An Integrated Control System for SMEs in the Construction Industry

4 ]Revista de la Construcción Volumen 8 No 2 - 2009 Sistema de Control Integrado para PYMES del sector de la Construcción An Integrated Control System for SMEs in the Construction Industry Autores PELLICER, E. Profesor Titular Universidad Politécnica de Valencia, Escuela Técnica Superior de Ingenieros de Caminos, Canales y Puertos, España email: [email protected].es Fecha de recepción Fecha de aceptación 12/06/2009 07/08/2009 PELLICER, T. M. Profesor Contratado Doctor Universidad Politécnica de Valencia, Escuela Técnica Superior de Ingenieros de Caminos, Canales y Puertos, España email: [email protected].es CATALÁ, J. Catedrático Universidad Politécnica de Valencia, Escuela Técnica Superior de Ingenieros de Caminos, Canales y Puertos, España email: [email protected].es páginas: 4 - 17 [ 5 Revista de la Construcción Volumen 8 No 2 - 2009 [ Pellicer E. - Pellicer T. M. - Catalá J. ] Most construction companies are small and medium-sized enterprises (SMEs) that manage project-based and businessfocused activities simultaneously. Commercial software packages are not fully developed to offer a unique solution that tackles both. To fill this gap, this paper describes an integrated management system specifically developed for SMEs in the construction industry, whether contractors or consulting engineering and architectural firms. Both, project and business functions are addressed and handled by the system as a whole. Particular attention is given to the procurement process because it is essential for the strategic planning of these companies, which must naturally engage new contracts to remain in business. The system is based on a client/ server architecture that is arranged in three tiers: presentation (user interfaces La mayor parte de compañías de la industria de la construcción son pequeñas y medianas empresas (PYMEs) que gestionan simultáneamente actividades basadas en los proyectos y en los negocios. Las aplicaciones informáticas comerciales no se han desarrollado suficientemente para ofrecer una solución única que aborde ambos aspectos. Con el fin de cubrir esta carencia, el presente artículo describe un sistema integrado de gestión diseñado específicamente para PYMEs del sector de la construcción, sean constructoras o consultoras de ingeniería y arquitectura. Ambas funciones, proyectuales y empresariales, son abordadas y gestionadas conjuntamente por el sistema. Especial atención origina el proceso de contratación debido a que es fundamental para la planificación estratégica de estas empresas, las cuales deben conseguir nuevos contratos con el fin de mantenerse en el mercado. El sistema está basado en una arquitectura cliente/servidor que se estructura en and forms), application (queries), and data (relational tables). The system uses MS AccessTM as a database management system. Users are categorized according to their functions within the hierarchy of the company, and therefore several different interfaces are designed for each personnel category. The system works in real-time, so every employee with a preestablished right of access can obtain information instantaneously. This is crucial for making immediate decisions when problems arise, allowing prompt actions from every manager in the hierarchy and resulting in noteworthy time savings. This computer-based application has been successfully implemented by four Spanish SMEs in the construction industry. The suitability and advantages of the system implementation are highlighted in this paper with specific data regarding its current operation. tres niveles: presentación (interfaces del usuario y formularios), aplicación (consultas) y datos (tablas relacionales). Se utiliza MS AccessTM como sistema gestor de la base de datos. Los usuarios se categorizan de acuerdo con sus funciones dentro de la jerarquía empresarial y, por lo tanto, se diseñan diferentes interfaces para cada categoría de personal. El sistema trabaja en tiempo real, de modo que cada empleado, con sus derechos de acceso preestablecidos, puede obtener información instantáneamente. Este aspecto es fundamental para tomar decisiones inmediatas cuando surgen los problemas, permitiendo que los gestores en cualquier nivel jerárquico actúen rápidamente, y obteniendo ahorros de tiempo sustanciales. Esta aplicación informática se ha implementado con éxito en cuatro empresas españolas del sector de la construcción. La adaptabilidad y ventajas del sistema se destacan en el artículo, incluyendo datos concretos sobre su funcionamiento real. Resumen Palabras clave: Gestión de negocios, empresas constructoras, bases de datos relacionales, tecnología de la información, administración de proyectos. Key words: Business management, construction companies, relational databases; Information Technology (IT), project management. Abstract [ 6 ]Revista de la Construcción Volumen 8 No 2 - 2009 páginas: 4 - 17 Pellicer E. - Pellicer T. M. - Catalá J. ] Introduction The construction industry is managed primarily by projects, on the one hand, and it is basically composed of small and medium-sized enterprises (SMEs), on the other. For each phase in the construction process (feasibility, design, construction, operation, and divestment), different kinds of projects are needed and, consequently, specialized project-based companies have been set up to address this need (Gann and Salter 2000; Winch 2006): mainly consulting engineering and architectural (CEA) firms and construction companies (contractors). Most of these companies can be considered as SMEs (DTI 1998; Pearce 2003; Robeiro and Love 2003) since, for instance, in the European Union there is an average of five workers per company operating in the construction industry (Eurostat 2006). Taking all these into account, many companies in the construction sector manage their business as a pool of projects, focusing on each project in itself (Engwall 2003). Project-focused computerized tools have been developed to manage individual projects and ensure that information on the status of each project is available; nevertheless, these tools have not been sufficiently developed to guarantee good managerial practices nor they do provide a strategic direction for companies (Gann and Salter 2000). Additionally, information is not always shared among projects and the benefits of leveraging and integration are never realized (Engwall 2003). As a result, these companies usually look toward business integration (Davenport 1998). There are commercial software packages, generally called enterprise resources planning systems (ERPs) that can be implemented in any company from whatever sector. ERPs are composed of a set of standard modules: production, distribution, sales, human resources, accounting, finance, and so forth. These modules are integrated to allow all the departments of the company to work on the same computer system, sharing a common database. Additionally, ERPs aim to improve business efficiency providing accurate information on time in order to take optimum decisions while diminishing the traffic of documents among work posts (Shi and Halpin 2003). Most of the traditional industrial enterprises and the large construction corporations have already implemented ERPs (Botta-Genoulaz et al., 2005). Nevertheless, some authors have identified two basic problems with ERP systems. First, the cost is typically two to six percent of the company’s annual turnover, considering not only the price of the software, but also its implementation and staff training (Davenport 1998; Shi and Halpin 2003; Ehie and Madsen 2005). Second, it is necessary to adapt the system to the organizational processes and culture of the company and not the other way around (Davenport 1998; McAfee 2003; Ehie and Madsen 2005). Furthermore, the implementation of ERP commercial packages has been somewhat disappointing as reported for SMEs (Huin 2004), the services sector (Botta-Genoulaz and Millet 2006), and the construction industry (Shi and Halpin 2003). Following this trend, Tatari et al. (2007) carried out a survey among 101 construction companies (contractors, and CEA firms) mostly from the USA. They concluded that only 4% of these companies used ERPs for their daily project-based activities. Additionally, only 16% of the respondents were reported to be pleased with their present level of business integration. In brief, commercial software packages offer limited solutions for SMEs in the construction industry. Some provide operational tools (project-focused software), but not business management tools (company-focused software). By contrast, ERPs are generally suited for large-scale standard and repetitive operations and management processes, just the opposite of what project-based firms usually face. Consequently, the main goal of our research is the development of an integrated computer-based management system, working in realtime, and specifically designed for SMEs, taking into account both project activities and business activities that take place in every construction company. Accordingly, this paper is structured as follows. First, the research objectives and the methodology are specified. Second is a review of the current research as applied to the sector. A model of business organization is then proposed. Next, the integrated management control system is presented and explained by means of some illustrations. The technical feasibility and actual implementation of the system are highlighted later. Finally, conclusions are drawn and recommendations for future research are made. Research objectives and methodology We argue that effective management for a typical project-based SME in the construction industry requires the availability of a flexible and easy to implement computerized information system specifically designed for this kind of companies. The system must deal with both project-based and business-focused activities. Our purpose is to describe a computerized management system that can be easily implemented in SMEs in the construction industry in accordance with their current needs. This system is adaptable and works in realtime with a client-server architecture that meets the páginas: 4 - 17 [ 7 Revista de la Construcción Volumen 8 No 2 - 2009 [ Pellicer E. - Pellicer T. M. - Catalá J. ] requirements of these companies. It uses customized applications of common commercial software. There are three additional objectives to this study: • To review the current state of the art on the subject. • To design and develop a conceptual management model considering project and business management activities. • To verify the technical feasibility of the system. The system described herein is subjected to a thorough theoretical analysis as well as implementation projects to assess its feasibility. The system is developed through a qualitative analysis from different case studies of Spanish construction firms. The results are obtained from direct observation, interviews and follow-ups; they are the base to design the theoretical and computer models. Summarizing, the cases under assessment were: • An ethnographic study of one medium-sized company (from 1997 to the present), which is specialized in civil engineering design and construction management. • Three additional case studies: one contractor and two CEA companies. • Seven interviews with SMEs (three contractors and four CEA companies) carried out in 2001 and 2002, with follow-ups in 2003–2005, and 2007–2008. Literature review More than a decade ago, Rao et al. (1997) proposed the use of interconnected components from commercial software tools as an alternative solution for developing a computerized management system. Their proposal consisted of exclusive, customized computer applications assembled from off-the-shelf software packages. The interconnection of modules and programs, which are generally familiar to the user, led to reductions in development effort and training (Rao et al., 1997). Following this customized applications philosophy, researchers at the Center for Integrated Facility Engineering (Stanford University, USA) have worked for many years to develop integrated models to manage projects in concurrent engineering (see Kunz et al., 2002, for a summary of their work). Several customized systems to manage construction projects have already been developed. All of them were created to provide solutions at the project management level, without taking into consideration the management of the whole business. Abudayyeh et al. (2001) described an intranet-based cost control system capable of producing instant reports on demand, focused on costs generated at the work site. Elzarka (2001) suggested the integration of MS AccessTM, MS ProjectTM, and MS ExcelTM with AutoCADTM using visual basic technology in order to manage construction projects during the design phase. Cheung et al. (2004) proposed an internet-based project management control system using performance indicators (for people, cost, time, quality, safety, environment, client satisfaction, and communication) that achieve a better monitoring of the project and even benchmarking. Perera and Imriyas (2004) introduced a time and cost information system for project management, integrating MS AccessTM and MS ProjectTM, which is specially suited for SMEs in the construction sector. Al-Reshaid et al. (2005) developed and implemented a web-based project control system for preconstruction stages: feasibility, design, and tendering. Finally, Li et al. (2006) designed a real-time internet-based project management system that generates construction progress reports using the earned-value method. Kim and Liu (2007) took one step further. They attempted to solve the issue of integrating cost data from multiple projects into corporate management; thus, a cost object was designed as the basic element of the model in order to process data and retrieve information. Likewise, Benjaoran (2008) devised a cost control system for construction projects, suited for SMEs, and based on the earned-value concept. Kanoglu and Arditi (2001) successfully dealt with the problem of integrating project management and business management functions using a holistic approach. These authors developed a computer-based information system, called ASAP, to manage the information flow among participants in CEA firms. This system makes use of MS ProjectTM for planning purposes at the project level. It also includes external databases for standards, specifications, codes, and regulations. ASAP is not only focused on individual projects but also on the business as a whole. Shi and Halpin (2003) encouraged the use of integrated management systems adapted to the unique characteristics of the construction industry, as distinct from the manufacturing sector. They also enumerated the basic features that should be required for an ERP system implemented in a construction company: project oriented, integrated, paralleled and distributed, open and expandable, scalable, remotely accessible, and transparent, as well as reliable and robust. Other authors only handle some part of the global challenge, which is none other than information exchange using web-based technology (Chan and Leung 2004; Zhiliang et al. 2004). As a last contribution, Forcada et al. (2007) developed a web-based system for documentation management specifically applied to [ 8 ]Revista de la