr. A and Mr. B as shown in

Table 9.7. This supports Hypotheses 3a and 3b, rejecting the type 1 and type 4 rival
explanations as suggested in Table 9.6.
Mr. C mentioned the following.
For one of our project, we were the lowest. Because we have not got a job for a long time
so we bid at very low price. We are actually two million dollars away from the other guy.
So for that situation normally what you will do is you see where you will cut cost. You will
try to not come onboard; to delay as long as possible so that you won’t start incurring cost.
You will get your staff to multiple projects so you can minimize the cost…. The first group
that is affected is the workers being laid out first. Because if the workers are idling there is
no reason for the company to hire them.
This is a sign of quality trade off as the firm now has lesser workers to supervise
their work on site. Nonetheless, given that Mr. C’s firm has multiple firm charac-
teristics and strategies that would moderate the extent of the firm’s quality tradeoff
decision, one cannot conclude that Mr. C would compromise on quality upon the
retrenchment of workers. Hence, there is no evidence to suggest the rejection of
Hypotheses 3a or 3b.
In relation to the commingled rival explanation to Hypotheses 3a and 3b,
when asked about an anomaly in relation to a project performing better than the poorer
performing projects in terms of CONQUAS during periods of economic recession
from 2000 to 2003, Mr. B mentioned the following
Depends on the clients and the supervision. If the client has a very strict standard then
the contractor have to comply. If you look at those with high CONQUAS score, a lot are
from City Development Limited. City Development Limited impose very high standards on
quality. So that can be a reason as well be it recession or not.
This suggests that client’s commitment to quality works may triumph any other
factors. Mr. C on the other hand, raised a different factor as follows.
Market forces for the construction industry are very interesting. If you see the cyclical curve
for Singapore construction, it is actually two quarters behind GDP. We will not really feel
the impact of the bad news when it first comes in as there are still ongoing projects. We are
very busy, but everybody is rushing us to finish the work. When the market trend is going
downwards, that is when everyone tries to secure as many projects as possible, hoping that
when the market falls and when we subcontract out, we can subcontract out at a better price.
However, we secure at a highest best possible price last time. Now we see that the economic
conditions are improving. But construction industry is still bad but now we can’t feel it yet.
We will only feel it next year when projects start to come alive. Those who try to rush in to
secure projects are securing contracts at a low base now but now when the market picks up
they will suffer.
This statement by Mr. C suggests that the fall in prices of materials, manpower
and machinery not only does reduce the extent of quality tradeoff as suggested by
Hypothesis 3c, it worsens the quality performance of firms. This suggests that besides
the quality tradeoff resulting from those suggested by Hypotheses 3a and 3b during
recessionary times, the fluctuations in the prices of major construction resources
is another key factor arising from recessionary periods that would result in quality
tradeoffs. In summary, albeit no evidence to suggest dominance in overthrowing the
support established for Hypotheses 3a and 3b earlier, the type 5) commingled rival is
present. This suggests that there are other factors that cause quality tradeoffs during
recessionary times apart from those suggested by Hypotheses 3a and 3b.
9.4 Proposition 4
In relation to Hypothesis 3c, Mr. B and Mr. C expressed as follows.
Mr. B: “that is why those contractors that make money are those that bid before the recession
comes. Because when they bid the price, the price is based on the material labor price at that
point in time. When recession suddenly comes, all the prices goes down because there is a
time lag when they are procuring your materials, so they enjoy the benefit of a lower price
with a higher bid”.
Mr. B: “when I (the subcontractor) price it at this price during an economic recession and
when the market turns around, these materials prices I committed to you at such a low price
in fact I can sell them higher elsewhere so they may turn around. So you may have shortages
and delays in deliveries. Because they will sell it to people who offer higher prices or their
factory may insist on higher prices because the prices have gone up”.
Mr. C: “those who try to rush in to secure projects are securing contracts at a low base and
when the market picks up they will suffer.”
Mr. C’s statement is aligned with Mr. B’s on three fronts. Firstly, both suggest
similar strategies used by firms in bidding during recessionary times. Firms would
seek to bid for projects before prices of materials, manpower and machinery falls
and subsequently gain profits when the prices of construction fall. Secondly, Mr. C
suggests that firms who tries and secure projects at the best possible price during a
recession will potentially lose money due to inaccurate predictions in the price trends
while Mr. Lim suggest that those bidding before a recession comes (i.e. those that
accurately predicts the timing of recessions and price fall) will make money (hence,

P4: Not considering the Type (1) Null hypothesis The fall in the prices of
presence of moderating materials, manpower and
factors, the higher the fall in machinery, have no effects on
the prices of materials, the quality tradeoff by the firm
manpower and machinery, the
lower the quality tradeoff by
the firm as suggested by
Hypothesis 3c

P4 Hypothesis 3c – – – –

P5: Governmental efforts in Type (1) null hypothesis Existing governmental efforts
nurturing a high quality built in nurturing a high quality
environment in Singapore built environment have no
reduce the extent of quality impact on (any one of) the
tradeoff arising from economic sixteen impacts of economic
recessions as suggested by recessions
hypothesis 4a

achieving theoretical replication i.e. the highest form of support in replication logic).
Thirdly, both suggest high likelihoods of quality trade off arising from the fluctuation
in the prices of materials, machinery and labour prices during recessionary times;
from firms’ bidding decisions banked on the accuracy of (materials, manpower and/or
machinery) price predictions and the profit maximizing nature of subcontractors
and/or suppliers. Hence, Hypothesis 3c is rejected. Yet, the null hypothesis is rejected
as well because the case findings suggest that the fluctuations in the prices caused by
economic recessions do have an effect on quality tradeoff but in a completely opposite
direction as hypothesized. In short, the findings suggest that the fluctuations in the
prices of materials, manpower and machinery do not moderate the extent of quality
tradeoff. On the contrary, findings suggest that the higher the fluctuations in the
prices of materials, manpower and machinery, the higher the quality tradeoff. This
new suggested relationship shall be discussed in Chap. 10.
9.5 Proposition 5
In relation to Hypothesis 4a, Mr. A, Mr. B and Mr. C expressed as follows.
Mr. A: “of course it helps, because at this point in time, there are not many projects, all this
cut cost things will come in. When you have all these small projects coming in, all these
will help the smaller contractors to have something to work on. I think the impact will be
on the industry as a whole; the net. Making them still viable. Companies manage to sustain
their businesses; people get jobs, that kind of thing. If not the SME, they close down, people
suffer, jobless. That is how I see it. I mean this is not for everybody to get a share of all
these”.
Mr. B: “as to whether if they have an effect on the local economy, to a certain extent it has”.
Mr. C: “on the surface 1.4 billion may seem huge but in reality it is translated into very
small scale contracts to benefit those very small operation companies maybe those with
20/30 staffs for them to sustain. Because the construction industry is like a value chain. The
smallest company will support the next tire and then support the next tier which goes on and
on until the top tier which are the big Multi National Corporations and main contractors”.
These statements made by Mr. A, Mr. B and Mr. C are of similar pattern and as
such achieve literal replication across all three respondents as shown in Table 9.11.
This supports Hypothesis 4a; rejecting the null hypothesis as suggested in Table 9.10.
9.6 Proposition 6

P6: In times of economic Type (1) null hypothesis Existing governmental efforts
recessions, existing have a notable impact on firm’s
governmental efforts have quality tradeoff decisions
weak effects in reducing the
extent of quality tradeoff as
suggested by Hypothesis 4b

P6 Hypothesis Yes Yes Yes Literal
4b
In relation to Hypothesis 4b, Mr. A, Mr. B and Mr. C expressed as follows.

Mr. A: “because we are main contractor, we do big job. These are the smaller ones; they cut
the big cake into pieces. So smaller contractors it will help them”.
Mr. B: “as to whether if they have an effect to local economy, to a certain extent it has but to
a certain extent it doesn’t. Reason is because Singapore construction market is a very open
market. There is hardly any barrier to entry. (pause) Although the government says need to
have certain grading, all those big companies can get it easily. When the government pump
in jobs to the market, who get the jobs? If you look at MRT and airport jobs in the past, a lot
are given to foreigners…. Pump-priming will benefit local companies if they are able to get
those jobs. Otherwise I don’t think there is any effect on them. But if the foreign company
value chain is still local companies, it may benefit individual companies”.
Mr. C: “look at the peak of the construction demand. Back then we hit 30 odd billion. Now
we are nowhere near. I would say the private sector really died. So what happens? Who is
going to top up this shortfall. Government doing 1.4 billion out of the 10 billion that is wiped
out? So the help is almost non-existent…. So you can see the current system you have to fit
so many people how can 1.4 billion fit such a big group”.
The statements made by Mr. A, Mr. B and Mr. C are of similar pattern suggesting
that the effectiveness of government efforts in nurturing a high quality built environ-
ment is not strong and as such achieve literal replication across all three respondents
as shown in Table 9.13. This supports Hypothesis 4b; rejecting the null hypothesis
as suggested in Table 9.12.
9.7 Proposition 7
In relation to Hypotheses 5a and 5b, Mr. A expressed the following statements
which support Fc_6, Fc_7 and Fs_4 respectively.
As long as you have a team to look at, manage the quality, more or less the standard will be
there” and “the good thing is that we… have an internal team, a quality team that cushions it,
to salvage the situation better…. Without a team, you leave it to a project… we will suffer.
As long as you have a culture…. more or less the standard will be there. Our management
never tells you to cut corners then you will not dare to cut corners because you got to answer
for it. So this is not in our culture to do these things, no matter how hard it is, we just try our
best.
When you talk about client project, most of them are our own projects. We have two com-
panies here, the developer and the contractor. So basically, there won’t be so much of an
issue pertaining to cost…. If we do external then it’s another story. So if there’s anything
you compare HDB, those are external projects. We are quite familiar with HDB so, more or
less it’s there.
Mr. B expressed the following statements which support Fc_4, Fc_7, Fs_5, Fs_6
and Fs_7 respectively.

P7: There is a set of seven Type (1) null hypothesis The extent of quality tradeoff
firm characteristics (that is not reduced in light of the
assist firms in weathering firm characteristics or
recessions and/or upholding strategies
quality works) and thirteen Type (4) direct rival The reduction in quality
firm strategies (that firms tradeoff is independent of the
respond with to weather firm characteristics or
recessions). These strategies
characteristics and strategies
reduce the extent of the Type (5) commingled rival There are other firm
quality tradeoff outcome of a characteristics or strategies
project during recessionary resulting in the quality
times as suggested by tradeoff reduction
Hypotheses 5a and 5b

Hypothesis Yes Yes Yes Literal
5b
Poor quality can kill you as to rebuild the damage by your poor quality can cost you more
then to spend upfront.
Quality is very important for the company to survive in the long term. That is what the
company believes in and that is how I think a reputable contractor should behave…. Economic
recession will affect quality to a certain extent but that depends on the company’s philosophy
and their principles.
We always uphold good relationship with our subcontractors. And we do it in such a way
when we have technology that we want to introduce, we also train them. So when we train
them, they become part of us. And when we want to use this technology, they are familiar,
we don’t have to waste time to teach new subcontractors. So they will stay with you a long
time. Naturally the bonding will overcome the pricing.
I noticed an improvement in construction quality. And more so because there is progress in

terms of adopting technology and also a strong component of what the government is pushing
with regards to Design for Manufacturing (DFMA), Prefabricated Prefinished Volumetric
Construction (PPVC), Public Bathroom Units (PBUs) manufacturing and assembly on site
concept. I see a lot more improvement in quality. Because with use of technology and
methodology being changed, you can see better products out in the market.
What my company tries to do to counter the economic recession is to invest in technology

to do processes better therefore bring your price down to be more competitive in the bidding
process.
Mr. C expressed the following statements which support Fc_5, Fc_7 and Fs_4
respectively.
We procure the materials ourselves. We want to control the quality of material source. We
only subcontract out to installers to do installation work.
If you do a good work, people will actually recommend you to other people especially for
architectural. Similarly for MRT we don’t need to go around marketing ourselves. People
will come to find us.
If it is the first time client, why bother trying to find a new one. We might as well stick to our
old client; we know them they know you…. We are quite pleased that LTA has recognized
our workmanship. In fact my company is the only one company where LTA called for three
provisional sum contracts. We are the only one invited to all three stations’ tender and we
won two.
In summary, the above statements made by Mr. A, Mr. B and Mr. C are captured
by the set of seven firm characteristics (that assist firms in weathering recessions
and/or upholding quality works) and thirteen firm strategies (that firms respond with
to weather recessions). With literal replication in the responses among all three
respondents as shown in Table 9.15, Hypotheses 5a and 5b are supported; rejecting
the type 1, type 4 and type 5 rival explanations as suggested in Table 9.14.
9.8 Summary of Findings
Table 9.16 summarizes the hypotheses supported by the case study method through
the general analytic (i.e. rival explanations) and specialized analytic strategy (i.e.
pattern matching for replication logic).
In summary, the case study findings have provided support for a large part of
Hypotheses 1–5 (in particular Hypotheses 1a, 1b, 1c, 1d, 1e, 1h, 2, 3a, 3b, 4a, 4b,
5a and 5b) as shown in Table 9.16. These findings are largely consistent with the
survey findings where the only difference is that the survey findings provide more
support for Hypothesis 1 than those provided by the case study findings. In relation
to the effect sizes as concluded in Chap. 8, the SEM results suggest that the effects of
(1) fluctuations in prices of construction resources arising from economic recessions
have the largest effect on the quality tradeoff outcome, followed by those arising
from the (2) impacts of recession on the construction phase of projects and lastly,
those arising from the (3) impacts of recession on the bidding phase of projects; with
path coefficients of 0.489, 0.294 and 0.243 respectively. The case study findings have
shown partial support for the observations on effect sizes in the sense that it has sug-
gested a string of relationships (to be elaborated in Chap. 10) on how quality tradeoff
is resulted from the three broad areas of impacts arising from economic recessions
as mentioned earlier. However, the research team finds insufficient evidence from
Table 9.16 Summary of hypotheses supported by the case study method

Hypotheses Rival explanations Replication logic Results
Hypothesis 1a: When an No rivals Literal replication Supported
economy falls towards a
recession, the
construction demand in
Singapore falls
Hypothesis 1b: When an No rivals Literal replication Supported
recession, firms’ pressure
to secure new projects
rises
Hypothesis 1c: When an No rivals Literal replication Supported
recession, the more
aggressive the
assumptions made by
firms in deriving the bid
price
Hypothesis 1d: When an No rivals Literal replication Supported
recession, the number of
bidders per project rises
Hypothesis 1e: When an No rivals Literal replication Supported
recession, bidding
competition rises
Hypothesis 1f: When an – – Not supported
recession, changes to the
agreed scope of work
rises
Hypothesis 1g: When an – – Not supported
recession, employee
productivity falls
Hypothesis 1h: When an No rivals Literal replication Supported
recession, supply chain
reliability (including
subcontractors and
suppliers) falls
Hypothesis 1i: When an – – Not supported
recession, overhead costs
rises
(continued)

Hypothesis 1j: When an – – Not supported
recession, defaults in
payment rises
Hypothesis 1k: When an – – Not supported
recession, sources of
fund decreases
Hypothesis 1l: When an – – Not supported
recession,
lending/interest rates
rises
Hypothesis 1m: When – – Not supported
an economy falls towards
a recession, property
prices fall
Hypothesis 1n: When an No rivals Literal replication Supported
recession, prices of
materials fall
Hypothesis 1o: When an No rivals Literal replication Supported
manpower fall
Hypothesis 1p: When an No rivals Literal replication Supported
machinery fall
Hypothesis 2: The higher Type (2) rival. However, Literal replication Supported
the number of bidders per not dominant
project and bidding
competition arising from
economic recessions, the
lower the bid prices in
order to win new projects
Hypothesis 3a: Not No rivals Literal replication Supported
considering the presence
of moderating factors, the
lower the bid price, the
higher the quality
tradeoff
(continued)

