Curriculum for Lectures in Construction Department of NTUSC University in Taipei, Part3D. Features of Construction Industry explained in 5M:
(1) Power to drive Individuals and Organizations to achieve Business Goal
Man loves power, unlike animal’s content with existence and reproduction; human desires are essentially boundless and incapable of complete satisfaction.
A large proportion of the human race is obliged to work so hard in obtaining necessaries that little energy is left over for other purposes; but those whose livelihood is assured do not cease to be active, they look to power and glory. So young people start to drift in the world will wonder why the needs of obtaining the two become imperative for those have something.
The easiest way to obtain glory is to obtain power; this is especially the case as regards the men who are active in relation to public events. The desire for glory, prompts the same actions by the desire for power, and the two motives may be regarded as one.
Power exhibits in many forms, such as wealth, civil authority, and influence on opinion. No one of these can be regarded as subordinate to any other, and there is no one form from which the others are derivative.
Among the phenomena featuring construction industry, "Man" is most relevant. Because people can't be alone to work out big and complicated structure and buildings, they have to be molded into "organizations", to synchronize different expertise and sized up strength, then are capable of serving the society as a meaningful member of construction industry.
To make them functional and contributive, organizations need to be given goals, compatible resource, and rules for participants accepting rewards and punishments as inducements. So there must be leader, hierarchy, and systems in an organization; it means the engineers won't be immune from influence of power maneuver, which an innocent engineering debutant may hesitate to touch.
However, in an organization where technology and experience are regarded as highly important, naked power manifested on the leader assigned not with assent of the members but through investment, heritance or tradition will have to share power with doyens of superior skill and knowledges. It's the same that commercial people also will get their part of power apportioning when profitability is major concern. So when the organizations become big and complicated, power from creeds and over opinions of public will be another origin. As a result the leaders or candidates for them will be restrained for the power, and the organizations' behavior will have to be institutionalized.
So the entire system become more business-oriented at least in this part of capitalist world because we are sure that any organization, be public or private, shall perform according to the principle of utilitarianism that worth taxpayer, shareholders or expert's trust.
Although it takes on different guises from person to person, there's possibility that the leaders may pursue and profit from enacting their own agenda using their naked and traditional power, and it won't be conflicting that the follow employees who gains nothing will be cooperative as they seem to gain vicariously from the superficial achievements of the leaders.
It's fact that "genuinely cooperative enterprise" often appeared in Asian countries where "power distance" can be big between each layer of management and the young startups are always taught only to listen and learn. But the deliberation of power in an engineering organization will affect its benefit, loss, even survival. On the other hand, individuals always humbly don't like to touch non-technical issues and think by so they can be shielded from power manipulation of imperious person. So people shall care about the leadership and history of organizations he wants to join and make judgement whether or not it's an organization worth fighting with.
But it has to be noted, as organizations differ in size and type, though common to them all is the tendency for inequality of power to increase as membership increases. It's a confusion to to young people who may have justice and fraternity in mind and consider big company management rogue.
The general effect of an organization, is either to increase the well-being of persons, or to aid the survival of the organization itself, apart from those resulting from governmental self-preservation.
(2) Managerial cadre, Professional, Occupational.
A successful engineering company requires good balance between managers, professionals and occupational. But the balance could only be achieved when number and quality of the "man" employed are met operational requirement.
Among all, loyalties to the company or the boss personally in an industry where small entrepreneurs are everywhere, are most important. It means steady employment that the "man" can be recruited and assigned to work places for required period under reasonable conditions. Qualification to fit the jobs is basic, and more than that, the hired must be trusted for many inter-person deeds happened in construction industry.
In Taiwan, there're 2,845 Class A Contractors, 1243 Class B Contractors, 7,057 Class C Contractors, and 547 Specialty Contractors toward the end of 2019. At the same time no less number of Consulting Firms, Architects and independent PE Offices have bee registered. That it means thousands post of which qualification levels equal to general managers, managers and senior engineers are wanted in the industry. The side effects under the circumstance can be that the construction companies or consultants cannot hire managers or engineers experienced enough for their positions; and people also don't have opportunities to learn management or technical skills in their career.