Construcción Volumen 8 No 2 - 2009 páginas: 4 - 17 Pellicer E. - Pellicer T. M. - Catalá J. ] SMEs in the construction industry; this system allows internet exchange of documentation among different stakeholders of the project with appropriate registration and access controls. All these contributions, from both project and business approaches, considered a relational database as the core of the system. This kind of database management system (DBMS) is highly suitable for building customized management systems around it (Date 2000; Benjaoran 2008). Management system Business organization Our target organization is a project-based company working in the construction industry, either a contractor or a CEA company. For this kind of enterprise, business management presents additional difficulties that can be summarized as follows (Gann and Salter 2000; Shi and Halpin 2003; Pellicer 2005): 1. Strategic (long-term) planning: forecasting future contracts is a complex task; thus, a good procurement strategy is essential for the survival of the business. 2. Operative (short-term) planning: projects are subjected to delays or changes in specifications initiated by clients or third parties; thus, an internal reorganization is needed to reallocate resources. 3. Organization: integration of each member of the project team within the company’s hierarchy, and the increasing number of subcontractors involved may lead to complex structures. 4. Coordination: personnel must be kept well motivated and adequately lead. 5. Control: delays or changes in short-term planning must be monitored closely to detect deviations so that corrective actions can be taken as needed. A typical business model is outlined in Figure 1, and is based on an open systems approach in which the company interacts with the external environment. Each project originates in a bid prepared by the company to fulfill a request from a client. A signed contract between a company and a client follows, although this contract may be a verbal one. The aim of the contract can be any work that a company can perform during the construction process: feasibility studies, design documents, built infrastructures, maintenance works, etc. The production of the company is run by projects. Resources are needed to deliver the end product. They may be internal (human resources, equipment and infrastructure) or external (supplies and subcontracting of human resources and equipment). It is likely that some of the company’s resources must be transported from the central office to the work site in order to carry out a construction project. In addition, the firm is hierarchically organized, with well-defined personnel categories and work posts. Not only manpower, technicians and experts are needed, but also administrative personnel. Moreover, every employee has one supervisor that oversees his/her work. The activities that take place in a construction firm (CEA or contractor) can be productive or administrative. The former are project-based, whereas the latter are business-focused (Gann and Salter 2003). Administrative activities are non-productive activities, carried out mainly by administrative personnel that cannot be exclusively associated to a specific contract; consequently, they are calculated as overhead (Pellicer 2005). System architecture A DBMS provides the company with centralized data control. A DBMS has many advantages (Date 2000): sharing data, reducing redundancy, avoiding inconsistency, supporting transactions, maintaining integrity, and enforcing security. The main principle underlying a DBMS is that each datum can only be input one time. Two main kinds of data are considered: primary configuration data, introduced by the system administrator, and operative data, entered by personnel. The system architecture requires additional elements that are arranged in three tiers (Figure 2): presentation tier (user interfaces and forms), application tier (queries), and data tier (relational tables). Input data are introduced through the first tier (interfaces) and properly stored in tables (third tier). Information is then retrieved from the first tier via reports and pivot tables (interfaces) using data stored in the third tier with the adequate exploitation of data (second tier). Our integrated management control system, called COGEST, is developed using MS AccessTM as the DBMS. This software tool is widely used, and it is also linked to the Microsoft OfficeTM package. Subsequent upgrades of COGEST also run in MS SQL ServerTM. Besides, MS AccessTM and MS ExcelTM are integrated using ODBC (open database connectivity) and Visual Basic for ApplicationsTM. Structured Query Language (SQL) is used for queries. The system is based on client/server architecture. The server is the DBMS itself, and the clients are the applications that run on top, but on different computers. Thus, the first and second tiers run on clients and the páginas: 4 - 17 [ 9 Revista de la Construcción Volumen 8 No 2 - 2009 [ Pellicer E. - Pellicer T. M. - Catalá J. ] Figure 1 Business organization model server holds the relational tables. Currently, the system is maintaining 