Hypothesis 3b: Not No rivals Literal replication Supported
higher the impacts of an
economic recession that
relates to the construction
phase of a project, the
higher the quality
tradeoff by the firm
Hypothesis 3c: Not – – Not supported
higher the fall in the
prices of materials,
manpower and
machinery, the lower the
quality tradeoff by the
firm
Hypothesis 4a: No rivals Literal replication Supported
Government efforts in
nurturing a high quality
built environment reduce
the extent of quality
tradeoff arising from
economic recessions
Hypothesis 4b: In times No rivals Literal replication Supported
of economic recessions,
existing governmental
efforts have weak effects
in reducing the extent of
quality tradeoff
Hypothesis 5a: There is No rivals Literal replication Supported
a relationship between
some or all of the
strategies adopted by
firms to weather
recessionary periods and
the extent of quality
tradeoff for a project
Hypothesis 5b: There is No rivals Literal replication Supported
a relationship between
some or all of the firm
characteristics that either
uphold quality works or
weather recessionary
periods and the extent of
quality tradeoff during
recessionary times
the case study findings to suggest that any of the three broad areas of impacts arising
from economic recessions have a larger effect on quality tradeoff than the other. In
fact, both the case study findings and survey findings suggest that all of the three
broad areas of impacts arising from economic recessions have considerable influence
on the quality tradeoff decisions made by contractor firms. Hence, it shall be taken
from this point forward that the question as to who has a larger effect shall receive no
further discussion; and it should be concluded that all of these three broad impacts
arising from economic recessions have large effects on quality tradeoff decisions.
Chapter 10
Expert Interviews on Triangulated
and Non-triangulated Findings
The purpose of the expert interviews is to validate the findings triangulated between
the quantitative findings derived from the survey method and the qualitative findings
derived from the case study method. Section 10.1 points out the triangulated findings
and the opinions of the experts on those findings. Similarly, Sect. 10.2 sets out
the non-triangulated findings and the opinions of the experts on the reason(s) why.
Table 10.1 profiles the experts interviewed. Please refer to Appendix J, K, L and M
for the verbatim reports of the expert interviews with Mr. D, Mr. E, Mr. F and Mr. G.
10.1 Triangulated
10.1.1 Hypothesis 1
With reference to Table 8.16, F_1, F_2, F_3, F_4, F_5, and F_8 have p-values less
than 0.0500 and t-values above 2.0452. This provides support for Hypotheses 1a, 1b,
1c, 1d, 1e and 1h respectively. In relation to the case study method, Hypotheses 1a,
1b, 1c, 1d, 1e and 1h were supported because the rival explanations were rejected (i.e.
Table 10.1 Profile of experts interviewed

Expert interviewee Position in company Years of experience in Current company
the construction
industry
Mr. D Senior Manager >20 years A1 contractor
Mr. E Executive Director >10 years A1 contractor
Mr. F Partner >20 years Consultancy firm
Mr. G Deputy Director >20 years BCA quality
department

172 10 Expert Interviews on Triangulated …
all type 1, type 4 and type 5 rival explanations) and literal replication was established
across at least two of the respondents for each hypothesis. Hence, triangulation is
achieved for the stated hypotheses.
Mr. D, Mr. E and Mr. F provided no disagreement with the findings for F_1, F_2,
F_3, F_4, F_5, and F_8, validating the research findings. Mr. G did not provide his
comments as he felt the perceived impacts on firms would be best answered by the
contractor firms themselves.
With reference to Table 8.16, F_14 have a p-value less than 0.0500 and a t-value
above 2.0452. This provides support for Hypothesis 1n. In relation to the case study
method, Hypothesis 1n was supported because the rival explanations were rejected
(i.e. all type 1, type 4 and type 5 rival explanations) and literal replication was
established across all three case study respondent. Hence, triangulation is achieved
for Hypothesis 1n.
Mr. D agrees with the general trend stating: “in times of recession they fall”. Mr.
E stated: “all these are natural impacts of recessions”. Mr. F and Mr. G showed no
objection to the notion of prices falling as a result of economic recessions. With all
four experts pointing towards the same direction, there is strong validation for the
said findings.
10.1.2 Hypothesis 2
Hypothesis 2 suggests that the higher the number of bidders per project and bidding
competition arising from economic recessions, the lower the bid prices in order to
win new projects. This hypothesis is represented by the path relationship ER_1&2
to BID_PRICE. With a path coefficient of 0.447 and a p-value of 0.007, Hypothesis
2 is significant at a 50% confidence level. In relation to the case study method,
Hypothesis 2 was supported because both type1, type 2 and type 7 rival explanations
were rejected and statements made by all three case study respondents pertaining to
Hypotheses 2 is of similar patterns and achieve literal replication across at least two
of the respondents. Hence, triangulation is achieved for Hypothesis 2.
All four experts expressed agreement with the findings with statements made as
follows.
Mr. D: “keeping staffs in your office functioning is far more honorable than having your
office closed”.
Mr. E: “it is possible but not necessarily so because it’s affected by many other elements”.
Mr. F: “recession will be worst. The margins may not be profit but they just keep going. The
margin may be negative say negative five just to keep alive”.
Mr. G: “if there are lesser projects to go around and the number of contracting firms remains
constant. There will be more hungry firms…. If firms are hungry… they just want a job to
roll over to keep their manpower and resources. So profit margin may be the least in mind”.
With all four experts pointing towards the same direction, there is strong validation
for the said findings.
10.1 Triangulated 173
10.1.3 Hypothesis 3
Hypothesis 3a suggests that not considering the presence of moderating factors,

the lower the bid price is, the higher the quality tradeoff at the construction stage
to recover losses/profits. This hypothesis is represented by the path relationship
BID_PRICE to QTO. With a path coefficient of 0.243 and a p-value of 0.193,
Hypothesis 3a is significant at a 50% confidence level. Hypothesis 3b suggests
that not considering the presence of moderating factors, the higher the impacts of
an economic recession that relates to the construction phase of a project, the higher
the quality tradeoff by the firm. This hypothesis is represented by the path relation-
ship BID_PRICE to QTO. With a path coefficient of 0.243 and a p-value of 0.193,
Hypothesis 3b is significant at the 50% significance level; with a 50% confidence
level. In relation to the case study method, two case study respondents made state-
ments which suggest that the impacts of economic recessions on the bidding price
and the construction phase (particularly that on the supply chain) results in a qual-
ity trade off due to a series of events; supporting Hypotheses 3a and 3b; rejecting
the null hypothesis. Hence, triangulation is achieved for Hypothesis 3. However, it
should be noted that type 5) commingled rival is present, suggesting that there are
other factors that causes quality tradeoffs during recessionary times apart from those
suggested by Hypotheses 3a and 3b. These new relationships shall be discussed under
Sect. 10.2.
All four experts expressed agreement with the findings. Mr. D expressed no dis-
agreement with the proposed findings while Mr. E, Mr. F and Mr. G explicitly made
the statements as follows.
Mr. E: “yes of course, quality is one thing that will be compromised…. If price pressure
comes from the top, it’s always the last guy that suffers. You underbid. That’s where you lose
quality”.
Mr. F: “first you have to get a job and get the best prices and sometimes its below costs, even
negative profit margin to win the job. Then you go back and ask everybody to take a 10% cut
and you take a 5% margin. So you just squeeze everybody down and ask the subcontractors
and suppliers, “do you want the job or not? You have to cut your prices by 10% if not I go
to somebody else” ”.
Mr. G: “unless you have some technology that no one knows of but it wouldn’t come cheap. If
you are using the same technology, then cost would be the same. If you use the same resources,
where else can you cut? First thing is quality will suffer. You can cut on manpower but less
people will supervise the work. So at the end of the day something will be compromised. It
could be safety or quality”.
Similarly, with all four experts pointing towards the same direction, there is strong
validation for the said findings.
Hypothesis 3c suggests that, not considering the presence of moderating factors,
the higher the fall in the prices of materials, manpower and machinery, the lower
the quality tradeoff by the firm. With this hypothesis being represented by the path
relationship ER_4 to QTO, Hypothesis 3c is not supported because it has a positive
path coefficient of 0.489; suggesting that the higher the fall in prices of materials,
manpower and machinery, the higher the quality tradeoff in the works carried out
by contractor firms. This phenomenon is supported by the case study method where
Mr. C and Mr. B provided aligned responses. Firstly, both suggest similar strategies
used by firms in bidding during recessionary times; where firms would seek to bid
for projects before prices of materials, manpower and machinery falls and subse-
quently gains profit when the prices of construction fall. Secondly, Mr. C suggests
that firms who tries and secure projects at the best possible price during a recession
will potentially lose money due to inaccurate predictions in the price trends while Mr.
Lim suggest that those bidding before a recession comes (i.e. those that accurately
predicts the timing of recessions and price fall) will make money (hence, achieving
theoretical replication i.e. the highest form of support in replication logic). Thirdly,
both suggest high likelihoods of quality trade off arising from the fluctuation in the
prices of materials, machinery and labour prices during recessionary times; from
firms’ bidding decisions banked on the accuracy of (materials, manpower and/or
machinery) price predictions and the profit maximizing nature of subcontractors
and/or suppliers. Hence, hypothesis 3c is not supported; with a new relationship
suggested as follows.
10.1.4 New Relationship 1 and 2
The case study findings suggest that materials, manpower and machinery price fluc-
tuations may result in subcontractors and/or suppliers diverting their resources else-
where when the price rises. This is because the case study respondents suggested
that it makes business sense where if a subcontractor committed to a main contractor
at a low price of X to supply materials, labour or a service and subsequently, the
market prices for the subcontractor’s materials, labour and/or service rises to Y, the
subcontractor will naturally divert his resources elsewhere that pays him sufficiently
higher. This results in delay which puts pressure on the time dimension of projects.
Thus, in the time-cost-quality tradeoff equation, when time takes a higher priority
over quality, there will be a resultant quality trade off.
Mr. D, Mr. E and Mr. F expressed agreement with the findings with statements
made as follows.
Mr. D: “if they are big clients, they generally can stick onto it. So this does happen”.
Mr. E: “of course. This is true. There was once a subcontractor telling me that it’s okay
because my liquidated damages are lower than their other project. They are saying that they
don’t have to worry about my project, they can delay”.
Mr. F: “it’s possible. Of course they would want to shift some of their resources and manpower
to a new project when they are at the end of the current project”.
Mr. G did not provide his comments as he felt the intricate effect of price fluctu-
ations on firms would be best answered by the contractor themselves. With three of
the relevant experts pointing towards the same direction, there is strong validation
10.1.5 New Relationship 3
The case study findings suggest that arising from the fact that prices of materials,
manpower and machinery will fall in times of economic recession, firms will try
to pick the best timing to bid for projects such that they can secure a project at
a current high price and when the prices of materials, machinery and labour falls,
substantial profits can be earned. However, the case study respondents suggested
that only a handful of successful contractors who can accurately predict the timing
of prices will gain from this phenomenon. The respondents added that it is hard to
predict when the prices will fall as a result of the economic recession and hence,
when contractors try to predict price trends and bid for projects according to their
predictions, it may result in heavy losses due to reasons such as market lag and
further. These losses more likely than not, will result in a quality trade off.
Mr. D and Mr. E expressed agreement with the findings with statements made as
follows.
Mr. D: “in my company we got a big job in 1997. We started executing it in 1998. Materials
prices fell so they could make money. That was a MRT project. They got another MRT
project in 2001. They started executing it in 2003. At this time, there is the biggest change
in Singapore. The steel prices increased by more than two times. Almost every contractor
lost minimum 40 to 50 million for large scale MRT projects. They went up to clients for an
increase in price but clients refused. And because of the pressure, one change happened.
Now in government projects, there is a price escalation clause after the problem of 2003”.
Mr. E: “I mean, these are strategies”.
Mr. F expressed no comments on this question. Mr. G similarly did not provide
his comments as he felt that the intricate effect of price fluctuations on firms would
be best answered by the contractor themselves. With Mr. D and Mr. E, who are from
contractor firm themselves, pointing towards the same direction, there is validation
10.1.6 Hypothesis 4
Hypothesis 4a suggests that governmental efforts in nurturing a high quality built