So market fragmentation is ensured as many small companies in the industry struggle for survival. But people still cherish their titles such as vice presidents or directors of the companies even the jobs require them to do works of more occupational content than professional ones.
The situation further worsens when impatient authority tried to introduce project management system supposed compatible with international practice. The problem is unless there is an overhaul in construction related companies to stop the vicious cycle of professionalism tumbling, make it plain, the decimation of underperformed companies following the restructure of enduring ones should be required first to transform the disciplines, grade, and initiative of engineers, and then proceed to neat, clean and efficient 21st century construction.
(3) Disciplines, expertise, project based management, functional department oriented management.
As it evolves, emergence of the subcontractors to undertake the field work in lieu of the main contractor becomes a trend seeming irreversible. And when competition goes further, many of the main contractors withdraw to the point that they don't keep sufficient engineers to stay in lowest notch of expertise. The educated retained by the companies won't divide the works in line with disciplines, levels and grades truly demanded by the complicated system.
The recent project management system imposed by government to supervise public work has intention originally to assign more engineers for different discipline of work so as to developed expertise over the course. But the companies cannot follow the system because careful and elaborated division of works require more engineers to fit the jobs thus weaken related parties' competence if strictly enforced. Also It's a fact that there're more than10, 000 constructors, consultants and architects existing in a small market, making the recruitment seems difficult if not impossible.
To say it more candidly, most of the young engineers cannot learn proper construction knowledge throughout their careers because they're "generalist" under current practice. The problems come from, first, people are allured by the positions that a small organizations will give in their earlier days; and second they're more than willing to stay near their hometown or municipality causing perfect match with highly localized companies who never hear of functional department oriented management.
The conventional diplomatism accepted by general public recognizes people's ability and even expertise through examination compels the authority to make compromise in every occasion they should look into the true curriculum of job candidate. When bureaucrats waive their power to judge the adequacy of proposed project staff, they turn in all the tools and weapon that can safeguard the quality and progress of the projects.
Only a few companies in Taiwan have fortune to expand their organization into big, and sophisticated matrix structure, in which both project based and functional department oriented management co-existed and supposed to support each other.
As we show above, many entrepreneur led companies with limited business volume have to adopt project based management, of which, the practice is to assign people to site offices meeting minimum client's requirement. The site offices are presumed to gain technical and management backup from specialty engineers based in head offices, however, it couldn't be done as competition decimates knowledgeable veterans in the company.
Consequently, people are reduced only to work on projects of which the design and construction are general and routine because they don't hold engineers with know-how of posh nature because it only can be nurtured on an exclusive basis; and in reality, their employer has to be afford to establish a matrix organization embracing both project base and functional department oriented system.
(4) Personal and organizational behaviors, coordination and communication under high or low context culture.
Personal behaviors are different from person to person, also for different time for the same person. When they form an organization, it behaves always as a person but sometimes will have different faces. It depends on the leaders much; especially the way he handles coordination and communication in sizable companies.
Organization mainly consist of engineers can be stiff and fastidious in giving orders and implementing them. People with more liberal or creative thought may not appreciate. To certain extent, it has to be like that to avoid mistake happening and push things forward. However, coordination and communication are always problematic especially in a big company with byzantine structure. It's also partly the reason that the old style boss wants their company to stick to more traditional organization.
When organization is small, cultures can be defined as "high context', more inclined toward relational and collectivist. Message can be spread effectively aiding by gestures, relations, body language, verbal messages, or non-verbal messages between individuals.
But when organization grow big, communication shall be more explicit, direct, and elaborate; because under the circumstance the individuals are not expected to have knowledge of each other's histories or background, and communication can't be shaped by long-standing relationships between speakers, they depend more on the words being spoken rather than on the interpretation of more subtle or unspoken cues. In such case, the organizations need low context culture.
"High" and "low" context cultures typically refer to language groups, nationalities, or regional communities. However, they have also been applied to corporations, professions and other cultural groups. Though not all individuals in a culture can be defined by cultural stereotypes, it can roughly classify:
-When we're in elementary school, classmates and teacher fixed in the same classroom all day will know more each other, it's high context; and in university, people come and go, with professors and classmates the communication is made in lower context.
