CONSTRUCTION SUBCONTRACTING

CHAPTER FOUR: CONSTRUCTION SUBCONTRACTING

4.1 Introduction

This chapter discusses subcontracting in general terms and introduces the Flexible Firm

model. It includes the present role played by subcontractors in the construction industry.

It also reviews the literature on subcontracting in Singapore with special emphasis on the

traditional labour sub-contracting approach, the ‘kepala’ system.

4.2 Subcontracting

In most of the twentieth century, small and medium-sized establishments (SMEs) were

considered to be an archetypical and declining sector in which "informal" and "pre-

modern" labor relations and technologies hindered the process of economic development

(Taymaz and Kilicaslan, 2002). In this context, “subcontracting” was considered as a

form of domination of large firms over small ones where large firms benefited from low

wages and flexible work arrangements in small firms. Therefore, it was thought that the

SME sector would be eliminated by more efficient and advanced large firms (Taymaz

and Kilicaslan, 2002).

Subcontracting is usually defined as a form of relationship between firms mostly

depending upon complete or partial production of goods and services (Taymaz and

Kilicaslan, 2002). Subcontracting could also be a situation where the firm offering the

subcontract requests another independent enterprise to undertake the production or carry

out the processing of a material, component, part or subassembly for it according to

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specifications or plans provided by the firm offering the subcontract (Holmes, 1986).

Holmes (1986), following Watanabe (1971) and Chaillou (1977) and others, identified

three major types of production subcontracting: capacity subcontracting, specialization

subcontracting, and supplier subcontracting.

In capacity subcontracting, the subcontractor manufactures part of the parent firm’s

products due to an excess in demand (Holmes, 1986). It is sometimes also referred to as

“horizontal subcontracting” (Taymaz and Kilicaslan, 2002). Specialization

(complementary) subcontracting represents a vertical disintegration of production and

arises when two firms have (vertically related) complementary assets or technologies

(Holmes, 1986). Finally, in supplier subcontracting, the subcontractor is an independent

supplier with full control over the development, design and the method of production, but

is willing to enter a subcontracting arrangement to supply a dedicated or licensed part to

the parent firm (Taymaz and Kilicaslan, 2002).

As a labour-market strategy, subcontracting involves a myriad of different forms and

processes, making it extremely difficult to give it a precise definition. Bernstein (1988)

explains subcontracting in terms of casual labour and shows the different categories.

Also, Harrison and Kelly (1993) see outsourcing as a form of subcontracting.

Similarly, Bresnen et al. (1985) identify ‘supply and fix’ and ‘labour-only’

subcontracting. They explain that this broad distinction encompasses considerable

variability in the types of work undertaken and the form of relationship between the main

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contractor and the subcontractor. In the construction industry, labour-only subcontracting

is very common. This system involves the temporary employment of general labourers or

tradesmen who are either self-employed or work for a subcontractor for sections of a

project (Bresnen et al., 1985). The primary function is to help the main builder lighten the

load of full construction work by sharing it among the subcontractors (Pietroforte and

Costantino, 2003). Subcontracting shares responsibilities and rewards as well as lowers

costs for the main builder, particularly in trades that the main builder is not well-equipped

to perform (Beardsworth et al., 1991).

4.3 Subcontracting in Singapore construction

Subcontracting is a prevalent feature of the Singapore construction industry where it is

quite common for contractors to engage subcontractors for most of the trades, especially

those which require special skills. However, the large number of subcontractors involved

generates high levels of construction waste as they use mainly unskilled foreign workers.

With this, waste generation of the projects due to subcontractors’ performance has

become more critical. Subcontractors’ co-operation is needed to ensure successful

implementation of waste management plans (Ling and Lim, 2002). Understanding main

contractor-subcontractor relationships and exploring the impact of waste generation in the

Singapore construction industry calls for a close look at (1) the need for subcontracting

and (2) the labour employment practice in the local industry.

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Debrah and Ofori (1997) defined a subcontractor as one who performs a particular trade

under the supervision of a main contractor. It also includes one who provides labour to

execute the construction work. This is termed a labour-only subcontractor. It is

impossible to generalize subcontracting because the range of organizations embraced

under the umbrella of subcontracting is so diverse (Peck, 1985). The definition of a

subcontractor is by virtue of specialization among the various trades, not wholly because

of the financial and technical constraints (Lim, 2003a).

Ofori and Loh (2000) suggested that subcontractors are needed due to the following

reasons:

• Different projects have different features and requirements and as a result, it would be

uneconomical for the main contractor to keep all the required specialized skilled

workers and equipment; and

• There is a lack of continuity in work due to fluctuating demands in the construction

market. In response to the uncertainty of workload, main contractors do not want to

employ workers directly in order to reduce overheads.