environment in Singapore reduce the extent of quality tradeoff arising from economic
recessions. This hypothesis is represented by the path relationship between GPP_1
to ER_1&2, GPP_2 to ER_3 and GPP_3 to ER_4. All these path relationships have
a negative path coefficient at −0.562, −0.323 and −0.197 with p-values of 0.000,
0.447 and 0.468 respectively. Thus, Hypothesis 4a is significant at a 50% confidence
level. In relation to the case study method, Hypothesis 4a is supported because the
null hypothesis rival explanation was rejected, and literal replication was established
across all three respondents. Hence, triangulation is achieved for Hypothesis 4a.
Mr. D stated: “Yes, it helps. The penalty for poor quality is higher now”. Mr. E
is skeptical of the effectiveness of governmental efforts. Mr. F on the other hand,
expressed full support for the effectiveness of governmental efforts in raising quality
standards. Mr. G stated: “The way I look at it, construction contributes about 5%
to GDP. So it makes sense for the government to pump in more projects to make up
for the short fall. They also have to keep it in a healthy state. So they try to help to
certain extents”. With three of the four experts pointing towards the same direction,
there is more weight towards validation for the said findings.
Hypothesis 4b suggests that in times of economic recession, existing governmental
efforts in nurturing a high quality built environment have weak effects in reducing
the extent of quality tradeoff. By looking at the indirect effect of government pump-
priming (or other government efforts) (represented by GPP_1, GPP_2 and GPP_3)
on QTO shown in Table 8.13, the path coefficients of GPP_1 to QTO, GPP_2 to QTO
and GPP_3 to QTO are −0.061, −0.095 and −0.097 respectively with p-values of
0.000, 0.447 and 0.468 respectively. Path coefficients of such size are small, and
this supports Hypothesis 4b at a 50% confidence level. In relation to the case study
method, Hypothesis 4b is supported because the null hypothesis rival explanation
was rejected, and literal replication was established across all three respondents.
Hence, triangulation is similarly achieved for Hypothesis 4b.
Mr. D, Mr. E, Mr. F and Mr. G expressed agreement with the findings with state-
ments made as follows.
Mr. D: “absolutely right. Take for example in 2008 in Singapore. Companies and contractors
not happy. Small timers suffer more than big timers. The reason being competition is very
high. Not only that, protective and internationalized rules created competition and pushed
people out. From 2009 onwards the local contractors made a complaint to the government
that they are not having jobs and that they should be allowed to bid for MRT projects. They
did try but lost the jobs. So the local suffered. There are not a lot of locals working for the
government jobs”.
Mr. E: “no. Even they themselves say that the quality didn’t go up”.
Interestingly, Mr. G was certain that governmental efforts were moving towards
better quality in the Singapore construction industry but referred the research team to
the other side of the coin in government initiatives such as the Price Quality Method
(PQM):
As long as government is concerned, we use the Price Quality Method (PQM). So you not
only look at price but quality achievers. There’s a scoring method in PQM where government
is supposed to reward the bidder with the highest score. After you take away the quality part,
if contractor dive at a very low price, there is a possibility that they will get the job. Unless
you have a valid reason to say that this contractor cannot deliver, you will have to give it to
the contractor.
This implies that excessively low bid prices resulting from recessionary times
may render government initiatives such as the Price Quality Method ineffective in
crediting quality works; validating the findings for Hypothesis 4b. In relation to
government pump-priming, Mr. G similarly provided the other side of the coin:
But I think a lot of these public sector projects come in the form infrastructure and MRT
jobs which may not benefit a lot of local contractors. Because not all contractors have the
ability to do these type of jobs.
With three of the four experts pointing towards the same direction, there is more
weight towards validation for the said findings.
10.1.7 Hypothesis 5
Hypothesis 5a suggests that there is a relationship between some or all of the firm
characteristics that either upholds quality works or weather recessionary periods and
the extent of quality tradeoff by firms during recessionary times. This hypothesis is
represented by the path relationship between Moderating Effect 1 and QTO (which
moderates the impact of low bid prices on QTO) and Moderating Effect 3 to QTO
(which moderates recessionary impacts on the construction phases of projects on
QTO). With a path coefficient of −0.253 and a p-value of 0.336 for the path of
Moderating effect 1 to QTO, Hypothesis 5a is supported. The path between moder-
ating effect 3 and QTO however, has a path coefficient of −0.0063 and a p-value of
0.880. With a p-value more than 0.500, this representation of Hypothesis 5a is not
supported.
Hypothesis 5b suggests that there is a relationship between some if not all of
the strategies adopted by firms to weather recessionary periods and the extent of
quality tradeoff by firms during recessionary times. This hypothesis is represented
by the path relationship between Moderating Effect 2 and QTO (which moderates the
impact of low bid prices on QTO) and Moderating Effect 4 to QTO (which moderates
recessionary impacts on the construction phases of projects on QTO). With a path
coefficient of −0.421 and −0.352 respectively and a p-value of 0.258 and 0.382
respectively, Hypothesis 5b is supported.
In relation to the case study method, all three case study respondents expressed
moderating factors that were captured by the set of seven firm characteristics (that
assist firms in weathering recessions and/or uphold quality works) and thirteen firm
strategies (that firms respond with to weather recessions). With the rejection of all
rival explanations and literal replication in the responses among all three respon-
dents, Hypotheses 5a and 5b are supported. Hence, triangulation is achieved for
Hypotheses 5a and 5b.
Mr. D expressed agreement with the findings by stating:
Yes, I agree with them (i.e. the seven firm characteristics and thirteen firm strategies); because
just to maintain the reputation, they will go ahead. Name is very important. Once the name
is tarnished you can never get back again. They move people from left, right to centre to get
things done. I’ve seen outside companies from Singapore do it.
Mr. E discredited a few of the firm characteristics and firm strategies in moderating
the impacts on quality tradeoff but agreed that most of them do moderate the extent
of the quality tradeoff. Mr. F was positive of the influence of firms’ characteristics
such as their culture and management but was less positive about the effects of
firm strategies in moderating firm quality tradeoff decisions; showing validation
for the findings pertaining to Hypothesis 5a but not for Hypothesis 5b. Mr. G did
not provide his comments as he felt that the effect of firm characteristics and firm
strategies in moderating firm decisions would be best answered by the contractor
firms themselves. Considering the fact that a majority of the experts expressed similar
views, and taking into account that both contractor firms have similar responses, the
research team would lean towards the fact that the findings for Hypotheses 5a and
5b are validated.
10.2 Non-triangulated Results
Hypotheses 1f, 1h, 1i, 1j, 1k and 1l were supported by the survey method but
not supported by the case study method. Hypotheses 1m was not supported as a
significant impact of economic recessions by both the survey method and the case
study method. The research team sees the varying extent of consensus on these
impacts of economic recessions as the least of concerns. The most likely reason why
some of these impacts were not supported must have been that different firms perceive
the extent of the impacts of economic recessions differently. For instance, the case
study respondents revealed that issues of falling sources of funds and rising interest
rates did not affect them in times of recession because they mentioned that they either
knew the banks well or had strong relationship with the clients. This suggests that
depending on the traits of the firm, some impacts of economic recessions may be
absent or present.
Similar to how new relationship 1, 2 and 3 were proposed earlier, the case study
findings have suggested further explanation on the effects of economic recession on
construction quality; suggesting new relationships 4, 5 and 6 as follows.
10.2.1 New Relationship 4 and 5
The case study findings suggest that bid price decisions can affect the supply chain
reliability which ultimately may result in an overall quality downfall for a project.
This is because, when the main contractor bids at a low price to win a project, they
tend to lower their cost by getting subcontractor at low prices. Hence, the quality
trade off decision is now largely passed down to the subcontractors.
Mr. D, Mr. E and Mr. F expressed agreement with the findings with statements as
follows.
Mr. D: “yes, this is likely for private jobs”.
Mr. E: “yes it is the same”.
Mr. F: “first you have to get a job and get the best prices and sometimes it’s below cost,
even negative profit margins to win the job. Then you go back and ask everybody to take
a 10% cut and you take a 5% margin. So you just squeeze everybody down and ask the
subcontractors and suppliers: you want the job or not? You have to cut your prices by 10 if
not I go to somebody else””.
10.2 Non-triangulated Results 179
With three of the relevant experts pointing towards the same direction, there is
strong validation for the said findings.
10.2.2 New Relationship 6
One of the case study respondents firmly believed that the client’s commitment to
quality works may in fact triumph any other factors. Mr. E expressed strong agreement
with the findings with statements made as follows.
It is never the contractors who want to reduce quality. Everybody wants to go forward. The
only reason why we go backwards is because we have no choice. Some developers still want
to maintain their margins…. So someone has to give and this will cascade out…. This is
the problem with the industry now. If the developer is willing to pay high, do you think the
contractor don’t want to do it for you? Will I risk delivering a lousy product when this is a
good pay master? So it is never the contractor’s choice to do so. So if price pressure comes
from the top, it’s always the last guy that suffers. You underbid, that’s where you lose quality.
Although only one expert indicated support for this new relationship, the proposed
finding is an important one because it asks one to examine the drivers upstream which
may in fact be an important link to depicting the effects of economic recessions on
construction quality. Hence, the research team sees the need to include this finding
in the revised conceptual framework as shown in Chap. 11.
10.3 Summary
In summary, except for Hypotheses 1f, 1g, 1i, 1j, 1k, 1l, 1m, 1o, 1p and 3c, all the
hypotheses set out in this study have strong empirical support with triangulation from
both quantitative and qualitative findings, followed by a validation of the findings
with expert interviews. However, apart from the initial hypotheses, new relationships
were also suggested from the research findings. New relationships 1 to 6 largely
suggest that the influence of clients, supply chain partners such as subcontractors
and suppliers and fluctuating prices have considerably strong effects on construction
quality during recessionary times. This provides avenues of further research to deepen
the understanding of the effects of economic recessions on construction quality at
the firm level.
Chapter 11
Conclusion
11.1 Summary of Main Findings
The triangulated findings between the survey findings and case study findings, and the
validations of those findings with expert interviews are summarized in Table 11.1.
Figure 11.1 proposes the revised conceptual framework; depicting the effects of
economic recessions on construction quality at the firm level.
With an overview of the supported and unsupported research hypotheses in
Table 11.1, one may proceed to examine Fig. 11.1 which illustrates the conceptual
framework that depicts the effects of economic recessions on construction quality at
the firm level.
In relation to Fig. 11.1, there are seven direct impacts (namely F_1, F_2, F_3, F_4,
F_5, F_8 and F_14) of economic recessions on contractor firms which trigger a series
of subsequent events (discussed later) that would affect the quality tradeoff outcome.
F_1 to F_5 outline the impacts of economic recessions on the bidding phases of
projects; F_8 on the construction phases of projects; and F_14 on the fluctuations in
the prices of materials. Each of these impacts have varied gestation periods where
property prices and private sector demand for construction would usually be the first
to fall with little gestation period from the onset of economic recessions. On the other
hand, most of the impacts on construction firms would take two to three quarters from
the onset of economic recessions to take its toll. The gestation period would become
important when one seeks to understand the quality tradeoff outcome of projects at
specified timelines in the recessionary period.
Firms’ responses to impacts F_1 to F_5 are reflected in their bid price decisions
where most firms would bid at excessively low prices to win projects. This phe-
nomenon is supported by auction theory which suggests that in the presence of a
higher number of bidders and higher bidding competition, firms see the need to bid
at lower bid prices in order to win projects. Interestingly, the findings suggest that it
is common for firms bidding low to pass on the costs to subcontractors as suggested
by NR4 in Fig. 11.1. This however, would result in subcontractors compromising

182 11 Conclusion
Table 11.1 Summary of hypotheses tested and results validated

Hypothesis Survey Case Results
method study Triangulated Validation
method results of results
from
Expert
interviews
Hypothesis 1a: When an economy falls Supported Supported Supported Validated
towards a recession, the construction
demand in Singapore falls.
Hypothesis 1b: When an economy falls Supported Supported Supported Validated
towards a recession, firms’ pressure to
secure new projects rises.
Hypothesis 1c: When an economy falls Supported Supported Supported Validated
towards a recession, the more aggressive
the assumptions made by firms in deriving
the bid price.
Hypothesis 1d: When an economy falls Supported Supported Supported Validated
towards a recession, the number of bidders
per project rises.
Hypothesis 1e: When an economy falls Supported Supported Supported Validated
towards a recession, bidding competition
rises.
Hypothesis1f: When an economy falls Supported Not Not Not
towards a recession, changes to the agreed supported supported validated
scope of work rises.
Hypothesis 1g: When an economy falls Not Not Not Not
towards a recession, employee productivity supported supported supported validated
falls.
Hypothesis 1h: When an economy falls Supported Supported Supported Validated
towards a recession, supply chain reliability
(including subcontractors and suppliers)
falls.
Hypothesis 1i: When an economy falls Supported Not Not Not
towards a recession, overhead costs rises. supported supported validated
Hypothesis 1j: When an economy falls Supported Not Not Not
towards a recession, defaults in payment supported supported validated
rises.
Hypothesis 1k: When an economy falls Supported Not Not Not
towards a recession, sources of fund supported supported validated
decreases.
Hypothesis 1l: When an economy falls Supported Not Not Not
towards a recession, lending/interest rates supported supported validated
rises.
Hypothesis 1m: When an economy falls Not Not Not Not
towards a recession, property prices fall. supported supported supported validated
Hypothesis 1n: When an economy falls Supported Supported Supported Validated
towards a recession, prices of materials fall.
Hypothesis 1o: When an economy falls Not Supported Not Not
towards a recession, prices of manpower supported Supported validated
fall.
Hypothesis 1p: When an economy falls Not Supported Not Not
towards a recession, prices of machinery Supported Supported validated
fall.
(continued)
11.1 Summary of Main Findings 183

Hypothesis 2: The higher the number of Supported Supported Supported Validated
bidders per project and bidding competition
arising from economic recessions, the lower
the bid prices in order to win new projects.
Hypothesis 3a: Not considering the Supported Supported Supported Validated
presence of moderating factors, the lower
the firm’s profit margin reflected in the bid
price, the higher the quality tradeoff.
Hypothesis 3b: Not considering the Supported Supported Supported Validated
presence of moderating factors, the higher
the impacts of an economic recession that
relates to the construction phase of a
project, the higher the quality tradeoff by
the firm.
Hypothesis 3c: Not considering the Not Not Not Not
presence of moderating factors, the higher supported supported supported validated
the fall in the prices of materials, manpower
and machinery, the lower the quality
tradeoff by the firm.
Hypothesis 4a: Governmental efforts in Supported Supported Supported Validated
nurturing a high quality built environment
in Singapore reduce the extent of quality
tradeoff arising from economic recessions.
Hypothesis 4b: In times of economic Supported Supported Supported Validated
recessions, existing governmental efforts
have weak effects in reducing the extent of
quality tradeoff.
Hypothesis 5a: There is a relationship Supported Supported Validated Validated
between some or all of the strategies
adopted by firms to weather recessionary
periods and the extent of quality tradeoff for
a project during recessionary times.
Hypothesis 5b: There is a relationship Supported Supported Validated Validated
between some or all of the firm
characteristics that either uphold quality
works or weather recessionary periods and
the extent of quality tradeoff for a project
during recessionary times.
Legend: = hypothesis not supported
on quality as their costs of producing quality output now rise; which explains the
direction of NR5 in Fig. 11.1. The reliability of supply chain which includes subcon-
tractors and suppliers is found to fall drastically during recessionary times largely
due to reasons such as defaults in work and bankruptcies of subcontractors and/or
suppliers (F_8). The findings also suggest that the fluctuations in the prices of mate-
rials (F_14) can result in significant quality tradeoff in two ways. Firstly, the findings
suggest that fluctuations in the prices of materials may result in subcontractors and/or
suppliers diverting their resources elsewhere when the price rises in hope of secur-
ing better revenue; where this relationship is represented by NR1 in the conceptual
framework. This results in delay (i.e. pressure put on the time dimension) for the
affected project and thus, in the time-cost-quality tradeoff equation, when time takes
184 11 Conclusion
Contractor firm
Construction Number of bidders Firm characteristics that upholds quality/ weather recessions
Client demand per project (F4)
(F1)
Bid Hypothesis 2 1. Firm have niche areas/ specialized services
price
2. Firm have relatively high bargaining power in the
NR6
Firm’s pressure to secure Bidding industry/ good network in the industry Hypothesis 4a-b
bids (F2) competition 3. Firm has cost advantage from technology know-how,
(F5) high R&D capability and/ or possession of value adding
Impacts
Aggressive bid from bidding intellectual property
assumptions (F3) phase 4. Firm has relatively good reputation, track record and
management certifications
x
NR4
Hypothesis 3a 5. Firm has relatively strong financial standing
Firm’s extent of QTO
Changes in work scope 6. Firm has relevant technical personnel
depends on the
(F6) 7. Firm has a relatively strong culture of quality with
x
regulative, normative
strong management commitment to quality
and cultural/
Staff productivity (F7)
cognitive pillar of the
NR5 Cost of Firm strategies that weather recessions
firm towards
Supply chain reliability Impacts from construction phase producing producing quality
(F8) NR2 1. Diversification and entry into new markets
x
quality works as suggested by
output 2. Divestiture and placing greater emphasis on niche
IT; where PMT
Overhead costs (F9) 3. Crisis management strategies and pre-planning
x
dictates that QTO will
4. Establishing strong client relationships
Payment defaults (F10) , IT dictates the
5. Establishing good relationships with sub-con.
x Hypothesis 3b extent in which QTO

ER 6. Investing in technology, innovation and/ or R&D
Sources of fund (F11) will by
7. Streamlining operations/ leaner management
x Property prices
(F13)
x
Lending rates (F12)
NR1 NR3
8.
9.
10.
11.
Cost reduction through human resource means
Emphasis on special marketing efforts
Risk management
Document lessons from past recessions Hypothesis 5a-b
12. Negotiating for special loan services
Material price (F14) 13. JV, M&A, partnerships and collaborations
x Manpower price (F15) Prices of manpower, machineries & materials Cost of
x
producing QTO does not
x
Machinery price (F16) quality
output
Hypothesis 3c
Hypothesis 1a-1p
= Path relations suggested by Auction Theory (AT)

= Path relations suggested by Profit Maximization Theory (PMT)
x = hypothesis not supported
= New relationships suggested
= Path relations suggested by Institutional Theory (IT)
= Path relation suggested by Keynesian theory (KT)
= Start of economic downturn and subsequent recovery