-In smallest companies, boss know every employees, give orders and evaluate performance themselves, it's high context; in big companies, departments and levels are many, between them the communication needs to be made in meetings with minutes or written mails, power must be delegated and the bosses reduced to figurehead.
-The lawyers and accountants talk and writes to identify the truth must be precise in words and numbers, they're of the lower context; the engineers and businessman next, while the farmers deal with the same lands and climates for life can be higher context.
-In nations or societies where harmony and the well-being of the group is preferred over individual achievement, higher context cultures can be more prevailing in Asian countries, that many of them subsistent on peasantry economy historically. While European and North American countries long developed their industry, the culture can be lower context.
People grow up in different context of culture will have distinct response toward the organization which he is hired; however, he can judge how or whether he has to change himself in behavior if he knows more about the cultural group the organization belong to; people will have flexibility for change when he is young.
(5) Labor laws, quality, incentives, unions, big bosses.
Working at site as construction people or supervisors will have to follow the weather instead of the calendar for their agenda. There's considerable improvement on the aspect as labor law and regulation interfere for the employed; but the employer especially the big companies may not be able to observe to the law completely. It's also one of the reasons that sub-contractors and work gangs are introduced to the project for execution as they may be more "flexible' to follow the law.
More than law abiding for overtime assignment, smaller company in Taiwan can pay corporation tax in deemed amount in exchange of lax scrutiny into their books. It means sometimes they can neglect or under report their employees' personal tax, retire fund or health care premium. And beyond money evaded, they can be freer to recruit employees especially for blue collar people that many of them illegal foreign labors.
A well-organized company in construction industry will consider laws amended in favor of employees are draconian to them, and tend to be meticulous toward recruitment even for white collar professionals. So when construction or design companies finally have to rely on dispatched people to fulfill minimum contract requirement, they actually leave the responsibility to lay off people to manpower dispatch agencies; which is sort of surrender, and the departure to the professionalism.
Professionals also have their problem to fully develop their expertise; first people are lack of patient and demand titles and income, or withdraw to the situation allowing them stay near municipality or hometown and in many cases they need to share with spouse for family chores and thus only work on regular hours. When those to be hired demand something for nothing and the employers have to do something to counter and that the easiest way could be to sacrifice the work quality, which usually is propped by professionals.
Fortunately in Taiwan, union, or engineer's' association aren't so active; the management won't be much teased in the interaction with their own employees, or those of subcontractors and any third party. Furthermore, for an industry notorious for its connections with mafia or packs leaders, the annoyance weren't be so buzzing thanks to the more complete and strictly enforced law for past two decades.
Taiwanese engineers’ received fair education since young and the general public won't put up with downright corruption, so the professionals should have decent chance to claim their dominance on the realm with patience and time.
(1) Prototype, bespoke; portable, fixed.
All the major players of construction industry need to know machine, plant and equipment to do construction works, for their type, cost and productivity. The general contractors used to own machines, in the days they're expensive relative to human cost.
When countries start to build infrastructures, they need to move earth, lift heavy weight and paving concrete and asphalt. There're machines typical to do these jobs and should be in prototypes: bulldozers, cranes, graders, trucks, mixing plants for concrete and asphalt, paving machines, compactors, or various working boats etc.. The works were big and many, so they design the machine in different capacity for the same function; they rolled out of equipment assembly plants like Caterpillar, Komatzu, Liebherr and Peri, in big numbers.
As construction become more sophisticated, the method to build structures and their dimensions different, the machine to do the desired work need special design and fabrication. Their use is limited unless it is a very big market and timing allowed; we called the order and the makes bespoken. The most obvious one is tunnel boring machine to suite for different diameters and shapes; and probably for the endurance because either the machine may not have second business chance for reuse and material designed be scraped for economical purpose.