If the main contractor is established, he may retain a group of general workers, unskilled

or semi-skilled, to assist the subcontractors as well as to carry out the minor operations on

site. The main contractor would normally also provide the necessary tools, plant and any

temporary supports for the subcontracted works.

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4.4 The flexible firm model

New pressures are causing companies and their employees to consider a wide variety of

novel ways to perform tasks. The common themes impacting employment plans of the

majority of firms are: (1) market stagnation, (2) economic uncertainty, (3) technological

change, and (4) reduction in working hours. Companies are seeking flexibility that is

functional, numerical, and financial in nature. Thus, employment practices are shifting in

response to this need for flexibility (Atkinson, 1984).

Flexibility has gained currency for its analysis of changes in workplace organization, in

particular, for analyzing labour utilization (Broadbent, 2002). Atkinson’s flexible firm

model (1984) is an example of how theorists have characterized these changes. It focuses

on ways in which greater use of an adjustable periphery, less rigid work practices,

implementation and utilization of new technology may contribute to a firm’s profitability

and competitiveness (Hunter et al., 1993). He observes that employers have created a

large periphery of non-permanent employees to bear the burden of restructuring.

According to Guerrier and Lockwood (1989), two main approaches to flexibility seem to

have emerged. The first approach is to develop a core of permanent full-time employees

trained in a variety of skills to move from function to function as demands require.

Typically this has been the response from the manufacturing sector. The second is to rely

on part-time, casual and short-contract staff to provide the necessary variation in the

number of employees required. It is normally expected that these employees would only

have skills in a narrow area of operation.

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The model can be viewed as a new strategic, innovative tool in response to changes in a

firm’s environment. The typical changes in a firm’s environment include economic

change, unemployment, legal restrictions on union actions and most importantly global

competition (Ofori and Debrah, 1998). The model suggests that one can design the

workforce to proactively meet business needs through flexible staffing arrangements. The

key characteristic of the flexible firm model is that it emphasizes the core-periphery

workforce.

The extensive use of subcontracting in Singapore is evidenced by the survey results (see

section 8.3.5) and case studies (Table 9.5). This suggests that main contractors are

adopting employment approaches similar to those portrayed in Atkinson’s (1984) flexible

firm model, which is described below.

4.4.1 Types of flexibility

The concept of a flexible firm was proposed by Atkinson (1984) so as to recognize that

organizations will require enhanced flexibility to meet the ever-evolving market and

competitive pressures. The flexible firm model is a strategic model of labour utilization

which is becoming increasingly common as firms face restructuring to meet a number of

challenges such as market uncertainty, cost pressures and technological change (Atkinson

and Meager, 1986). Atkinson (1984) pointed out that there are three different kinds of

flexibility. They are (1) Functional flexibility; (2) Financial flexibility; and (3) Numerical

flexibility.

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4.4.1.1 Functional flexibility

Functional flexibility allows the employer to quickly and smoothly transfer employees

between activities and tasks. Which means either the deployment of multi-skill craftsmen

moving between different types of skilled jobs or moving workers between indirect and

direct production jobs, or even a complete change of career. During the short and medium

term, when products and production methods change, functional flexibility will result in

the ability of the same labour force to change with them (Atkinson, 1984).

4.4.1.2 Financial flexibility

It was highlighted by Atkinson and Meager (1986) that financial flexibility is sought for

two main reasons. First, employees’ salaries and other employment costs reflect the state

of supply and demand in the external labour market. The significance lies more in

relativities and differentials between groups of workers rather than in an across-the board

push to reduce wages, and the implications include a continued shift to plant level

bargaining and widening differentials between skilled and unskilled workers. Secondly,

and probably of greater importance in the long term, pay flexibility means a shift to new

pay and remuneration systems that facilitate either numerical or functional flexibility,

such as assessment-based pay systems in place of rate-for-the-job systems.

4.4.1.3 Numerical flexibility

Numerical flexibility enables the firms to have the ability to adjust the level of labour to

meet fluctuations in demand. During short term changes in demand for labour, numerical

flexibility permits headcount to be quickly and easily increased or decreased.

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Furthermore, it facilitates the smooth implementation of various hiring and firing policies

(Atkinson, 1984). Essentially, hiring gives way to a looser contractual relationship

between the manager and the workers. The conclusion would be that at any time the

numbers employed or working would therefore exactly match the numbers required.

4.4.2 Types of work force

Atkinson’s (1984) flexible firm model provided an early and innovative framework to

analyse the move towards greater use of contingent labour, the adoption of employment

strategies such as insourcing and outsourcing, together with a concentrated use of

compulsory competitive tendering in the public sector. Procter et al. (1994) argue that

the flexible firm model provides a framework for focusing on the extent of change and

development of the new work patterns at the level of the enterprise, providing a more

complex and useful means of analysis.