= Construction demand
= Prices of residential and commercial property
Q1 Q2 Q3 Q4 Q1 ... = Prices of material, manpower and machineries
Year 1 Year 2 = Quarterly construction contracts awarded
Fig. 11.1 Conceptual framework depicting the effects of economic recessions on construction
quality at the firm level (Legend ER Economic Recession; QTO Quality Tradeoff; Dotted
boxes the external forces (i.e. government pump-priming and Singapore’s quality environment)
and the internal forces (i.e. firm characteristics and firm strategies) that would influence the social
behavior of upholding quality despite recessionary periods as suggested by the three pillars of
institutional theory)
a higher priority over quality, there will be a resultant quality tradeoff as suggested by
NR2 in the conceptual framework. Secondly, firms will try to pick the best timing to
bid for projects such that they can secure a project at a current high price. These firms
would then gain substantial profits when the prices of materials fall. However, the
findings suggest that only a handful of successful contractors who can accurately (or
fortunately) predict the timing of price fluctuations will gain from this phenomenon.
The respondents added that it is hard to predict the timing of price fluctuations and
hence, when contractors try to predict price trends, it may result in heavy losses due
to reasons such as market lag.
The above-mentioned series of events will contribute to an increase in the costs
of producing quality output and this will result in a (higher) quality tradeoff as sup-
ported by the profit maximization theory. However, in accordance with institutional
theory, depending on the strength of the regulative pillar (influenced by governmental
efforts in nurturing a high quality built environment), normative pillar (influenced by
industry practices and the firm’s characteristics and strategies) and cultural-cognitive
pillar (influenced by the firm’s characteristics and strategies) of producing quality
outputs, the extent of the quality tradeoff will differ among firms. In terms of the
effects of governmental efforts captured in the conceptual framework which consti-
tutes the regulative pillar of institutional theory, the findings suggest that the existing
governmental efforts are insufficient in convincing firms to embrace quality in times
11.1 Summary of Main Findings 185
of economic recessions. It was suggested that initiatives such as the price quality
method (PQM) may become ineffective during recessionary times because firms
tend to respond to recessionary conditions by bidding at excessively low prices. This
would result in firms bypassing the quality criteria of the PQM and still win the tender.
Others suggested that governmental efforts were not targeted enough. For instance,
some pointed out that CONQUAS scorings were biased towards residential projects.
Others pointed out efforts such as governmental pump-priming were insufficient in
scale and often times only benefited a selected segment of the construction industry.
In terms of the firm characteristics and firm strategies captured in the conceptual
framework which constitutes the normative pillar and cultural-cognitive pillar of
institutional theory, there are conflicting findings on which set of characteristics and
strategies are ideal in reducing the extent of quality tradeoff for firms. However,
perhaps it is this conflicting opinion that reflects the true meaning of firm dynamism.
Firms are unique amongst one another and different strategies would work differently
among firms. The important finding is that whatever the combination may be, the
list of firm characteristics and firm strategies captured in the conceptual framework
suggests that they do assist firms in reducing the extent of quality tradeoff. As such,
firms should carefully identify the traits that they have and the strategies that best
suit them to move towards higher quality outcomes.
Last but not least, with reference to Fig. 11.1, NR6 suggests that clients play a
key role in framing the quality tradeoff outcome because the pay masters usually
determine the extent to which contractors can commit to quality. Hence, it is clear
from the conceptual framework that construction quality is determined by the totality
of the firms involved in a project; where the impacts on contractors would reflect the
sentiments and actions of all firms in a project.
In summary, there are three broad areas of impacts arising from economic reces-
sions on contractor firms; (1) impacts of economic recessions on the bid price deci-
sions of firms, (2) impacts of economic recessions on the reliability of a contractor
firm’s supply chain which includes their subcontractors and suppliers and (3) the
series of events arising from the price fluctuations of major construction resources
such as prices of materials.
11.2 Significance of Study
For government officials, there is no question on the dedication of the Singapore

government in pushing for a high quality built environment. Perhaps what is yet to
be addressed is the support that firms require during recessionary times. Survival is a
priority over growth for most contractor firms in Singapore. As such, quality cannot
sustain nor grow for they are not elements critical for survival. Leaving the industry in
this state would result in consequences as suggested by Low and Tan (1996b) where,
if firms have to scramble to look for gainful employment of their resources during
recessionary times, poor quality standards in the construction industry are likely to
become oscillating problems due to the cyclical nature of economic conditions. To
186 11 Conclusion
respond to changes in demand from falling economic activity, the industry must have a
very high degree of flexibility which needs to be reflected in a firm’s business strategy
(Ruddock et al., 2014). Hence, the proposed conceptual framework would assist
government officials in formulating initiatives, schemes and policies for upholding
construction quality by targeting the various points of intervention available in the
path from the onset of economic recessions to quality tradeoff outcomes. Government
officials may for instance intervene by releasing public sector works in a timely and
inclusive manner; managing firm sentiments during recessionary times; ensuring
that the bid price is able to sufficiently cater to the technical proposals (particularly
for the two envelope tendering system in Singapore); regulate the prices of major
construction resources to prevent large fluctuations; and, nurturing firms in adopting
traits or strategies suggested in the proposed framework.
For firms, the significance of this framework may be an overview of the pitfalls that
can be drawn. The pitfalls are issues such as subcontractors and suppliers defaulting
on the agreed scope of work (suggested by NR4 in Fig. 11.1) and undertaking risks of
wrongly predicting the prices of materials, manpower and machinery (as suggested
by NR3 in Fig. 11.1). One may observe from Fig. 11.1 that supply chain reliability is a
key determinant of quality tradeoff outcomes not necessarily wanted by a firm. Hence,
contractual provisions and/or stricter management can be exercised in enhancing the
reliability of supply chains in preparation for recessionary times.
For the research community, this depiction of the effects of economic recessions
on construction quality at the firm level would allow researchers to build upon this
framework. Any pioneering conceptual or theoretical frameworks should be honed
as time passes; just as how Keynesian’s theory is challenged and refined since its
inception in the early 1930s and, just as how the theory of the firm by Coase (1937) is
refined over years since its inception in 1937. More importantly, it is the significance
of knowing what goes on at the firm level that allows researchers to tackle these
cyclical issues on construction performance areas.
11.3 Limitations of Study
The first limitation pertains to a lack of multi-group analysis in this study. Thirty
respondents were sought after for the survey questionnaire method; of which thir-
teen are A1 contractors, five A2-B1 contractors, six B2-C grade contractors and six
consultants. This study considered the standpoints of all contractor firms in Sin-
gapore ranging from A1 to C grade contractors and proposed a final conceptual
framework that seeks to capture their quality tradeoff decisions during recessionary
times. Having said that, the study did not attempt a multi-group analysis to compare
the differences (if any) on the quality tradeoff decisions of A1 contractors, A2-B1
contractors and B2-C grade contractors in response to recessionary times. This is
due to the impracticality of seeking sufficient A1 contractors, A2-B1 contractors and
B2-C grade contractors for the survey to carry out a multigroup analysis; where a
11.3 Limitations of Study 187
minimum of 30 survey respondents should be acquired for each category of contrac-

tors.
The second limitation pertains to the reliability and validity of the indicators used
to measure quality tradeoff decisions of contractor firms in Singapore. The research
team uses the following two survey questions administered on a Likert scale to mea-
sure firms’ quality tradeoff decisions during recessionary times: “My firm reduces
the priority of quality in the time-cost-quality tradeoff equation in times of economic
recessions (by importance ranking)” and “My firm reduces the priority of quality in
the time-cost-quality tradeoff equation in times of economic recessions (by prior-
ity ranking)”. This method cross checks the validity of respondents’ answers where
there should be no contradiction in their responses. Nonetheless, one may question
the reliability of this approach in measuring firms’ quality tradeoff decisions and
suggest the use of historical data such as CONQUAS scores to somehow measure
the quality tradeoff extent of firms. However, using CONQUAS scores to establish
a scale of quality performance for quantitative analysis would not be recommended
because contractor firms with CONQUAS scores are largely (established) main con-
tractors and the sample size would as such not be representative of contractor firms
in Singapore. Having said that, the research team posits that having established indi-
cator reliability and convergent validity of the two survey questions in measuring
quality tradeoff with tests of convergent validity, internal consistency reliability and
discriminant reliability, there should be no concern of validity and reliability issues
with the way quality tradeoff is measured in this study.
11.4 Future Research
To better understand the effects of economic recessions on firms’ TCQ tradeoff deci-
sions, researchers may look at the gestation period between the onset of a recession,
and the impacts of that recession on the construction industry. Identifying the time lag
between economic recessions and the impacts felt on the construction industry would
allow policy makers, firms and research community to better prepare for recessionary
times. In this study, the research team did not place heavy emphasis on accurately
predicting the timing of the impacts of economic recessions on construction firms
because the research team believes this deserves a separate study in its own right.
Secondly, in the proposed conceptual framework, the fundamental link between
economic recessions and the firm’s quality tradeoff decision is that of the cost (direct
or time related costs such as liquidated damages arising from delays) of producing
quality output. Profit maximization theory suggests that firms seek to maximize
profits by producing at the equilibrium where marginal cost is equal to the marginal
revenue. As such, to better understand the effects of economic recessions on firms’
TCQ tradeoff decisions, one may hope to uncover the marginal cost and marginal
revenue curves of producing quality output (defined here as output with minimal
defects in the long run).
188 11 Conclusion
Apart from the above, further research should be conducted to uncover the effects
of economic recessions on other performance areas in the construction industry at
the firm level. For instance, one may examine the effects of economic recessions on
health, safety and environmental (HSE) performances at the firm level. If performance
areas such as quality, productivity and HSE share the same fundamental relationship
with economic recessions, one may then proceed to examine the correlation between
quality performances, productivity performances, health, safety and environmental
(HSE) performances and other related construction performance areas. If there is
a strong correlation between quality, productivity and HSE performances per se, it
would suggest that efforts expanded by the research community and/or the govern-
ment on enhancing either performance area would simultaneously improve other
performance areas on the construction industry.
11.5 Concluding Remarks
Following the inquiry of a couple of prominent incidents in 2017 (such as the PIE
viaduct collapse), Singapore Minister for National Development, Minister Lawrence
Wong has announced that the non-price attributes (with quality as the major compo-
nent) for public projects tender assessment shall be raised to 60% with effect from
January 2018 (Au-Yong, 2017). If we place this initiative in perspective, it is one but
an important component of the proposed conceptual framework; where if successful,
the revised Price Quality Method (PQM) would spur contractors to exit price wars
(to make favorable bid decisions that would uphold construction quality), to revise
their practices towards construction and perhaps more importantly, see an unprece-
dented strengthening of the regulative pillar for quality works; pushing clients, main
contractors and subcontractors towards the need to embrace quality. To materialize
these predictions, the research team has to unfortunately say that one has to wait for
the skies to darken; for the next cycle to hit. However, are recessions not cyclical?
One must recognize that it is because recessions are cyclical that this study is of
considerable importance. If Singapore is bent on moving towards her strategic thrust
of establishing a high quality built environment, one must understand how firms can
move beyond the traditional paradigm of simply surviving on an oscillating basis to
one that is able to sustain and flourish despite hard times; first, by understanding the
effects of economic recessions on construction quality.
Appendix A
Survey Questionnaire

190 Appendix A: Survey Questionnaire
Appendix A: Survey Questionnaire 191
Appendix B
Path Relationships Significant at the 1%
Significance Level
H1a-e
H2
H4a-b

Appendix C
Significance Level
H1a-e
H2
H4a-b

Appendix D
Significance Level

Appendix E
Significance Level
H1a-e
H2
H4a-b
H3a
H3c

Appendix F
Significance Level
H1a-e
H2
H4a-b
H3a
H5a
H5b
H1g, h, I, j, k, l
H3b
H4a-b
H5b
H3c
H4a-b
H1n-p

Appendix G
Case Study Interview with Mr. A
Mr. A
Date of interview: 7 December 2017
Time of interview: 3pm to 4pm
BCA CRS grading of current company: A1 Contractor
Position in the company: Senior QA/QC Manager
Years of experience in the construction industry: >20 years
The first question, when did you join the company?

1996.
Why are some of your company’s projects under the Construction Quality
Assessment Scheme (CONQUAS) while others are under the quality mark
(QM) scheme?
These two schemes are different. CONQUAS is compulsory for public housing
projects. Beside these private projects, we also go for CONQUAS. By doing QM,
we believe that the score will be better because QM score will be translated to
architectural score so that helps the overall CONQUAS score. On top of that, we
believe that by subjecting our projects to QM, we will produce better quality units.
And of course QM is an initiative by developers. Otherwise it has been tradition and
we have been doing that.
When I look at CONQUAS scoring, I realized that Architectural scored the

lowest among the three. Why?
Yes, it’s always the case for most Contractors. Because in a construction site, I
believe during your attachment, you went through the process. In terms of structural
works it’s relatively speaking, straightforward. Furthermore, sampling can be done

214 Appendix G: Case Study Interview with Mr. A
and this makes it easier to control because, on the construction site, structural works
subcontractor is usually a single guy. He does everything; he does concreting, he
does formwork, he does rebar. Easier to manage. For that matter CONQUAS score
tends to be higher. MEP, also not that difficult, as it’s based on whether the work
follows the drawings or not. But, architectural trade is more complicated. There are
many trades involved, and they are interdependent. So somehow, it’s not easy to
control or manage the quality so as to speak. And many a times, quality suffers
when the sequencing is wrong. Why sequencing is wrong? Because of rushing to
meet the deadline. So we compromise. Look at the number of workers involved in
the construction site. You see that most workers are in the architectural trade and
there are a lot of dependencies. So once one guy fails, the others will suffer.
Over your past fifteen years of experience with your current company, do you
notice any dips in construction quality due to any particular reason?
I don’t remember any sudden dip in the past, as far as our company is concerned.
I don’t know about the others. Because as long as you have a culture and as long as
you have a team to look at, manage the quality, more or less the standard will be
there. Especially so when, just now I mentioned, CONQUAS, QM, that is the
yardstick that will help to track and monitor our performance. So, unless you don’t
have a standard, then it will drop, without knowing.
The past CONQUAS score for your company is in fact much higher than past
CONQUAS score in some of the recession years in 1998, 2001 global IT
meltdown, 2002, 2003 SARS period which dragged on to 2004, 2008 financial
crisis, and now we have the looming technical recession. Just by looking at the
periods of recession, I realize that many of your company’s CONQUAS scored
relatively poorly in the recession years. Why?
Of course, from the earlier years, we are lower. Same with all the other Contractors.
I think it’s typical of all the Contractors. Because slowly they know what is
expected of them. They know how to score better so it gets better and better.
(Interviewee looking through CONQUAS trends that interviewer handed him): This
is school (pointing to the 2001/2002 period). School cannot be compared with
residential. This is school again. I can tell. I don’t think so. If you ask me, I don’t
think so. The trend for my company is going up. We plotted this out before.
Can you point out two projects that the construction quality is not as good
compared to the rest of your track records?
As I mentioned, one of the school projects we didn’t do quite well as it was an
institution and we have no experience in that before. I was involved in that project
actually. One of the reasons was because that project went into delay. Of course
quality will not be the priority. And it is time that matters most. So for that matter, it
suffers. So, if you ask me, this school project is one of the not as good ones. We
have another school around the same time scoring better 78.7. That school went
Appendix G: Case Study Interview with Mr. A 215
relatively smoother than mine so it most likely translates into higher quality. So it’s
mostly Addition and Alteration (A&A) works and it’s relatively simpler. It boils
down to whether you have the time or not. So is this project affected by economic
situation, definitely, not clear here. But, there should be some kind of
relationship. When the pricing is low, you tend to get the subcontractors that are not
that competent. They are not competent, we will be expecting delay. When there is
a delay, there will be a rush. When you rush, I think you study before, time, cost
and quality, you should suffer from quality. There is no doubt about that. So this is
one but the other one, I can’t find another one. More or less it is the same, I can’t
really pin point. The rest are more or less there.
Is there any project that has cost constraints?