Most of construction machines can be transported to construction sites, self-driving or mounting on trailer traveling for long distance and can move themselves arriving at construction site, we call them portable, such as dump trucks, excavators, dozers, loaders smaller mobile cranes, etc.. For mixing plants, TBM, tower crane, or machines too big for transportation, they're divided in parts or compartments, and then hauled to the site for erection; we call them fixed type of machine.
Engineers must take into consideration the cost require to mobilize and demobilize construction machine; cost for disembarking and embarking, installation. They also need to consider the damages possibly incurred to the parts or compartments, of plants and equipment during transportation, think about insurance and time lost to influence total project due to accidents. Also people need to know certain fixed plants depreciate their value very much in one usage, the remaining value after one project could be only the material cost after dissection.
(2) Operation, maintenance and repair.
In the days when the value of machine and spare parts far exceeded cost of people serving them, operators, crew for maintenance and repair, only companies big enough would buy machines as their main asset and source of revenue. For two reasons the machine ownership had to be shifted to specialty companies: 1. Facing rising human cost and fastidious labor law, only some companies could concentrate their effort to manage problems related to operation, maintenance and repair. 2. Company owning big fleet of machine would have financial problem when they didn't get works involving usage of machine, especially at time interest payment was high.
The machine owning cost shall be calculated as buying price plus interest payment over the machine's service life. One is called flat depreciation method, use the buying price divided by estimated remaining service life; the other is weighted depreciation method, assuming the first 2 or 3 years the machine will have high productivity and place the cost depreciated for these 2 or 3 years certain fraction more. However, the amount permitted for depreciation depends on regulations announced by each taxation offices for different equipment. Interest payment can be considered for each company outside of the machine cost calculation.
Machine need operator to move, the owners must pay to the operators the hourly wage and overtime. And machine also needs daily, weekly or even periodical maintenance; the related cost comes from workers responsible for maintenance and the other small part for consumable, lubricant and tool. Repair cost in general is low when machine is new, but it will accelerated when machine's condition become less fair in later part of work life. The elements of repair cost consist of mainly two parts; one is labor, and the other will be cost of spare parts. In developed economy, depending on different equipment, the repair cost shall be between 100% and 200% of the initial cost according to statistic.
In developing countries where machine price is high compared to human cost, the wage of operator can be 4-5 times of that of manual labor and output of machines will be higher than what can be achieved in advanced economy. Because when owner consider machine is expensive, he doesn’t care to give higher payment to operators and is eager to see it convert to higher machine production for the works.
(3) Rental and owning.
Started from 70's last century, general contractors wouldn't own construction machine themselves in consideration of big investment over uncertain business opportunity, difficulties to handle labor relationship with operators, maintenance and repair workers, and specialty judgement over replacement or repair of major parts.
It gave the rise of equipment rental companies, the stories were always at beginning the boss acquired construction machines with puny capital while seeking blessing from big construction companies to guarantee their works. It's important in Asian countries that this kind of company expanded their business with cooperation from fleet machine owners, who were operator com maintenance workers, will always be able to keep equipment and trucks in good conditions, building reliable images motivating general contractors thinking owning machines won't be necessary.
The machines like pets need to be taken good care, even after their full computerization. So the general contractor cannot compete with big machine companies, which, actually comprise of many small entrepreneurs. However, the rental now goes to include operator and depreciation/maintenance/repair according to work hours and nowadays the market rates can be high that 2 years rental may be equal to the buying price because all the owner/operator/maintenance workers think and bear the same cost for interest/livelihood.
(4) Construction method and machine selected.
Designing a feasible and efficient construction method is key to success of infrastructure works, the right sequence, get through of the most critical part of work, and avoid or minimize interference of hazardous incident shall be top consideration when the plan is drawn. Engineers may have wide range to select machines for construction method; however, it will be influenced by the market availability. Sometimes people will be more accustomed for certain type of machine, for example, in Taiwan excavators are everywhere but dozers and loaders are hard to see contrary to North America. The reasons could be incidental that the ones first introduce the them to Taiwan thought of something and others just followed suit.
