THE SIZE OF CON-STRUCTION FIRMS

Sewon Kim

Kevin Tran

Mary Svennerborg

Contents

The size of construction firms The size of business The small firm The medium-sized firm The large-sized firm References

1. The size of construction firms

‘Modernising Construction’ (National Audit Office 2001) reported that there are over 160.000 firms operating in the con-struction industry and many of these are small contractors.

The current annual turnover of the top 100 contractors in terms of annual turnover is shown next table. This indicates that the vast majority are either medium-sized or small.

Turnover(₤ million) Number of firms

Less than 100 0

100 – 249 37

250 – 499 26

500 – 599 20

1000 – 1999 10

2000 – 2999 1

3000 – 3999 4

4000 – 4999 0

5000 + 2

Top 100 contractors and house builders

2. The size of business

Drucker(1989) suggested an interesting approach that is in respect of defining the four stages of business growth

① Small Business

② Fair-Sized Business

③ Large Business

④ Very large Business

2. The size of business

Small business It is distinguished from the one-man proprietorship by re-

quiring a level of management between the man at the top and the workers.

 

Fair-sized business The role of the managing director has become a full-time

position. He is required to concentrate his efforts on guid-ing and managing the affairs of the business. In the major-ity of construction firms in this category, the tendency is to develop a departmental approach to the various sections of the organization.

2. The size of business

Large business A large construction organization may be managed

by a main board of directors, supported by depart-mental directors and regional and technical directors.

Very Large business This is characterized by the fact that the overall busi-

ness objectives and resulting actions must be orga-nized on a team basis. Each position requires the full-time services of several people.

3. The small firm

3. The Small firm National statistics categorise the small firm

as a business with between 1 and 24 di-rectly employed staff. The number of firms in the UN is in the order of 1.100.000 with 91% employing less than 10 people.

① Company background

② Business control procedures

③ On the role of the principal

3. The small firm

①Company background

The business is managed by the prin-cipal or owner with three employed staff. Sixty percent of the work is obtained by negotiation and the rest from competit-ive tenders. Turnover after 2 years of trading is in the order of ₤800,000 and the largest project undertaken to date is ₤250,000.

3. The small firm

①Company background

The business is managed by the prin-cipal or owner with three employed staff. Sixty percent of the work is obtained by negotiation and the rest from competit-ive tenders. Turnover after 2 years of trading is in the order of ₤800,000 and the largest project undertaken to date is ₤250,000.

Contact with clients / architects etc

Preparation of tenders / obtaining work

Submission and adjudication decisions

Pre-contract arrangements

Letting of subcontracts

Planning – programming of work

Interim certificates / final accounts

Payment to subcontractors / suppliers

Establishing policy

All decision making

PRINCIPAL OWNER

RESPONSIBLE FOR:

Organisation Structure – Small Company

Project Organisation Small Company

Principal

Construction site

manager

Subcontractors

Construction site

manager

Subcontractors

3. The small firm

②Business control procedures

The principal’s major concern is providing a personal service to clients and ensuring that projects are completed on time at a reason-able profit. Maintaining client contact during a project is considered essential to the success of the business. Management checks are made on project profitability and monthly site meetings are attended by the principal. The majority of the principal’s time is spent on pre-paring tenders for new work and chasing round his existing projects.

3. The small firm

③On the role of the principal

The principal tends to make all deci-sions, and tends to do everything him-self, which is the typical small company approach to managing a construction enterprise.

4. The medium-sized firm

4. The medium-sized firm

The medium-sized firm has developed from expansion of the small business, brought about by the increase in workload, turnover and business diversification. The core business may have been refurbishment work, but the company may now be offer-ing a design and build or a work package service to clients. Many such options are available as a business expands.

Must be established at Medium-sized

Team approach

Strategic plan

Policy objectives

Delegation of responsibility

Control & Reporting procedures

Channels communication

4. The medium-sized firm

①Company Background

Organisation Structure Medium-sized company

Chairman

Managing Director

Commercial managerdirector

Estimating/Surveying

directorSe-nior es-

tima-torBuyer

/scheduler

Se-niorsur-veyo

rContractsurveyor

Contractsdirector

Contractsmanager

Con-struc-tionSite man-agers

Project OrganisationResponsibility lies with contracts division

Sites are serviced by head office-buying/survey-ing

Head Office

Contractsdirector

Contractsmanager

Construction manager

Subcontractors engaged on project

4. The medium-sized firm

②Business control procedures

• Input to projects to aid management• Wages, personnel, surveying measurement, valuation

services, buying and overall project planningHead Office

• Control of the various functions• Cover construction management, estimating and sur-

veying• Managing cash flow

Director• Programming and progress reviewing• Reporting on progress

ContractsManager

• Short-term planning• The coordination of subcontractors

ConstructionManager

5. The Large-Sized Firm

5. The Large-Sized Firm Develop originally from the expansion of a

medium-sized business. Growth is by acquisition when separate

business join together via eithera merger or a takeover.

Employ between 300-1200 people there-fore the organisation structure must be de-signed to meet the specific needs of the company.

Business Unit Approach to Project Management

Unit 1

Head Office

Project 1

Site Engineer Quantity Surveyor Assistant construction manager

Construction Manager

Project 2 Project 3

Contracts Manager

Business Unit Manager

Unit 2 Unit 3

Construction Director

Managing Director

5. The Large-Sized Firm

Organisation Structure- Large Company

Organisation structures tend to be based on the individual preferences of the owners or directors and are very much personal to each type of business.

○ nature and source of firm’s respective workloads and their expertise available are possible explana-tion for difference.

5. The Large-Sized Firm

Grouping Arrangement

Functional Product/Service Geographical Customer Capital Project

5. The Large-Sized Firm

Organisation Example

Design and build director

Contracts director

Contracts director

Plant director

Design and build Major contracts Minor contracts Plant holding

COMPANY DIVISIONS

Chairman/Managing Director

5. The Large-Sized Firm

• Head office is responsible for providing ser-vices to all projects in the form of …

• Head office support may be provided from a single head office or may be regionalised in order to serve its customers’ needs better.

Office services Estimating services Surveying services Marketing services

Office manager

HEAD OFFICE SERVICE SECTIONSServicing the company divisions

References Burke, R.(2003) Project Management, 4th edn. John

Wiley&Sons.

Drucker, P.F. (1989) The practice of Management. Butter-worth-Heinemann.

Lavender, S. (1996) Management for the Construction Indus-try. Pearson Education.

Winch, G.M. (2002) Managing Construction Projects. Black-well Publishing.

Clutterbuck, D.&Crainer,S. (1990) Makers of Management. Macmillan Press.