Not really. The thing is that this is our client project. When you talk about client
project, most of them are our own projects. We have two companies here, the
developer and the contractor. So basically, there won’t be so much of an issue
pertaining to cost. If we do external then it’s another story. So if there is anything
you compare Housing and Development Board (HDB), those are external projects.
We are quite familiar with HDB so, more or less it’s there. 80 plus 90 plus, the next
thing we are moving into the CONQUAS star, we have not gotten a CONQUAS
star for HDB. We got three projects ending about the same time, end of this year, so
we are aiming for that. The trend is going up and there is no significant drop.
Based on your experience, what do you think are the impacts of recession on
the industry?
Economic recession comes there is not enough projects and people cut throat to get
projects. Actually it’s happening now also, HDB price keep dropping until we don’t
want to tender. Building and Construction Authority (BCA) are also warning the
industry not to drop the price like that. So, if you ask me, definitely there’s an impact,
whoever gets the job in order to make some profit out of it, they will compromise
something. But of course, material wise they can’t compromise much because some
how they need to be approved, the materials have to come from an approved supplier.
There is some control there by HDB, but workmanship will suffer. Subcontractor,
same thing, you give them low price they will not put in their best team or they will not
put in adequate manpower. So we need to watch for workmanship. When in a rush,
you suffer. But the good thing is that we have an internal team, a quality team that
cushions it, to salvage the situation better. Then we make sure that all the sites,
standards are there, at least some minimum standards are there. Without a team, you
leave it to a project, then it will happen like what you say, we will suffer.
Do you think the prices of the materials and labor fluctuates due to the
recession?
Definitely the case. Free market. Depends on the economic conditions.
Will the impacts on the project be significant?

Will be significant. We will be concerned especially when the project duration is
long, like a four year five year period. Then, it will affect your bottom line.
Do you still remember the number of bidders for the school project?
Six or seven. It’s not high. Average will be twenty to be considered high. It is hard
to say, if not enough job, people go in. If you already have current job at hand,
people are not interested to go in.
How was competition like in the bidding stage of the school project?
Sometimes it’s not directly linked to economic situation. Like for this school
project, if the boss wants to do it, it could be due to reputational reasons and not
really about making a lot of profit. In this case, price will be low to get the job.
What was the gap between the lowest bid and the next lowest bid?
It’s actually a big gap, big gap. That also explains why we run into delay. I myself
am not involved in the bidding, but roughly I know the figure and the second
position was very surprised that they didn’t get the job. It could be they tried their
best and lowered their price, but we were lower than them. So that kind of situation
arises. As we got the budget there, in terms of subcontractor control, it is tighter.
Do you agree that economic recession leads to larger risks in construction

project?
Not really because risk can come from many sources; complexity of project, prices
of material etc.
When your company bid at very low profit margins such as the case of the school
project, does this forces your company to reduce manpower or to cut cost?
As far as we are concerned maybe what we usually will do is to negotiate with our
subcontractors on the pricing. But in terms of internal resources, we don’t really cut.
Because by cutting we are worried that we might not be able to complete the work
on time or run into liquidated damages. Usually the prelim and overhead all this we
don’t really cut that much. But contract is more or less managed by the project
team. But the contract we are managing the subcontractors. From the start they
know what the profit margin ratio is. They have their own budget in order to meet
that kind of profit margins. So big bulk is come from the subcontractor. We are
main con managing the subcontractor, so we control from that angle. Again, if let’s
Appendix G: Case Study Interview with Mr. A 217
say we find someone that can give us low price, tendency is that they cannot
perform so well.
With regards to the school project again, is there any issue on cash flow or
bank defaulting on loans?
This question very sensitive. Confidential. We (as project managers) don’t have the
figures to point that out. I was the PM there. Cash flow problem even if there is, no
one would tell you. Cash flow thing is in and out, in and out. You know even if red
color also doesn’t matter. As long as the bank is willing to lend you money. But we
will not reach the stage where we do not have enough money to pay the subcon-
tractors. Not that serious. That will be a cash flow problem.
Were there any hiccups then with regards to cash flow?

No big issues because like what you say, we don’t just do school, we have other
projects. Furthermore, we know the bank well. They also know our track record.
For the supply chain issues you mentioned, recently, there is a newspaper
article stating that firms cut cost and corners when they bid at very low prices
at the construction stages.
Definitely, if you want to survive, you have to somehow find ways to cut cost. Cutting
costs is definitely something that we will do. But cutting corners is another thing. As
far as the main contractor is concerned, we will try to avoid doing all these things.
Because government projects are now doing Price Quality Method (PQM), you can
be blacklisted or put into the limelight for cutting corners, you suffer. You cannot get
a job and you must bear that in mind. You see nowadays, it is not just pricing. It is
also about track record on the past, whether you get all the demerit point, all these
things. It happened to me. We really suffer that time. We want job, but no one gives us
any job. So to cut corners as long as we are concerned, we will not do that. However,
sometimes our subcontractors cut corners without our knowledge. They also need to
survive. So for that we have to manage them. We have to really control.
So what’s the reason they cut corners?

They know how to save that, find ways to save that because it’s all architectural
trade. Rebar must be there, lapping man must be there. I think you as an engineer
you must know. All these things are things that you cannot run away from. But
somehow, architectural trade you can. So many types of material, in terms of
materials there is various quality. There is a way to cut corners as long as our
subcontractors are concerned. For example, painting, you can cut corners.
What are some of the strategies or characteristics of your company that makes
you not cut corner. In other words, why others cut you don’t cut?
It’s the culture. Our management does not allow cutting corners, so we will not dare
to do so as we got to answer for it. It is not in our culture to do all these things, no
matter how hard it is, we just try our best. Like what I said, sometimes if the
subcontractor does it then we suffer.
What are the impacts on the industry from such government interventions?
Of course it helps, because at this point in time, there are not many projects, all this
cut cost things will come in. When you have all these small projects coming in, all
these will help the smaller contractors to have something to work on. I think the
impact will be on the industry as a whole; the net. Making them still viable.
Companies manage to sustain their businesses; people get jobs, that kind of thing. If
not the SME, they close down, people suffer, jobless. That is how I see it. I mean
this is not for everybody to get a share of all these.
When you say not for everybody?

Because we are main contractor, we do big job. These are the smaller ones; they cut
the big cake into pieces. So smaller contractors it will help them.
Impact on your company?

Not really. Not so much.
What is your opinion on the effectiveness of the existing governmental efforts

such as government pump-priming in alleviating the impacts of economic
recessions?
Definitely it helps. People are not so hungry so they will not resort to cutting costs
so much. Better price. All this measures by the government will help the industry to
some extent. But how much, it is hard to quantify. Very much depends on the
companies, what is their culture, what is their emphasis. Will they forego Safety or
quality just for the sake of making money.
Thank you Mr. A.

Appendix H
Case Study Interview with Mr. B
Mr. B
Time of interview: 10am to 11am
Position in the company: Chief Operating Officer
When did you join?

Nine years ago. June next year will be nine years.
Here is the CONQUAS score, this is the final scoring, and the columns here
indicate how they have broken down the scoring into structural, architectural
and Mechanical and Electrical (M&E) scores. Architectural is most of the time
the lowest. Why is this so?
Structure can produce very high score. We use precast now. With technology we
produce good quality components. Architectural, we need labor and skilled labors
sometimes. But the government is trying to change that by doing a lot more of this
architectural works in the factory rather than on site. Imagine if you were to do it on
site, there are going to be a lot of work and coordination of different trades. Take for
example, the bathroom, a complicated place and a small area. But there are a lot of
trades like mirrors, lights, architectural finishes tiles and electrical works. So to
coordinate it on site will be quite challenging depending on the weather. I think the
government is trying to move it off site in the factory to work under controlled
environment without depending on the weather. You can do it like a production line
and sequence the whole.

220 Appendix H: Case Study Interview with Mr. B
Over the past nine years, do you notice any sudden drop in construction
quality in your company?
In fact I noticed an improvement in construction quality. And more so because there
is progress in terms of adopting technology and also a strong component of what
the government is pushing with regards to Design for Manufacturing (DFMA),
Prefabricated Prefinished Volumetric Construction (PPVC), Public Bathroom Units
(PBUs) manufacturing and assembly on site concept. I see a lot more improvement
in quality. Because with use of technology and methodology being changed, you
can see better products out in the market.
Based on the company’s CONQUAS score, like you said there is an

improvement. But in the early years, in 2001 to 2004 CONQUAS score are
very low where there is an economic recession. What do you think is the
reason?
There a correlation between construction quality and economic conditions?
I surveyed 30 other companies and observed a relationship.

I don’t think there is a correlation. Okay because your economic conditions affects
your pricing but the use of labor and your product is how you plan and what kind of
technology you use. So in an economic recession your labor price and material
price comes down as well so I don’t see a direct correlation between quality and
economic condition theoretically.
One of the things we have proven is that in an economic recession, bid prices
generally become lower reflecting lower profit margins. From there, work-
manship quality will suffer due to the low price that they got the project for.
You see, if there are not enough jobs in the market a lot of people will price it
competitively and they will price it in order to get the jobs. So pricing becomes very
important. Pricing is not dependent on how well the economy is doing but
depending on how many jobs are available in the market. Take for example, the last
four years, the real estate market has been dropping. There are not many jobs in the
market, but the civil jobs backed up by the government has been moving up. So
when can you say that the economic condition has been down? The building jobs
have been in shortage, but a lot of contractors bid for civil jobs like MRT. So they
may be very competitive and that is coupled by the fact that steel prices concrete
prices dropped by half since 2010 to 2015. They are able to price it lower because
the material prices went down labor price come down even though levy went up
they are forced to use technology. So personally, I am not so sure that there is a
correlation between CONQUAS and economic recession. Yes, maybe profit mar-
gins is squeezed, unless the contractor is not a reputable one looking for sustainable
long-term presence in the market. Because the poor quality can kill you because to
rebuild the damage by your poor quality can cost you more then to spend upfront.
Quality is very important for the company to survive in the long term. We also seek
Appendix H: Case Study Interview with Mr. B 221
to uphold the CONQUAS score or architectural finishes at the end of the day in the
market. That’s what the company believes in and that’s what I think a reputable
contractor should behave. What my company tries to do to counter the economic
recession is to invest in technology to do processes better therefore bring your price
down to be more competitive in the bidding process. You see in 2000, the Yew Mei
Green project this was when I’m in Choice Home, at that point in time the
CONQUAS score framework is not well established I think over the years they
were able to improve it. I think it just started around that time so a lot of people
were trying to get used to the framework. So over the years they were able to
identify what are the critical things in the CONQUAS framework and therefore
focus on those to improve it. That could partly explain why in the early years the
CONQUAS score is lower than the current ones.
With regards to an anomaly in 2002, one of your project scored 86.1 which is
high compared to the projects in 2003/2004. Why?
It depends on the clients and the supervision if the client has a very strict standard
then the contractor have to comply. If you look at those with high CONQUAS score
a lot are from City Development Ltd. City Development Ltd, they impose very high
standards on quality. So that can be a reason as well, be it recession or not.
What are your general view on economic recessions and its impacts on the
construction industry?
You see construction industry is very reliant on labor, not skilled labor but actually
workers. To a certain extent in economic recession there will be fewer jobs in the
market but the government will push out more infrastructure jobs so there will be a
counter measure to keep the amount of value of jobs about the same level if not
higher. Taking aside the government’s role looking at the private sector, you will
see a drop in the number of jobs. And because there are so many contractors in the
market there will be fierce competition. People bid for different reasons. Some more
established ones will not wish to enter a bidding war. Some feel they need to
survive if not if they retrench, they will have to build their team capability all over
again. They will bid even if they lose money. Of course, after they bid for the jobs,
they will have to find ways to save cost. Now, if the contractor saves costs by
looking at better ways of doing things like improving productivity and adopting
technologies, it is fine. But if they reduce cost by cutting corners by using inferior
products you will see a drop in quality. It depends on the contractors. The bigger
foreign contractors will not sacrifice their reputation to cut corners. It is the same for
the big Singapore contractors as well. So economic recession will affect quality to a
certain extent but that depends on the company’s philosophy and their principles.
Are there any projects out of this list (i.e. the list of projects that Mr. B’s
company has undertaken) where construction quality is not as good?
All those that are under choice home their quality are good because high standards
are exerted. Those under City Development Ltd., high standards are also exerted.
Industrial quality is quite poor; it suffers from architectural finishes. The structural
score is always very high, but the architectural score is always very low. Like for
this industrial building, there are very few architecture finishes. And I don’t know
how they mark the quality for this architecture finishes. Usually for residential
architecture finishes can be quite high. This is one of the highest scores in the
market. This institution you see architecture finishes drop. So overall I think the
CONQUAS score may be bias from one building type to another. Because in
residential there are a lot of architecture finishes like tiles and paintings. But in
industrial there is not much. So, if you ask me if there are any projects that
CONQUAS is not well, we must separate it into residential industrial and institu-
tions. The residential projects I don’t see them doing badly. The low ones are the
institutions and industrial ones dragged down by architecture finishes. In fact, the
residential ones are done quite well. I don’t see any projects that have not done
well. But for our company the architecture is always high partly because we use
precast components. It is manufactured in the factory and brought to site and
stacked up. Using precast that is automated the quality will be much better.
Do you think it is true that the higher the risk of the project the higher the bid
amount to account for the risk?
Naturally for bidding, your price is always equal to your cost plus profit plus risk.
And your risks have two components. If you are overseas then it is a country risk
plus whether it is interest rate risk or operational risk. They will also look at the
client to see whether they can pay or not. They also look at the material price risks.
For contractors that price for jobs, they will naturally look at those risks and input a
figure to the price. But the price depends on the contractor. For bigger contractors,
their risk appetite is much bigger. So sometimes they don’t think that it is a risk.
You can see from the bidding, the big company may be more aggressive.
Do you agree that in an economic recession the risk will be higher for a
construction project? If yes, bid price should be rising during times of eco-
nomic recession. Hence, why does bid price fall instead?
The fall in price in bids can be caused by an accumulation of a number of factors.
Risk may be one of them as I said they are worried that the clients cannot pay but
(pause) I don’t think that’s a big risk especially for residential projects. More
importantly, they look at the costs of your material and labor price, the input cost. In
an economic recession these will fall as well so naturally your bid will fall. If you
continue to stay at that high price you won’t be able to get the job. That is why
those contractors that make money are those that bid before the recession comes.
Because when they bid the price, the price is based on the material labor price at
Appendix H: Case Study Interview with Mr. B 223
that point in time. When recession suddenly comes, all the prices goes down
because there is a time lag when they are procuring your materials, so they enjoy
the benefit of a lower price with a higher bid. In a recession, they will be looking at
when they bid. As I said, cost forms an important component, margin is the next
component and risks becomes the third component so in a recession when the cost
drops naturally your bid price falls that forms a bigger component in the drop
compared to the risks.
In an economic recession, do you see supply chain issues being a possible

problem for your company?
Possible. Because we are a main contractor, we are going to have material supplier
and labor suppliers etc. If let’s say for example in a recession whatever price you
have fixed upfront, especially when the economy is turning around that is going to
be worse for contractor than when the economy is going into recession. For
example, if let’s say I got this job at this price just before recession, I can still afford
to pay but when I price it at this price during an economic recession and when the
market turns around, this material prices I commit to you at such a low price, in fact
can be sold higher elsewhere. So you may have shortages and delays in deliveries.
They will sell it to people who offer higher prices, or their factory may insist on
higher prices because the prices have gone up. So yes prices will change when the
economy is up or down.
What about the subcontractors under your company? Do you see them
affecting your projects during recessionary times?
You see that’s why we always uphold good relationship with our subcontractors.
And we do it in such a way when we have technology that we want to introduce; we
also train them to become part of us. And when we want to use this technology,
they are familiar, and we don’t have to waste time to teach new subcontractors.
They will stay with you a long time. Naturally, the bonding will overcome the
pricing. Through thick and thin they will stick with you. Of course, the main
contractors have to be fair in adjusting the rates. When the economy recovers, the
subcontractors may divert their labor somewhere else when they are prepared to pay
higher rates compared to what you are offering because the contracts last two to
three years, you never know the economic conditions during the period.
For some of the smaller contractors, they expressed more concerns.