Capital availability and market demand could play a part, the other example was the use of tower crane wasn't so popular and rental fee became higher because maintenance cost shared by small number was much; but tall buildings were popular and tower crane made construction convenient cost was relatively low against mobile crane. The introduction of local made, at least for major part, further brought down the buying and repair cost; for other equipment, similar stories also happened.
In small or particular construction market, the selections of machines can be restrained by several reasons like above; so there no standard or distinguished construction method. A proof that civil works is very local. In countries like India, machines face strong competition from man power; Bulldozers and earth moving machine are levied with high import duty and surcharges so hoe and dustpan will have chances to outperform construction method based mainly on mechanization.
There are situation that prototype machines will not meet construction requirement, the bespoken one, bigger plant assembled by smaller plants or fabricated for that special purpose will be the only solution. People need to know: 1. Lead time to design and to build the plant is long; not so convenient to acquire like ordinary equipment immediately to get on the market. 2. When one part of them goes down, entire system will be idle. 3. Though people will try for next use after one project, actually it's difficult. 4. So it scraps after one project, and the residual value of the bespoken plant can be very high. 5. Turnkey contracts become popular these days; the contractors will have chances to design structure sections optimal and fit into owned bespoken equipment.
(1) Local, traditional construction material as first choice.
Civil engineering work is local business. Many of us consider construction material is universal but actually in many places the engineers must think of to use maximal extent of local material. When considering availability, transportation cost and local employment, bulk material like aggregates, sand, stones, brick, tiles, etc., will be traditional. Even for cement, in the days carbon reduction was not a major issue, people wouldn't like to use imported ones, instead, using tariff as a way to stem their import.
In the old days, human's weight lifting capacity was limited, the long distance hauling capability also prohibitively expensive and could only go through waterway. People had to use small and light material from local, like timer, brick and mortars for buildings and structures in most of the cases. Granite and basalt were used in part of Europe especially for churches, castles or monumental structures but the unit weight is limited. Wooden structure was erected in Asia for aristocrats and land lord, but the timber size reduced as a result of deforestation. In general the masses had to live in hut and dens for which they built with any material they could pick up from nearby area. As a whole construction was slow and expensive, always took human life and the toils.
Discovery and use of steel in civil engineering works really change the world; they're expensive but can replace a lot of traditional construction material leading to great cost saving not mentioning augment of built structures strength and neat dimensions they become. Steel in the form of rebar, sections and strains flow freely around the globe and no sanction of its trading against any single country seems like possible. Though people still think of innovation for construction material better than steel, such as fiber glass or high strength concrete, but commercially it wouldn't go popular for long time.
There's possibility that local material and construction method can be used in orthodox construction projects. For example, the Baku piles were used in Southeast Asia for soil retaining and promote compaction effect in embankment (behind the abutment) is now incorporated into design for international class project as it's locally available and conveniently to install.
Mankind are smart to utilize everything from nature but sometimes it can be tragic. For instance, there's one country consist several hundred miles of extended alluviums, where hard stones and sand difficult to obtain. So the local people burn clay into brick like material and asking women and children to break them into sizes of aggregates and sand with hammers. Then they mix them with cement to obtain concrete. The solution risks human life because buildings and bridges sometimes collapse for the meager strength those improvised materials can only provide. It's wrong type of localization; however, ugly human apathy and commercial interest force people to continue the practice.
(2) Material and Equipment to be incorporated into Permanent Project.
As economy advances in a country, the construction work won't be simple structure again; many systems and equipment will be installed in the project which becomes more sizable and sophisticated. So the task of procurement won't be limited in basic material; specification will be more complicated than talking about composition, dimension and strength. Required system shall be functioned, monitored and controlled well before their punctual and proper delivery to the site. And of course commissioning and test run will be done now for entire project and should be more important than certificates and test that are still required for single material.
Since the owner may actually designate the maker of the system and equipment to be incorporated in the works; the winning contractor has to sign the subcontract with the specified makers after the tender. So he is to overtake the responsibility of system and equipment delivery toward the owner, which will include risks in quality and schedule starting from engineering, making, shipment, installation, commissioning and test run. In other words, he has to take care of whatever may happen in foreign countries: strike, sabotage, mistakes, bad performance, act of god, all kind of disruption that may occur to strangers.