143 relational tables, 170 queries, 30 pivot tables, and 197 forms. COGEST performs in real-time. Every employee with a pre-established right of access can exchange information with the system instantaneously. This attribute leads to remarkable time savings. It is vital to take quick decisions when problems arise, and therefore, COGEST allows for timely actions to be taken by every manager in the hierarchy. Several different interfaces are designed for each personnel category within the company. The users are categorized according to their functions, differentiating categories by type of company (contractor or CEA firm). Common categories to both types of companies are system administrator, chief executive officer, head of department, administrative personnel, and reception desk personnel. There are three specific categories for construction companies: construction site manager, field engineer/foreman, and basic user; while specific categories for CEA companies are project manager, project engineer, and basic user. Table 1 summarizes the personnel categories in a hierarchical structure, which also indicates if the work post is administrative or productive (for CEA company or contractor). Those users that can be considered in more than one category are shadowed in Table 1. The access level to the different system capabilities and the security stage acquired depend on the location of the work post within the organizational hierarchy of the company, as well as the administrative and managerial specifications. COGEST asks for the user’s ID and password when logging onto the system; however, if the computer is set for a certain individual, then it only asks for the password. If the intended user is accepted, the user’s personal interface is displayed. The access levels can be updated by the system administrator if necessary. Taking all this into account, the basic scheme of data flow in the organization is illustrated in Figure 3. It is based on four logical steps: data input and validation, data storage and exploitation, output of information, and action. Every employee inputs time spent on different tasks to the corresponding contract; expenses, such as restaurant meals, transportation, parking, supplies, and the like, can also be charged. Employees working in network-equipped offices input data everyday through the computer system, whereas employees working onsite introduce data directly through the intranet, or by means of paper or e-mail reports delivered weekly to the administrative staff. On a daily basis, administrative personnel input supplies, rented equipment, outsourcing services and subcontracting to each contract through the computer Figure 2 Conceptual system architecture [ 10 ]Revista de la Construcción Volumen 8 No 2 - 2009 páginas: 4 - 17 Pellicer E. - Pellicer T. M. - Catalá J. ] system. Invoices are also recorded to the corresponding contracts. Additionally, administrative employees can also input external data (ratios, for example) to be available for benchmarking purposes. Internal supervisors check the data input by their subordinates, being productive or non-productive activities. This supervision procedure can be softened or hardened according to work posts, functions, tasks, and contracts, always depending on the corporate policy. With all necessary data in the tables of the DBMS, useful information can be generated through queries using SQL. This information is taken out by way of reports and pivot tables. Reports are specifically designed to obtain certain information related not only to cost and time (per person, task, contract, department, or company), but to bids and contracts (regarding their status, resources, budget, etc.) as well. Figure 4 shows a typical monthly report regarding time (input hours, theoretical hours, overtime, accumulated debt time from previous months, and current hours to be recuperated by the employee), and subsistence costs (mileage, travel displacements, restaurant meals, others related to travel such as parking, and supplies). Pivot tables use MS ExcelTM to actively analyze the many variables that affect the performance of the company, such as the annual evolution of productivity and profitability, or financial ratios. They can also be used to compare past activities with the current status, or to forecast future scenarios. This feature is extremely important both to avoid potential problems, and to facilitate benchmarking; external ratios can be input to the system and may be used to contrast and to obtain valuable conclusions. Conceptual data model According to Date (2000), a conceptual data model is a theoretical, logical definition of the entities and relationships modeling the structure of the data. An entity is any distinguishable object to be represented in the database, whereas a relationship is a bidirectional link among entities. The entities reflect information about the company, in general, and each project, in particular. The DBMS is conceptually modeled using relational tables. COGEST is comprised of 50 entities, grouped under eight headings (see Table 2): regular