Yes they always have these difficulties; you can’t find people. For the resort world,
there are shortage of cranes and crane operators. Every contractor is scrambling but
the big ones were able to pay. The smaller ones end up with nobody. Hence, there is
project delay.
For your company, are there any financing issues?

Construction is a cash flow business, not a real estate business which is a
capital-intensive business. So we don’t really borrow a lot as the developer will pay.
If they cannot pay, that is also a risk that we will factor in. So generally, no
problem.
Recently in a newspaper article, Minister Lawrence Wong stated that in bad

times contractors cut corners when they bid aggressively. Why do you think
these companies cut corners?
To survive. Sometimes these big companies especially international contractors, the
world is their market. To a certain extent they have what you call profit centre so if
they lose here and make here, it will keep it balanced out. Singapore contractors on
the other hand, only have Singapore as its market. We don’t go overseas, we can’t
compete overseas. So the fate rests with the Singapore economy. When there is
economic recession there is no way to counter balance the effects of recession on
their company. For them to survive there are two options: bite the bullet and the
other is to cut corners just to stay afloat.
Regarding government pump-priming and its effects, what do you think are
the effects of government pump-priming on the industry and the firm level
when they add more jobs to the industry?
Singapore government have been doing it for many years especially when there is
an economic recession. For two reasons; one is they want push the economy up and
second they want to build cheaper. Let’s say if they were to build an MRT station in
good times, the price will be very high as you are competing with resources already
scarce. Now as to whether if they have an effect to local economy, to a certain
extent it has but to a certain extent it doesn’t. Reason is because Singapore con-
struction market is a very open market. There is hardly any barrier to entry. (pause)
Although the government says needs to have certain grading, all those big com-
panies can get it easily. When the government pump in jobs to the market, who gets
the jobs? If you look at MRT and airport jobs in the past a lot are given to
foreigners. Locals stand no chance. It is due to two reasons. One is the technical
capability. Second is the lack of resources and financial resources. Only recently,
some of the locals are getting the jobs. Pump-priming will benefit local companies
if they are able to get those jobs. Otherwise I don’t think there is any effect on them.
But if the foreign company value chain is still local companies, it may benefit
individual companies.
Thank you Mr. B.

Appendix I
Case Study Interview with Mr. C
Mr. C
Time of interview: 1.30pm to 2.30pm
Position in the company: General Manager
When did you join this company?

Last year (2016) May.
The next question, I noticed one of your projects went for CONQUAS
Yes. Usually only for building projects we go for CONQUAS and it is actually
spelt out by the client.
Why is the architectural score the lowest among the three scores?
There is a lot of subjectivity in architectural works. When it comes to architectural,
when you see the projects that we have here, they are mainly architectural in nature.
For this particular project (P.S. project name kept confidential to maintain confi-
dentiality of Mr. C’s identity) to be honest with you, the extent of the works, we do
have some commercial disputes with the client. But along the way, I think the
project also have a lot of challenges because the architect and client wanted a lot of
changes. Building structure can’t change much because that’s the first piling that
goes and once your piling goes, you have very little room left to do your building
structure. Whereas for architectural works, you can do a lot of wonders, change here
and there which I will say is still a common phenomenon now, that you will see a
lot of changes by the client, especially private clients. Having said that, I also think
that you should look at the context that this is actually an industrial building.
Whereas compared to those seasoned players, seasoned developers, they are very
226 Appendix I: Case Study Interview with Mr. C
familiar with what they want upfront rather than it being an Ad-hoc one-off project
where by the clients are not very clear of exactly what they want. So, things get a
little bit more complicated when things start to change along the way. We hardly
have all this kind of problems for MRT projects or all those where the clients
already knew upfront what they wanted, what is called for them, things get a lot
easier. So you don’t get so many changes such that next moment before you start
construction they say they want to change again and it is a problem in the industry.
But then, no excuses, there are also problems with sometimes workmanship
because at the end of the day you still have to subcontract. Being a main contractor
of the project, I will say that you are only as strong as your contractors. The strength
of yourself unless you do all the trades, all the finishing work yourself by your own
workers, then you can control. But honestly speaking, I hardly come across main
contractors who does all this work on their own using their own workers. Usually
you subcontract it. Sometimes if you get a cheap guy, your quality may be affected.
From your understanding of your company, are there any two projects you
feel that the quality is not as well because of certain reasons?
It is a bit difficult for us to comment as we have few projects that go for
CONQUAS. Even for government projects such as LTA projects, there is no
specification for CONQUAS. You cannot do CONQUAS if you are not the main
contractor.
How does your company monitor the quality of works?

This depends on whether you are the main or subcontractor. If you are the main
contractor, you will go around supervising the quality of all the subcontractors.
Most of our works are subcontractor works. It is for us to go around with our own
supervisors to monitor the quality. This does not mean you can get away with it.
The main contractor and client will come in to monitor your quality as well. We do
our first cut while the main contractors have their own quality officer to assess
whether they accept the quality.
So is there any project that has more demand from the clients for you all to
redo the work?
Okay architectural work encounters the most problem. They will monitor superfi-
cial things such as whether your concrete ceiling is well made and all other finishing
work. So quality is very much penalized only in architectural. Specifically on
whether any particular project that face more, I would say that even for MRT
projects there are stations whereby LTA staffs are more stringent with their checks
compared to other stations. So even for the eight stations we have done, the
standards can defer. It depends on how comfortable and how conversant they are
about architectural trades. In them wanting to get it rectified some think that it is
okay but some other guy will think it is unacceptable so it’s very subjective for
architectural. So I wouldn’t say there is any particular project but we do encounter
Appendix I: Case Study Interview with Mr. C 227
projects where the client team so called the resident technical officers and resident
engineers are very particular. For example, the resident technical officer themselves
will specify that we must do this, such as the paintings where they want a uniform
grayish color, which is not the norm.
When there is an economic recession, what are some of the notable impacts on
the industry?
One is the layout of staffs that is definite. Staff includes workers. The first group that
is affected is the workers being laid out first. Because if the workers are idling, there
is no reason for the company to hire them. Depending on things like MYE, one
worker can cost you about $2000; not their salary but levy alone is about $950
which we have to pay a huge chunk to the government be it whether they are doing
work or not. Second is their accommodation, their lodging and their transport. So
why would companies hold on to workers when there is no work. With less pro-
jects, more staffs are laid out. The project volumes dropped drastically which is why
2017 is a bad year for the industry. It is a snowball effect from 2016. In 2016,
companies still have projects. However, in 2017, many find that there are very few
projects to roll. Many companies, subcontractors and main contractors rolled
up. We have main contractors owing us money, almost on the verge of bankruptcy
until someone else bought it over. We have to do some commercial settlement to
finalize the deal such as a huge discount to close the contract. Taking whatever
money and running away with it is better than taking nothing when they are
bankrupt.
Were there any projects that your company took in 2016?

Yes. We have existing ongoing contracts. Honestly, we had contacts that were quite
healthy until somewhere this year. This year we only have about five new contracts
of which three of them are MRT stations, which is very tough because MRT
stations do not have any work for the next or first six to nine months. You need to
get your materials approved and many submissions samples need to go in before
they can give you approval to start work. We did a project that is alright and one
ongoing one. So these are some of the projects that are keeping us going. We have
another new project in October as well.
For one of your MRT projects, in 2016 can you name one project where there
are staffs being laid off?
When the project ends, naturally the team will move on to other projects. There
were three MRT stations we were doing last year, X, Y and Z station (P.S. stations
name kept confidential). Technically, X and Y certified completion is 30 December
2016. The Z station has only been completed two or three months back which was
when the government open the new MRT line last year. That is why when we finish
the project, we did not have enough workers to move on to the next stations. We
had to lay off quite a number of workers after the project.
For the Z station?

That is still ongoing. Because the government has to extend the whole contract, the
whole extension of time (EOT) was granted for the project. Everything including
the opening was delayed. So, for that station we managed to keep our workers
ongoing.
Were there any workers that are laid off during the project?
Project Z, I have laid off two staffs. It is due to their performance, not the recession.
As I feel they did not produce work that deserved their salary, I have to serve them
notice. I also have staffs that did not want to do the work they were supposed to do.
He wanted to be a driver. But it is impossible to give him that amount of salary just
to be a driver. So we had a mutual agreement for him to leave the company.
So for this kind of projects where you do architectural works for the company,
usually how many bidders are there?
Usually, because these are all subcontractors, some of them are actually called by
LTA for tender themselves. Some stations LTA shortlist the contractors to ten-
derers. So for this kind you have only about six bidders. While for some where you
bid directly to the main contractor, it is more challenging where there are about
eight or even ten bidders. But for a project like POBs and pedestrian bridges, you
can easily have a lot of people queuing up. To see how bad the market is, you can
attend any tender briefing. I’ve never encountered so many tenderers, 40 over, just
for a bus interchange project. This is unheard of but is happening now due to a
shortage of projects. I would say that in that sense the architectural trade is still
being protected. It is not like it is in the red ocean but between blue and red. You
can see more and more subcontractors trying to come into this sector because there
are not enough building projects. The private sector has died. Only the government
sectors and Housing and Development Board contracts are remaining. So many
subcontractors have been migrating to this sector. I used to believe that architectural
is in the blue ocean. Earlier days, four to five bidders is the norm but now I would
say it is higher.
Are there any projects you experienced much higher competitions with more
bidders?
Building projects. Building projects have many bidders. That’s why we prefer not
to do building projects.
So this is true across the industry?

Yes, building projects are now in shortage too. We were lucky we did one invitation
tender there are only 4 bidders for the building project which is unheard of partly
because the consultant did not want to do much work. When the number of bidders
go up, the amount of work the consultant needs to do goes up a lot more. Anyway,
it is a private client if the client is able to meet the minimum three quotations they
are happy already. Yes that’s where our strategy is. I don’t like to go head on such
as fighting over price undercutting. I prefer to be selective over my projects so that i
can maximize our hit rate.
What about your MRT projects

The recent one we started on is Project W (P.S. project name kept confidential to
maintain confidentiality of Mr. C). One of the station we have eight bidders while
the other only have six and for another, we have four. It ranges.
These are done over the same period?

Yes around last year 2016. So it stretches over to early this year. That’s why the
award only comes in around second quarter of this year.
So the number of bidders ranges, why?

It is also due to the complexity of the project. Some companies cannot take the
entire architectural work. If I am the main contractor, I will prefer one guy take care
of everything so I don’t have to hire more staffs to keep track of subcontractors. But
depending on the nature of the projects, some subcontractors will tell you they can’t
do this or that, or that they cannot take the entire package. However, for us, we take
the entire package.
So for the MRT station with eight bidders compared to the one with four
bidders. Is your pricing strategy different?
Yes. We will have to be more conscious about our pricing strategy. We have to find
out our potential competitors for these projects. For example, if I know this ABC
company is a diver, why would we bid with this ABC. If you want to dive, you go
ahead and dive. We will just move on to other projects.
So the one with eight bidders what is the project name?

That one is the project for station V (P.S. station name kept confidential to maintain
confidentiality of Mr. C).
The one with four bidders?

That one is project U (P.S. project name kept confidential to maintain confiden-
tiality of Mr. C). This is a bit more challenging because they have a lot of chal-
lenging designs including the whole structural steel for one whole entrance area.
But also, partly because some of the main contractors themselves wanted only one a
single company to take care of everything. They are not willing to tear
apart. Because if you tear apart you can get a lot of quotes from the smaller guys.
But if you keep them in one single package you can limit the number of players in
the market.
Do you agree that the higher the risk for the project the higher the bid price?
Maybe partially you are right, for the other half you must see how hungry the
company is. If you are full already why would you bid for a cheap price. While if
you have zero projects for the year, you will be one of the hungriest person in the
whole tender so you will probably do it at 1% or zero markup.
The one with eight bidders, has the project started?

Started.
Were there any difficulties in the project?

Started but I wouldn’t say that it has totally started. The first nine months we can’t
do anything we need to deal with a lot of submissions. For example, to do this
ceiling, we need a secondary support. All the materials have to be submitted as
well. You will have a very lengthy process to get all the approvals done. So if there
are any rejections you need to go through multiple re-submissions.
So what are the usual problems for architectural works?

I am talking about construction work right. I would say the skillset of workers
currently available is lacking. We rely a lot on general workers but they can only do
so much of labor type of work. Not a lot of them can appreciate architectural
finishing. To them a piece of panel is a panel. They just take it and mild it without
ensuring the conditions of the panel corners. Some workers don’t show pride in
their work so to them they just do what you say. They won’t really see whether they
properly do it or what. It doesn’t matter to them. So workmanship is always a
problem in the market. Ask any contractors, this is always a challenge. You can
subcontract out you don’t know whether they can give you all the good workers for
the project.
Hypothetically speaking, if your company bid at very low profit margins for
the project, does this forces your company to reduce manpower or any cost
saving measures?
Yes, let’s say for one of our project (P.S. project name kept confidential to maintain
confidentiality of Mr. C), we were the lowest. Because we have not got a job for a
long time so we bid at very low price. We were actually two million away from the
other guy. So for that situation normally what you will do is you see where you will
cut cost. You will try to not come onboard to delay as long as possible so that you
won’t start incurring cost. You will get your staff to multiple projects so you can
minimize the cost.
So overhead is one big cost saver?

Yes I would say in a project it is one big component. It alone is easily 10%,
excluding manpower costs. Can you imagine if you add in the workers cost it is
going to be a very big figure so the rest will be subcontractors cost and everything.
For your project on station V in 2010 and the eight bidder project, were there
any cash flow issues?
We will never see this kind of problems for LTA projects. LTA projects usually
have very prompt payments.
For the project on Station V too?

Yes. That is also a LTA project. We face more of a problem when they want us to
speed up the work to meet their cash flow. Because every LTA project works on a
cash flow. Based on your program. So if your program says you are going to reach
this milestone means you are going to reach this milestone. Your payment is tied to
this milestone, so if your schedule slips they will force you to come back to this so
you can get payment according to the milestone. This is how the system works.
Whereas for building projects, that’s where you face problems. Where private
clients give reasons like you haven’t finish this so I won’t pay you first.
For Housing and Development Board (HDB) projects too?

We don’t know because we don’t do HDB projects but for private projects we do
encounter them, such as the one that we applied for CONQUAS.
Is it a norm for payment defaulting?

I would not say defaulting. They just slow down the payment. Because to them cash
flow is key. The slower they pay you, the better it is for them. So for us if we have
slow cash flow we will do it down one tier so that we won’t end up in a negative
cash flow.
Supply chain issues do you see it arising because of economic recession?

I don’t think there will be a problem. Because the way our operation model is like is
we don’t really subcontract the whole thing out to them. We procure the materials
ourselves as we want to control the quality of material source. We only subcontract
out to installers to do installation work. We don’t subcontract a supply install
package as if we do so, we will end up with no control over the supply. So we rather
control the supply upstream where we procure the materials and then subcontract
out to install. However, some items we can’t, for example doors. We don’t produce
so we supply and install and subcontract out to the door guys.
For operating expenditure, during a project let’s say if operating expenditure

increases, does that cause your firm to reduce manpower or cut cost?
Theoretically you cannot. Because your stations will continue to run, and you still
need your same supervisors. Otherwise who will supervise and help you to delegate
the work? MRT station is not so easy, building projects you can still do that.
Because MRT station is a very wide area, you cannot cut down manpower like from
two guys to one. That one guy cannot possibly go around the wide area to delegate
works. Whereas for building, it is very confined, so you can do it.
When prices of materials fluctuate due to economic recessions, what are the
impacts on your firm?
I have seen it many times. I would say the material prices fluctuates due to the
market’s supply and demand. Back then I would say that the panels people
wouldn’t do it if it is not 200 but now, even 100 plus they will do it. Because what
are you going to do with the materials if you don’t sell? To them it is a chain
reaction. Manufacturers also realize there are not enough projects, so they want to
offload materials so that they can convert materials to cash. Everybody down the
line will be willing to cut depending on how bad the market is. But again, market
forces for the construction industry are very interesting. If you see the cyclical curve
for Singapore construction, it is actually two quarters behind GDP. When the thing
it is at its peak, we are not at the peak yet and when it is going down we will feel the
peak. So we are always two quarters delayed. We will not really feel the impact of
the bad news when it first comes in as there are still ongoing projects. We are very
busy, but everybody is rushing us to finish the work. When the market trend is
going downwards, that is when everyone tries to secure as many projects as pos-
sible, hoping that when the market falls and when we subcontract out, we can
subcontract out at a better price. However, we secure at a highest best possible price
last time. Now we see that the economic conditions are improving. But construction
industry is still bad now we can’t feel it yet. We will only feel it next year when
projects start to come alive. Those who try to rush in to secure projects are securing
contracts at a low base now but now when the market picks up they will suffer.
So there are no contract clauses that protect subcontractors?