When someone is asked to buy aggregate, cement, steel or even tiles, he's not supposed to spend so much expense as overhead; we call it conveniently as handling charges, which plus costs for bank guarantees, insurance premium, communication and attending fees, will be the overhead. But if he's buying equipment or system, for instance, the baggage handling system to be used in air terminal, he has to have people knowing the vendors at procurement, engage with the lawyer for international contract, do the entire necessary monitor before delivery, and take contingency cost for possible disruption during making and shipment, total overhead could be tremendous.
However, many people are still ignorant about modern day project. During budget establishment, there will be bureaucrats in authority, engineers in design consultant, accountants and auditors, still think offering the contractor the same fixed percent of overhead as before will do the job. They consider the frontage contractor won't increase anything physical on the equipment or system to be installed and thus added no value on the works. The denying of invisible cost stemmed from grand pa and ma's days when the economy still cling to agriculture and manufacturing and difficult to remove nowadays.
But one thing very fundamental is that the boss of contractors from their mind also accept the near physicrat saying that anything not physical wouldn't worth real payment because themselves also don't have experience to handle a construction project involving complicated sub systems and equipment which will cost them money to ensure a smooth and punctual delivery.
(1) Payment: cash, in kinds or goods (barter), deferred (BT), franchise revenue (BOT, PMI).
Men work for money, only after the contractor can get full payment the completion of the project is meaningful to him.
And because the construction contracts normally are with big amount of money, public or private owners will have various form of payment according to their financial conditions. Normally they will be paid in cash, kinds or goods (barter), deferred payment after completion and transfer to the owner (BT), or paid through franchise revenue (BOT, PMI).
It also possible that the form of payment can be mixed between the above mentioned methods. The contractor must evaluate its own ability to accept the form of payment, for example, when he would have accept the payment in crude oil over long period, he has to evaluate the possible oil price fluctuation and the extent and cost that he would have been protected by the fortunes.
The reliability of the owners, government or private companies must be taken into account.
(2) Standard international contracts to regulate: FIDIC, NEC3 (New Engineering Contract3), AIA(American Institute of Architects), JCT forms of Contract(Joint Contract Tribunal)...etc..
It's not enough that the contractor will get the owner's pledge to pay him. It depends on the contract conditions through which the contractors get paid. Normally we'd have type of contracts such as: FIDIC, NEC3(New Engineering Contract3, used for civil works in UK., Australia, New Zealand and Hong Kong, the language of it is simpler and the signing parties are said to be more equal), AIA(American Institute of Architects, form of contract popular in USA.), JCT forms of Contract(Joint Contract Tribunal, for architectural works in UK.)...etc..
As projects are different for each other, the contracts need to be modified to fit the situation; they will be reflected in so called Special Application (or Conditions) and leave the General Application (or Conditions) unscratched. However, slight difference in Special Application will result in big departure so that the contractor need to read carefully even the author of standard contract or the Owner would have claimed they're the most friendly contract terms.
(3) Money beget Money.
The added values of technology, business skill, labor and money (in terms of capital) changing their respective shares in construction project of 21st century-engineers are no more to play the dominating roles.
Though money is everywhere (due to QE?), but they get more respected; people like to invent idea to attract the capital, for that they provide guarantees, mitigations and even placebo like assurance to woo the mammon. Under the new trend, a big part of the construction projects will be ceded to be controlled by hordes of non-technical people.
For example, the government has restricted financial resource for construction project and it will almost be spent exclusively for construction related items last century. And right now much of them will be paid as financial cost for BOT and/or PMI as people argue commercial capital will be required to accelerate the public investment. The other part of money will go to so called independent third parties for their certificates, report and affidavits at non bargainable cost (as to be disposed by those non-technical people), while the construction hands need to compete each other.
Engineers must realize, somehow, they would become a secondary role for the construction projects, but on the other hand, they could become a better manager than people of other discipline to control the whole project because they know better among all only they reject to become more "general" they will lose the chance to be the dominating figure of their project.