inputs, personnel, resources, contracts, tasks, information, procurement, and communications. The unique relationships among entities are complex in nature. A full account of the interworking of these relationships is beyond the scope of this paper; however, ADMINISTRATIVE STAFF CEA COMPANY PERSONNEL CONTRACTOR PERSONNEL System Administrator Chief Executive Officer Head of Department Administrative Personnel Project Manager Construction Site Manager Project Engineer Field Engineer / Foreman Reception Desk Personnel Basic User Table 1 User categories by hierarchy Figure 3 Basic scheme of data flow páginas: 4 - 17 [ 11 Revista de la Construcción Volumen 8 No 2 - 2009 [ Pellicer E. - Pellicer T. M. - Catalá J. ] the following description of the eight groupings should serve to illustrate the functionality of the system. Furthermore, Figure 5 illustrates those tables linked to the procurement group of entities and their relationships as they appear in the database (in Spanish language). The first group, “Regular Inputs”, is the core of the model; it receives the operative periodic data (daily, weekly, or monthly) that feed the system, and makes them available to the other entities that depend on these input data: time for personnel, and money for supplies, rented equipment, subcontracting, and invoices. Analytical, budgetary and general accounting are obtained from the input data by using commercial accounting software that is linked to the system. Figure 6 displays the basic input interface in which each user enters the time spent and the subsistence costs for the different tasks of the specific contracts. The second group of entities, “Personnel”, contains a description of each work post and the individual that occupies it. Not only are the characteristics of the work post taken into consideration, but also the contractual conditions of each individual within the firm. The system keeps a continuous record of any changes in conditions (see Figure 7). These data allow the system to automatically calculate the cost per hour of any employee, taking into account the company’s overhead. The theoretical methodology, the implementation procedure, and the calculations of unitary costs applied are thoroughly explained in Pellicer (2005). This methodology, combined with the capabilities of the system, enhances the management of the firm by limiting overhead, improving productivity, revealing areas of efficiencies and inefficiencies, and gradually adjusting the entire process. As part of the “Personnel” group of entities, the organizational hierarchy defines the structure of the business: board of directors, departments, projects, units, etc. Each individual, through his/her work post, has a place in the hierarchy of the company. Likewise, contracts must be assigned to the corresponding department and unit if the company wishes to have full knowledge of how each is performing. Figure 4 Monthly report on personnel for time and subsistence costs Groups of Entities Entities Regular Inputs (6) Diary – Category – Concept – Daily Hours – Document – Data Personnel (7) Work Post – Organizational Hierarchy – Qualification – Labor Agreement – Wages – Description – Complementary Data Resources (6) Vehicles – Equipment – Materials – Auxiliary Facilities –Suppliers – Manpower Outsourcing Contracts (10) Clients – Joint Ventures – Budgets – Contracting – Sub Contracting – Invoicing – Description – Nature – Codification – Status Tasks (3) Activities – Sub Complementary – Sub Basic Information (3) Accounts – External Records – Unit Prices DataBase Procurement (10) Tenders – Bids – Type Procurement – Awarded – Demand – Joint Ventures – External Tenders Data – Type Guarantee – Type Payment – Warranty Communications (5) Letter – Fax – Minutes – Electronic Mail – Internal Mail Table 2 Conceptual groups of entities [ 12 ]Revista de la Construcción Volumen 8 No 2 - 2009 páginas: 4 - 17 Pellicer E. - Pellicer T. M. - Catalá J. ] Figure 5 Database tables for procurement process and their primary relationships The “Resources” group includes all resources that the company needs to carry out its different projects. Six entities are considered: vehicles, equipment, materials, auxiliary facilities, suppliers, and manpower outsourcing. The latter includes external professionals as well as experts. Figure 8 depicts the input data required by the system for an external company. The fourth group of entities is “Contracts”, which naturally includes any data relevant to the contract: description, nature, and status. Any given contract must be related to a client who pays for the work. It also takes into consideration the invoicing phase, according to contract specifications. It is directly linked to the resources entity, since different kinds of suppliers are needed: materials, vehicles, equipment, or subcontracting. The “Budgets” entity reflects the budgetary data that will provide for suitable cost control; Figure 9 illustrates the main form for the contract entity. Finally, the possibility of joint ventures is contemplated by the system. Figure 6 Basic entry of the system for productive personnel Figure 7 Description of employee and work post