Even main contractors are not protected, why do you think subcontractors are
protected? The only contracts where provision is allowed is for government pro-
jects, they only give fluctuations for your steel and concrete. They have a fluctu-
ation clause for them but that is tied to your index right.
Recently in a newspaper article, Minister Lawrence Wong says that firms cut
corners when they bid at very low prices. Why do you think they cut?
Labor, material and your profits are three major costs for construction. Labor is
whether it is direct or indirect cost. Material is all your material supply, whether you
or your subcontractor buy doesn’t matter. And lastly your margins, something has
to go. If your material price is already locked. You can go around to get cheaper
alternatives that’s where you cut corners. For example, I ask for 2mm thickness and
you go and source around and say 1.8mm cannot? These are all cutting corners.
Labor you can’t cut unless you cut your total manpower down. Next is your margin,
you can only cut labor and cut this of course your profit margins are already low.
You only have these two denominators to play on. So, you have to choose which is
the lesser evil. For the total volume of work you have if you cut manpower you are
going to face the issue of internal deliver. So you can only cut materials. So material
is going to be the one that suffers the most. People will go around finding the
cheapest possible material hoping they can get away with it. This is prevalent in the
market especially for contractors that are doing a lot of non-public kind of work so
whatever is hidden they will try to cut corners.
For your company, would you say you guys practice this as well?
My company is one of the few contractors that is recognized by the LTA for our
good work. Even when they lounge the station when they do the opening, it is done
at the Z station where the ministers come down to bless the opening. During the
announcement, four stations are identified for this press announcement and X
station is one of them selected. We are quite pleased that LTA has recognized our
workmanship. You can ask around. We are quite fairly treated by LTA in terms of
what we deliver. They can recognize that we are one of the good quality players. In
fact my company is the only one company where LTA called for three provisional
sum contracts. We are the only one invited to all three stations’ tender and we won
two.
So what do you think are the characteristics of your company compared to the
other subcontractors cutting corners?
I would rather not bid for the project if I knew that I will have to cut corners, which
we did it before. There is no reason for us to cut and then die when we realize we
cannot do it, so what’s the point. So for some tenders say for 40 tenderers your
chance is only 2.5%. I might as well save my team effort and time to do something
more effective then to spend it on this 2.5% chance. I rather bet on the tender that
have 25 or at least 15% decent chance over the 2.5% chance.
Are there any strategies?

That is one of them. The other strategy is if you do a good work people will actually
recommend you to other people especially for architectural. Similarly for MRT we
don’t need to go around marketing ourselves. People will come to find us. The
question is whether you have the resource to tender for it. So sometimes you may
have to reject them if you don’t have enough resources. Anyway, if it is a first-time
client, why bother trying to find a new one? We might as well stick to our old client,
we know them they know you.
Government pump-priming and its impacts. It helps to an extent but is not

strong enough to remove the impacts of economic recessions. Do you agree?
Look at the peak of the construction demand. Back then we hit 30 odd billion, now
we are nowhere near. I would say the private sector really died. There is no real
launch of commercial or residential projects for the last so many months I can
remember. So who is going to top up this shortfall? Government doing 1.4 billion
out of the 10 billion that is wiped out? So the help is almost non-existent. On the
surface 1.4 billion may seem huge but in reality it is translated into very small scale
contracts to benefit those very small operation companies maybe those with 20/30
staffs for them to sustain. Because the construction industry is like a value chain.
The smallest company will support the next tire and then support the next tier which
goes on and on until the top tier which is the big Multi National Corporations and
main contractors. So you can see how the current system you have to fit so many
people, so how can 1.4 billion fit such a big group?
Thank you Mr. C.

Appendix J
Expert Interview with Mr. D
Mr. D
Date of interview: 19 January 2018
Time of interview: 2pm to 3pm
Position in the company: Senior Manager
Factors F_1 to F_5 are impacts of economic recessions on the bidding phases of
projects. In response to F_1 to F_5, contractors/subcontractors respond by
bidding at (excessively) low prices in order to win projects. Do you agree with
the relationship thus far from ER to BID_PRICE?
As you cross the left hand side, this is the old immigration. If you remember, the
left hand side along the creek there’s a building. That was 1997 before the recession
hits. There was no construction. So the recession stopped construction. Secondly on
quality as you said. Now, recession of 1997 onwards what happen after that? What
did people do? First thing non-essential things were cut off. In a recession, let’s not
talk about quality. You start to throw a few things. So one of the things is the
environmental projects; they went off the radar. Construction demand yes. We have
two kinds of construction one is the government sponsored and the private ones.
The private demand falls drastically. And after the recession, the government
pumped prime to make it up.
Do you feel that in a recession companies feel pressured to get work and get
new work?
No not really. They would rather preserve what they can earn than to work more.
When you bid for a job, number one is to make money and number two to sustain
their staff; that means you are just making enough to make ends meet. So maybe

236 Appendix J: Expert Interview with Mr. D
when the cloud clears you can use the same staff. So they tend to be more
conservative.
In times of recession, when contractors bid for projects, do they make more
aggressive assumptions?
No because the risks are high they will be more conservative. It’s like gambling.
Would Singapore contractor firms respond to recessions by bidding more

aggressively?
That’s why all the companies that were considered the big players in 1997 don’t
exist now. I can give you the names. They bid aggressively and didn’t sustain.
Do you feel that competition in bidding rises in Singapore due to recession?

Yes it is very competitive. I give you one example. In 2010, first 3 bidders were
within 2%; very close. People get very conscious of the price.
When contractors/subcontractors bid low to win projects, they try and recover
the losses or profits during construction. Do you agree or disagree?
Yes. Either you make money or you try to sustain yourself. Keeping staff in your
office functioning is far more honorable than having your office close.
As a result of trying to recover the losses or profits during construction, quality

is compromised (i.e. there is a quality tradeoff). Do you agree or disagree?
Agree.
The findings suggest that when contractors/subcontractors bid at excessively

low prices, they may not compromise on quality but indirectly cause a fall in
overall quality of the project when they pass down the costs to subcontractors
by subcontracting works to them at very low prices. This results in subcon-
tractors compromising on quality as a result. (1) Is this a common phe-
nomenon in practice and (2) do you agree with this relationship?
Yes, this is likely for private jobs. In government jobs, the clients are more edu-
cated, they use their bull power to enforce things and get things done.
F_6 to F_13 are impacts of economic recessions on the construction phases of

projects. These impacts result in an increase in the costs of producing quality
output. This results in contractors/subcontractor resorting to quality tradeoffs.
Do you agree or disagree?
Changes in scope of work, yes people cut out non-essentials. They make something
to generate revenue then they add on something else. Property prices, yes they fell
drastically. Let’s take one step further I think in 1999 and 2003, these were the 2
lowest points for Housing and Development Board (HDB) housing prices; so prices
Appendix J: Expert Interview with Mr. D 237
do fall drastically. There is some uncertainty for the staffs whether they will retain
or not so that translates to productivity. The fluctuations are quite high for pro-
ductivity. Is there a higher risk of failure in the supply chain? Yes, very high. If the
main contractor is hit by recession so will the small contractors. So the problem of
insolvency is very high for smaller contractors. At times, they are unable to deliver
and some go bankrupt. Overhead costs no; everything goes down at that time. And
clients defaulting on payment, yes this used to be the case in times of recession.
This is where the law came in around 2005 where every subcontractor has to be
paid within 60 days. So that prevented this fall. In 1997 during recession the interest
rate went up affecting a lot of things. The world bank realised it is the wrong thing
to be done. Subsequently, they kept interest rates low in 2007 and 2008. And now
they are planning to go higher as recession is over. So there is a change in
philosophy.
Do you agree that prices of materials, manpower and machinery would fall in
times of recession?
In times of recession they fall.
Okay having talked about this, firms try to bid for projects during a recession
because the prices of materials haven’t dropped at that time. So they can win
the project at a certain high cost. And then when the recession takes effect,
prices of materials per se would fall and they thus make a profit out of it. Do
you agree that this is happening in the market?
This is like a stock market prediction. It works both ways.
Yes, this is one strategy but many say firms are unable to properly predict
when the recession is going to hit.
No one can predict. In my company we got a big job in 1997. We started executing
it in 1998. Material prices fell so they could make money. That was a MRT project.
They got another MRT project in 2001. They started executing it in 2003. At this
time, there is the biggest change in Singapore. The steel prices increased by more
than two times. Almost every contractor lost minimum 40 to 50 million for large
scale MRT projects. They went up to clients for an increase in price but clients
refused. And because of the pressure, one change happened. Now in government
projects, there is a price escalation clause after the problem of 2003.
Findings further suggest that when prices of materials, manpower and

machinery fall, subcontractors/suppliers who secured a contract at a low price
during recessions may allocate resources elsewhere when the economy
recovers and this results in potential delay of the current project. Do you agree
with this phenomenon?
But if they are big clients, they generally can stick onto it. So this does happens.
238 Appendix J: Expert Interview with Mr. D
The findings suggest that in the presence of Fc_1 to Fc_7 and Fs_1 to Fs_13,
the extent of quality tradeoff by contractors/subcontractors will be reduced. Do
you agree with (1) the factors and (2) this phenomenon?
Yes, I agree with them; because just to maintain the reputation, they will go ahead.
Name is very important. Once the name is tarnished you can never get back again.
They move people from left, right to centre to get things done. I’ve seen outside
companies from Singapore do it. Government in Singapore has encouraged com-
panies to venture out due to the recession. But it is not so easy because if there is
recession in Singapore, generally there will be recession in ASEAN. So you can’t
venture out as they will be protective of their companies.
These twelve initiatives coupled with consistent government pump-priming

over the years are major schemes that the Singapore government has adopted
in light of its commitment to develop a high quality built environment. The
findings suggest that in light of these efforts, the extent of quality tradeoff by
contractors/subcontractors will be reduced. Do you agree with (1) the factors
and (2) this phenomenon?
Yes, it helps. The penalty for poor quality is higher now.
On the effects of government pump-priming, the major finding is that it

benefits only a small segment of the industry.
Absolutely right; take for example in 2008 in Singapore. Companies and con-
tractors not happy. Small timers suffer more than big timers. The reason being
competition is very high. Not only that, protective and internationalized rules
created competition and pushed people out. From 2009 onwards the local con-
tractors made a complaint to the government that they are not having jobs and that
they should be allowed to bid for MRT projects. They did try but lost the jobs. So
the local suffered. There are not a lot of locals working for the government jobs.
[Additional question] So what do you think of the new price quality ratio for
the Price Quality Method (PQM)?
Actually now the emphasis is more on safety than quality. Quality becomes second.
Quality yes you try and maintain but they have to put in more money.
Thank you Mr. D.

Appendix K
Expert Interview with Mr. E
Mr. E
Date of interview: 05 February 2018
Position in the company: Executive Director
projects. In response to F_1 to F_5, contractors/subcontractors respond by
bidding at (excessively) low prices in order to win projects. Do you agree with
the relationship thus far from ER to BID_PRICE?
Can I ask something? How did you come about with this thesis?
Basically my research supervisor, Professor Low Sui Pheng and I came across
newspaper clippings from The Straits Times that discussed how quality is an
issue particularly in bad times; where firms (further) compromises on quality.
This led to me and my supervisors thinking about the relationship between
economic recessions and construction quality.
Okay I have a different view but okay you just share with me yours first.
Do you agree that with these (five) impacts bid price will fall?
You missed out one; ego. In Singapore it is particular so. It’s a culture thing
(laughs). Yes it is possible but not necessarily so because it’s affected by many
other elements. Construction demand is categorized by what kind of demand you
are talking about; civil or structural and what kind of areas you are trying to push
toward. Now, take for example the en bloc going on. You can expect better quality
in finishes to attract buyers because now they have a four years return on

240 Appendix K: Expert Interview with Mr. E
investment. Aggressive bid assumptions is natural; be it good or bad times. Number

of bidders, true; it’s more of who than the numbers.
As a result of bidding at excessively low prices to win projects, quality is

compromised (i.e. there is a quality tradeoff) down the line. Do you agree or
disagree?
Yes of course the quality is one thing that will be compromised.

Yes, it is the same. Economic recession is only the front part. It is too vague. But if
you look at the behaviors, down to the subcontractor, it gives you a better under-
standing of what is going on. It is never the contractors who want to reduce quality.
Everybody wants to go forward. The only reason why we go backwards is because
we have no choice. Some developers still want to maintain their margins, it will
pass down to the contractors and so on. So someone has to give and this will
cascade out. It’s always from the bottom to the top because you can simply pass on
the responsibility. This is the problem with the industry now. If the developer is
willing to pay high, do you think the contractor don’t want to do it for you? Will I
risk the risk delivering a lousy product when this is a good pay master? So it is
never the contractor’s choice to do so. So if price pressure comes from the top, it’s
always the last guy that suffers. You underbid, that’s where you lose quality.

projects. These impacts result in an increase in the costs of producing quality
output. This results in contractors/subcontractor resorting to quality tradeoffs.
Do you agree or disagree?
Why did you cross out these?
Because the survey findings suggest that these impacts are not felt by firms.
No, they will be felt by companies.
The findings suggest that the fall in prices of materials, manpower and
machinery during recessionary times is a double edged sword. Firstly, one
can profit from a recession if they can accurately predict the timing in the
fall of materials, manpower and machinery prices. By doing so,
contractors/subcontractors will attempt to bid for projects before a recession
hits and when a recession eventually comes and prices fall, they will make a
profit. In such case, no (further) quality tradeoff (QTO) arising from a
Appendix K: Expert Interview with Mr. E 241
recession will be observed. However, the findings suggest that most

contractors/subcontractors cannot accurately predict the prices and as a
result, incur cost they are unable to stomach. This results in eventual quality
tradeoffs. Do you agree with this phenomenon?
All these are natural impacts of economic recessions. I mean these are strategies.
You can literally know what is coming. The government puts up so many figures.
Everybody knows the data, and everybody will be using the same data, and will be
doing the same thing. We are that good. You go to Myanmar they give you rubbish
numbers.

recovers and this results in potential delay of the current project. Do you agree
with this phenomenon?
Of course. This is true. There was once a subcontractor telling me that it’s okay
because my Liquidated Damages (LD) is lower than their other project. They saying
that they don’t have to worry about my project, they can delay.
The findings suggest that in the presence of Fc_1 to Fc_7, the extent of quality
tradeoff by the contractor/subcontractor will be reduced. Do you agree with
(1) the factors and (2) this phenomenon?
Technical personnel, Fc_6 is not necessary. Fc_1, Fc_2 and Fc_7 are possible. The
minimum standard that government imposed for technical personnel in a firm is
good enough for the clients already.
The findings suggest that in the presence of Fs_1 to Fs_13, the extent of quality
tradeoff by the contractors/subcontractors will be reduced. Do you agree with
Diversification and entry in new markets, how does that help in quality? No. Niche
area is possible. I mean niche is not much out there; some specialists you cannot
replace. Yea Fs_4 and Fs_5 definitely help. Fs_7 in the field is very rare. I think
naturally almost all the companies are very lean already. Fs_13 is possible.
Re-negotiating loan contracts with the bank? How does it help? The current
facilities provided to the businesses are good enough for them to function. At this
loan interest rate, if they still don’t function well then there is something very
wrong.