(1) Contractors with Lemming Mentality
As it's said above, there're 2,800 strong Class "A" contractors in Taiwan to share a small market; the threshold to go into the construction market isn't high as capital (relatively low to the contract amount) is concerned. When they get contract, the contractors will find many sub-tier contractors more than eager to share their risks and sometimes loss.
The maintenance cost for a Class "A" contractor can be low, the minimum can be fee paid to registered PE, a tiny office, plus a secretary to answer the bell. When the bosses are frustrated for not to get business, they can go for "hibernation" for some time; they can wake up at any time when they get contract, to recruit people including manager and engineers, the employing market won't be against shoot and off requirement.
So the contractor of the "entrepreneur" type are majority among all, they're competitive and cause the awarding price, especially of public works, spirally downward, impossible to nurture big contractors with know-hows and experience.
But one day it will come, provoked by market mechanism such as sudden stoppage of trucks in 1990 (resulted in soil haulage hike and aggregate short supply) and steel price escalation in 2006, many contractors broke and their number culled to more reasonable extent.
The process repeats again and again; that contractor will spring up when they feel time is good (may be just illusion), employees and crews may go out of original company to fund new one, and the industry will be swelling, like lemming near pole area grow to incredible number within short spring time and jump from the cliff collectively, and it's construction industry in Taiwan.
(2) Style of Competition: Lowest Bid, Evaluated Lowest bid, Value for Money.
The problem of construction industry in Taiwan comes from over competition. Lowest bid is blamed because under the bureaucratic system, the budgets were considered to be right and standard by the contractors, and the winning price was considered as true market cost and will become good reference of next tender. After several vicious cycle the system become less flexible and further to worsen the industry.
Evaluated lowest bid is taken with the hope that the best contractor and their offer can be selected as the best for the project; however, the winners may not be the most outstanding one, and the judges' supposed imparity can be second-guessed. Authority try to improve the criteria for evaluation of the bid only invite more criticism and so the lowest bid system stopped at 2007. For similar stories, BOT and PMI also suspended except for very special project; and it means the tendering system returned to lowest bid after the first decade of 2st century.
The lowest bid tendering system were proven to be devastating for the constructors, the contractors claimed they're enduring big losses under harsh competition and they've to undertake the contracts only to maintain minimum operation, it could be true that in recent years there're cases that no one participated the tenders. So the evaluated lowest bid is coming back, the authority may get lessons and they’re also careful to choose the "judges" this time so maybe there's improvement that it will last longer, hopefully.
The final goal for government spending shall be "Value for Money", in which, the project completed will worth money spent. It's subjective as modern construction will involve different requirement by different sectors, thus giving different evaluation. But it's starting, we wish the bad element in the market will be eliminated and professionalism will have chances to prevail after improvement on the good one.
(3) Elements of Competition.
A market considered normal will be the one that the consumer maybe most important the government who's single biggest buyer of the public works to select the contractor based on their performance, past experience and readiness for the current tender: price, technical approaches, time of completion, safety record, experience in similar works, existing work loading, managerial and technical resource in hands, records of contract disputes (with owners)...etc..
It's true that during the selection of the contractors, the Authority and invited judges will "play god" to bring up some companies, and the result maybe the selected aren’t the right one because the selecting ones are never to be god; but the right ones will be chosen over long period, so the public especially the media and the society have to have patience.
(4) Defying the International Norms.
For long time, the developed countries especially Europeans and Americans have big say on the codes, standards, disputes solutions and financial arrangement of the international projects. They are establishment enjoy privileges and power more than their competency. The Asian powers maybe due to their introvert personality and late coming to the market, suffers considerable in international construction market, in which only south Koreans have obtained slightly better positions (in plant construction and high rise building projects).
We believe it's not an intended design based on the race and culture but is an essential market problem after long time practice, and realize to change it can be almost impossible because again you've to be in antagonistic with existing power. China approaches it with big loans supposed to be unstringed like Belt and Road Initiatives maybe effective at least for some African and Latin American countries, but it's again is more political that we need to watch out for some years.