Using Balanced Scorecard for Subcontractor Performance Appraisal

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Using Balanced Scorecard for Subcontractor Performance Appraisal S. Thomas NG, Hong Kong, China

Key words: Subcontractor performance, performance appraisal, balanced scorecard

SUMMARY Several influential industry reports have pointed out that a decline in construction quality and productivity could be attributed to the performance of subcontractors who are entrusted to complete the actual works, yet subcontractor performance appraisal is a much neglected subject in construction. To facilitate subcontractor registration, management and/or selection, an equitable and reliable subcontractor performance appraisal would be indispensable. Being regarded as a reliable and practical means for performance evaluation, the balanced scorecard should have a high potential for improving the quality subcontractor appraisal decisions. This paper discusses the issues in developing a balanced scorecard model for subcontractor performance appraisal. The current practice of appraising subcontractor performance begin is first outlined. It is then followed by introducing the research methodology. The structure of the balanced scorecard model for subcontractor performance appraisal is proposed. Finally, a prototype Internet-based model for appraising subcontractors based on the balanced scorecard concept is presented. The initial results indicate that it is possible to establish a balanced scorecard model to formalise the subcontractor performance appraisal decisions.

TS 3G – Management of Partnerships and Conflict S. Thomas Ng Using Balanced Scorecard for Subcontractor Performance Appraisal Strategic Integration of Surveying Services FIG Working Week 2007 Hong Kong SAR, China, 13-17 May 2007


Using Balanced Scorecard for Subcontractor Performance Appraisal S. Thomas NG, Hong Kong, China

1. INTRODUCTION Subcontractors could contribute to as much as 90% of the total project value (Matthews et al, 1997), and the performance of subcontractors could inevitably affect the productivity and quality of a project (Hsieh, 1998). A recent industry report to the Chief Executive of HKSAR points out that many subcontractors are tempted to save cost at the expense of quality especially when surviving in a competitive environment. PCICB (2002) urges the industry to monitor subcontractor performance regularly, and hence the setting up of a formal subcontractor appraisal model is relevant to the current trend and needs of the industry. Despite that, little research has been carried out to address the ‘soft issues’ inherent in the appraisal of subcontractors (cf: Ling, 2002; Amaratunga et al, 2002). Since subcontractor performance is usually difficult to measure and assess (Black and Porter, 1995), expert judgement is construed as inevitable in formulating the evaluation criteria and benchmark (Muralidharan et al, 2001). To improve the fairness, transparency and rationality of subcontractor performance appraisal (Garg et al, 1996), any appraisal model must be founded on unequivocal yardsticks instigated by the objectives and expectations of the client (cf: CIPS, 2001). In recent years, certain organisations such as the US Department of Commerce, Canadian Government, etc. have begun to realise the benefits of the balanced scorecard techniques and apply these methods to various kinds of performance-based appraisal schemes including business, environment, quality, etc. Literatures confirm that balanced scorecard have been successfully applied to various construction domains to measure the service/product quality (e.g. Gronroos and Christian, 1982; Kaplan and Norton, 1992; Winch et al, 1998; Ahn, 2001). There is a need to examine the full potential of balanced scorecard in promoting the objectiveness and transparency of construction SPA. In this paper, the initial result of a more comprehensive research study into the application of balanced scorecard techniques for subcontractor performance appraisal is presented. The paper begins by unveiling...
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