242 Appendix K: Expert Interview with Mr. E
No even they themselves say that the quality didn’t go up. So ask yourself who pay,
the person who pay is the most powerful person. In the middle, there is authority
coming here and there. If the guy who pays doesn’t move his butt, the ones at the
middle can do nothing, for show only. If the guy that pays really does his work, you
won’t need authorities anymore. If you are paid good enough money, you will do a
fantastic job. Don’t talk about individual don’t talk about framework. Let’s talk
about surviving in business. Let’s be practical. You need to earn money and it is the
guy who is the paymaster that controls that.
Thank you Mr. E.

Appendix L
Expert Interview with Mr. F
Mr. F
Date of interview: 06 February 2018
BCA CRS grading of current company: Not applicable (consultant company)
Position in the company: Partner
projects. In response to F_1 to F_5 in times of recession,
contractors/subcontractors respond by bidding at (excessively) low prices in
order to win projects. Do you agree with the relationship thus far from ER to
BID_PRICE?
I think the firms would have done their sums. I don’t think it will be an obvious
thing for them to compromise their quality. They must have had some advantage to
secure cheaper labor or materials. I don’t think there will be a deliberate attempt to
compromise on quality. You just have to get good supervisors to get construction
properly done that’s all. In recession, the margins may not be profit but they just
keep going. The margin may be negative say negative five just to keep alive.
When contractors/subcontractors bid low to win projects, they try and recover
the losses or profits during construction. Do you agree or disagree?
Not really.
As a result of trying to recover the losses or profits during construction, quality

is compromised (i.e. there is a quality tradeoff). Do you agree or disagree?
What is your definition of quality? [Reply: Quality in this case is measured by
CONQUAS; measured by the number of defects]. Yes CONQUAS is a tool in
terms of indentifying the quality of a project. But when we talk about quality what
244 Appendix L: Expert Interview with Mr. F
you meant is the construction; both the material and workmanship quality right.
Again in these sorts of things, exactly how it is defined is quite subjective.
CONQUAS is only one type of way to see quality as and it is skewed towards
residential work. So I am just saying that these factors (pointing to all the factors
from F_1 to F_16) will obviously affect the workmanship, it may. But it is not a
given thing. Even during economic recessions, those contracting firms with good
reputation, they may cut their margins. But as far as I can tell, there isn’t many. So I
am saying that there may be some relationship but not as direct as you think.

First you have to get a job and get the best prices and sometimes it’s below cost,
even negative profit margins to win the job. Then you go back and ask everybody to
take a 10% cut and you take a 5% margin. So you just squeeze everybody down and
ask the subcontractors and suppliers: “you want the job or not? You have to cut
your prices by 10 if not I go to somebody else”.

projects. These impacts results in an increase in the costs of producing quality
output. This results in contractors/subcontractors resorting to quality trade-
offs. Do you agree or disagree?
Why would property prices fall? [Reply: They are saying that in a recession people
demand less for houses. Okay. Why did you put down overhead costs will rise? Not
necessarily so, and defaults in payment, okay it’s possible. Lending rates depend on
the economy. It really depends whether the lending rates will increase; especially
when the risks are higher. It’s more of monetary policy; not so much controlled by
the private sector.
The findings suggest that the fall in prices of materials, manpower and
machinery during recessionary times is a double edged sword. Firstly, one
can profit from a recession if they can accurately predict the timing in the
fall of materials, manpower and machinery prices. By doing so,
contractors/subcontractors will attempt to bid for projects before a recession
hits and when a recession eventually comes and prices fall, they will make a
profit. In such case, no (further) quality tradeoff (QTO) arising from a
recession will be observed. However, the findings suggest that most
contractors/subcontractors cannot accurately predict the prices and as a
result, incur cost they are unable to stomach. This results in eventual quality
tradeoffs. Do you agree with this phenomenon?
No comment.
Appendix L: Expert Interview with Mr. F 245
A case study mentioned that the prices of materials rise in the midst of their
project and they had to absorb the costs.
Yes it depends on what contract form you have; whether there are any material
fluctuation clauses. If don’t have then too bad. Very few will have material fluc-
tuations. Only government projects have.

recovers and these results in potential delay of the current project. Do you
agree with this phenomenon?
It’s possible. Of course they would want to shift some of their resources and
manpower to a new project when they are at the end of the current project. Because
they would know their costs already and if they have an overspent situation, they
tend to mitigate the cost and cut the cost over-run and hence, push the laborers to
the site that requires them at the earlier phases of the job; where the cash flow is
much better. At the end of the job, it’s always very hard to receive payments
because you know the S curve. The payments are much reduced until you get
certain certificates. One is the certificate of completion; you get 2.5% of the sum
released. And beyond that, post completion, you have maintenance and defects
liability period for about twelve to fifteen months. So it is very hard to get sub-
sequent money because it’s the balance of stuff like varying show work.
The findings suggest that in the presence of Fc_1 to Fc_7, the extent of quality
tradeoff by contractors/subcontractors will be reduced. Do you agree with
Yes I think it will be true.
The findings suggest that in the presence of FS1 to FS13, the extent of quality
tradeoff by the contractor/subcontractor will be reduced. Do you agree with
To enter the new market, okay. Niche areas, okay. Establishing strong client
relationships, okay. What is emphasizing on marketing strategies? [Reply: helping
the construction firm to have a better position in the industry like market positioning
in terms of quality or sustainability]. So it’s a marketing thing. Document lessons
from past recessions. That’s possible because you have older people with experi-
ence that weathered it before they can probably help with their knowledge.
Negotiate for special loan services. Yes, I mean that is the side you will have to get
more financing facilities because the cash flow will be very slow.
246 Appendix L: Expert Interview with Mr. F
So these strategies would help to moderate the quality trade-off?

Quality? Why you compare to quality. I thought these are to help firms survive
recessionary times?
Because the proposed relationship suggests that these firm strategies would
moderate the impacts of economic recessions on firms. So indirectly it will
reduce the extent of quality tradeoff; if the preceding relationships hold true.
I think if you look at the impact analysis, the correlation will not be as good as you
think. When a company shrinks in size it doesn’t mean the quality will gone done.
Obviously the firms will do less work but they still do quality work. So you can still
maintain quality. It really depends on what kind of management and culture the firm
has. It’s important to commit to quality.

I think it will be effective; all these measures.
In the newspaper articles we saw earlier, it seems to suggest that governmental

efforts have been insufficient to encourage firms to uphold quality despite bad
times. What are your opinions on this?
Like I said I don’t think there’s a very strong correlation. I mean obviously they are
having financial difficulties; the work will not get done properly with fewer staff.
But in the normal sense, I think it’s hard to get a direct correlation. You can still
have good workmanship in a recession but those are good companies.
Thank you Mr. F.

Appendix M
Expert Interview with Mr. G
Mr. G
Date of interview: 15 November 2017
Time of interview: 3pm to 3.45pm
BCA CRS grading of current company: Not applicable (government agency)
Position in the company: Deputy Director
projects. Do you agree with these impacts of economic recessions on contractor
firms?
For us (government officials) we don’t know. We don’t manage projects. Have you
approached any firms or any quantity surveyors (QS)? If you are looking for some
statistic and all, perhaps the contractors or QS firms can give you some insights.
The Professor may have some contacts on QS firms. Because QS firm consults on
project, they can give insights.
What is your general view on the Construction quality performance in

Singapore over the past ten years?
The performance has improved vastly. If you use the CONQUAS score (which you
can get from IQUAS), looking at the industry average, it has significantly
improved.
Do you have reasons for the improvements on the Construction quality?

In Singapore we don’t regulate quality. We regulate safety and green requirements.
We also have requirements on productivity. We must meet certain constructability
scores. Nothing about quality; where quality is still voluntary. BCA actually pro-
motes quality based on the CONQUAS and Quality Mark schemes. Quality Mark is
meant for residential housing. However, public housing we do not use it now. So,
248 Appendix M: Expert Interview with Mr. G
only the private housing projects use Quality Mark. I think the main reason the
industry has improved is because we actively promote CONQUAS. CONQUAS is
actually a requirement now for all government land sale projects. For all govern-
ment projects, CONQUAS is a tender requirement. That means to say a plot of
government land if you are successful they will have to subscribe. For all public
sector jobs and building projects are required under the instruction manual to do
CONQUAS. This pushed the construction industry to make a minimum standard as
far as quality is concerned. However, CONQUAS doesn’t set a minimum score. For
public sector building projects there are some bonus and discount scores stated in
the project. If the project scores over the minimum bonus threshold score, anything
above the score there is a certain formula that is used to tabulate and to incentivize
contractors. Conversely, if they don’t perform, they can be penalized up to two
million dollars by the same formula; 3% or two million, whichever is lower.
What do you think are the impacts of economic recessions on the construction
industry as a whole?
If there are lesser projects to go around and the number of contracting firms remains
constant, there will be more hungry firms. You will expect that those bigger firms
that normally don’t bid for smaller jobs will now compete and bid with those
smaller firms. Smaller firms does not have as much resources and capabilities. One
impact is that quality will be compromised. They will be able to get the tenderers to
lower the bid to try to match another contractor’s bid but by doing so something
else will have to go.
Will the number of bidders increase generally for each project?

Yes.
Competition in bidding for the projects will also increase?

Yes.
Would a fall in profit margins be reflected in the bidders’ bid price during
recessionary times?
Of course, if firms are hungry I don’t think they are going for high profit margins.
They just want a job to roll over to keep their manpower and resources. So this is a
strategy where the firms maintain certain manpower such that when the economy
improves, they can take on the jobs. So profit margin may be the least in mind.
Based on your experiences, do you see a tradeoff in quality as a result of

contractors bidding at excessively low prices to win projects?
If all being equal, let’s say you got a job because you dive on the price, then
probably somewhere will be compromised. It could be the materials or the quality
of work. Unless you have some technology that no one knows of but it wouldn’t
Appendix M: Expert Interview with Mr. G 249
come cheap. If you are using the same technology, then cost would be the same. If
you use the same resources, where else can you cut? First thing is quality will
suffer. You can cut on manpower but less people will supervise the work. So at the
end of the day something will be compromised. It could be safety or quality.
Some construction firms produce high quality results even during recessionary
times. What are some of the factors that results in that?
This will boil down to the top management of the company because the top
management will dictate whether they will perform or not. So it all boils down to
the culture.
We move on to governmental efforts. The Singapore government has been

consistently pump-priming the public sectors due to assist firms in tiding bad
times. From your experience, how effective are these government initiatives?
Like I said quality is not regulated. So good or bad times depending on whether
your job is built on land sale or public sector building projects, anything that is five
million and above you are subjected to CONQUAS. As long as quality is concerned
it doesn’t change. Of course during economic recessions you see more tenderers. As
long as government is concerned, we use the Price Quality Method (PQM). So you
not only look at price but quality achievers. There’s a scoring method in PQM
where government is supposed to reward the bidder with the highest score. After
you take away the quality part, if contractor dive at a very low price, there is a
possibility that they will get the job. Unless you have a valid reason to say that this
contractor cannot deliver, you will have to give it to the contractor.
Do you have any insights on what the government is trying to achieve when
they carry out pump-priming per se.
They are trying to make up for the shortfall. The way I look at it, construction
contributes about 5% to GDP. So it makes sense for the government to pump in
more projects to make up for the short fall. They also have to keep it in a healthy
state. So they try to help to certain extents. But I think a lot of these public sector
projects come in the form infrastructure and MRT jobs which may not benefit a lot
of local contractors. Because not all contractors have the ability to do these type of
jobs.
When I looked at the CONQUAS scores for Samsung Construction and

Technology, their CONQUAS score for these five projects have an average of
85.23. I notice that architectural scored very lowly during the recessionary
period in 2001 and 2002. In fact for most of the companies, they have low
architectural scores during recessionary periods.
This one is what type of project? Any industrial buildings? [Reply: these are
residential and commercial projects]. We will also have to look at the project.
Generally industrial buildings will score lower because the focus is not a lot on
250 Appendix M: Expert Interview with Mr. G
finishing but more on workmanship quality. But it will be true for residential and
commercial. So when you look at the score you must look at the project as well. But
for those strong companies of course they may still do well even if the project is
industrial. You can try getting the contractor firms; there will be able to help you in
more detail.
Thank you Mr. G.

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Management in the Built Environment

Series Editor: Low Sui Pheng

Low Sui Pheng

More information about this series at http://www.springer.com/series/15765

ISSN 2522-0047 ISSN 2522-0055 (electronic)

Library of Congress Control Number: 2018965898

© Springer Nature Singapore Pte Ltd. 2019

2.7 Key Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... 41

5.2.1 Auction Theory for the Conceptual Framework . . . ... 76

8.2 Inferential Statistical Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 120

Appendix C: Path Relationships Signiﬁcant at the 5% Signiﬁcance

Fig. 1.1 First school of thought: ﬁtness for purpose . . . . . . . . . . . . . . . .. 4

Fig. 2.10 Singapore’s wholesale trade index (Source BCA, 2018b) . . . . .. 51

Table 2.1 Timeline of recessionary periods in Singapore post-1965 . . . .. 43

Table 8.6 Descriptive statistical measures for indicators

The conceptual relationship between construction quality and economic develop-

© Springer Nature Singapore Pte Ltd. 2019 1

1.1.1 Quality and Value for Money

1.1.2 Problems with Interpreting Quality

1.1.2.1 Fitness for Purpose

Fig. 1.1 First school of

Fig. 1.2 Second school of

1.1.2.2 Conformance to Specifications

A logical extension to the first school of thought would be conformance to specifica-

1.1.2.3 Fitness for Purpose and Conformance to Specifications

Fig. 1.3 Third school of

1.1.2.4 System Approach: Technical Rationality

Fig. 1.4 Fourth school of thought: system approach—technical rationality

In the British Standards Institution’s (1983) Handbook 22 on Quality Assurance

1.1.2.5 System Approach: Socio-Technical Rationality

Fig. 1.5 Fifth school of thought: system approach—socio-technical rationality

rigorously exacted. Quality is, to a degree, “negotiable” because it is difficult to

1.1.2.6 Recognition of Quality

1.1.2.7 Regulatory Framework

Difficulty in defining Need to maintain

Technical provisions Contractual

Fig. 1.6 Traditional compromise in relation to construction quality

1.1.2.8 Technical Provisions

1.1.2.9 Contractual Provisions

made up of stakeholders who determine quality according to their perceptions that

1.1.3 Construction Quality in Singapore

1.2 Research Problem

Upon review of existing literature studying the effects of economic performance on

quality standards persist in Singapore’s construction industry then is because there

1.3 Research Aim and Objectives

1.4 Research Hypotheses

1.5 Research Significance

The proposed conceptual framework should be of significance to policy makers,

1.6 Book Structure

Chapter 2 – The Chapter 3 – The Chapter 4 – Chapter 5 – Firm’s

Chapter 6 – Conceptual framework

Chapter 7 – Research design & methodology

Chapter 8 – Survey results analysis and discussion

Chapter 9 – Case study analysis & discussion

Chapter 10 – Expert interviews

Fig. 1.8 Book structure

2.1 Some Basic Concepts of the Construction Industry

2.1.1 Construction as an Economic Activity

2.1.2 Construction Products