The flexible firm model analyses the segmentation of the workforce utilizing the concepts

of core and periphery (Atkinson, 1984). This model could offer a starting point for

examining the segmentation of Singapore’s construction labour market and provides

direction in the exploration of why subcontractors are predominant in the construction

labour workforce. The model employs the distancing strategy which requires the

replacement of standard, traditional employment relationships with commercial ones.

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4.4.2.1 The core work force

The core workforce is characterized by permanent, highly skilled employees with internal

career paths (Wood, 1989; Procter et al., 1994). They tend to experience a higher degree

of job security with resources provided for training in firm-specific skills not readily

brought in. This segment of the organization is characterized by functional forms of

flexibility (Hakim, 1987b; Burgess, 1997). “Core” groups of full-time employees would

provide their organizations with functional flexibility: a pool of skilled employees that

could be mobilized in response to emerging technological, market or product changes.

4.4.2.2 The peripheral work force

The flexible firm model also includes numerical flexibility, such as the expansion and

contraction of labour to address market fluctuations that would primarily impact

“peripheral” groups: part-time, temporary or contractual workforces.

The peripheral workforce has been examined from a range of perspectives. Atkinson

(1984) argues that the peripheral workforce is associated with the organization’s

development of numerical flexibility. The key function or strategic aspect of this sector

for the organization is the undertaking of day-to-day activities which are important but

not vital to the organization.

However, the peripheral workforce, as defined by Atkinson (1985), is more complex than

originally thought. For example, Walsh and Deery (1997) suggested that it is now clear

that employment systems are not simply bifurcated. Indeed it has been argued that the

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distinction between core and periphery is essentially misplaced, and that part time and

temporary workers might constitute, both numerically and strategically, the core

component of a company’s workforce (Walsh, 1993).

4.4.3 Criticism of the model

Pollert (1988) insisted that the ‘flexible firm’ model conflates employment developments

due to sectoral restructuring, with new ‘manpower policies’, masking the importance of

continuities and qualitative changes within these.

Deery and Jago (2002) suggested that the core-periphery model is more complex than

originally thought with the two groups being demographically homogeneous. It also

appears that it is necessary to identify members of the periphery using attitudinal tests

rather than simply observing the demographic groupings of individuals. Pollert (1988)

discovered that there exist no empirical evidence at an aggregate level to support

significant changes in employers’ human resource use of strategies, and considers

‘flexibility’ to be a neat and bold model fraught with methodological and conceptual

problems.

Others such as Williams (1993) and O’Reilly (1992a,b) also discussed the conceptual,

methodological and empirical problems involved in the use of the term ‘flexibility’ and

cover the views of its protagonists and critics. Similarly, Geary (1992) observed that the

tendency to see flexibility as good and rigidity as bad is far too simple, as flexibility

involves advantages as well as tensions and conflict.

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Moreover, Hakim (1990) pointed out that in certain cases, companies have used ‘anti-

core-periphery’ strategies as they had abandoned the use of peripheral workers after

unpleasant experiences. This view appears to be consistent with Geary’s (1992) assertion

that the widespread use of flexibility has not resulted in any significant benefits to many

firms. Just as Atkinson’s (1984) model provided a springboard for discussion of

workforce complexities within the manufacturing sector, there is a need for more

accurate modelling of the service sector workforce. The challenge for current researchers

in this area is to accommodate the depth and complexities of such modelling (Deery and

Jago, 2002).

4.4.4 Applicability of Flexible Firm Model to construction

For the flexible firm model to work, it requires a sophisticated interplay of strategic

business planning and human resource management (Ofori and Debrah, 1998). When

human resource management is unclear on the long-term business needs for labour

flexibility, staffing activities are often short-term reactions to product or market

pressures; this can result in poor employee relations, reduced quality and productivity.

Adoption of the flexible firm model allows for greater use of subcontractors in the

Singapore construction industry (Ofori and Debrah, 1998).

Under the flexible firm model, majority of the employees are self-employed, part-timers

and workers of subcontractors. They are mainly local workers. The model offers

employees both functional and numerical flexibility, but this model is most probably

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temporary (Ofori and Debrah, 1998). Most important of all, the model is applied to

reduce costs in changing global markets resulting in financial flexibility.

The development of the ‘flexible firm’ model has rekindled interest in research on

subcontracting as part of employers’ labour-use strategies (Harrison and Kelley, 1993;

O’Reilly, 1992a, 1992b). In discussing subcontracting, the question arises as to why

companies employ subcontracting.

4.5 The case for subcontracting

The tasks of speciality subcontractors may appear straightforward upon first examination,

but further consideration of their role shows that they have to concurrently engage in

numerous preparation, production and scheduling tasks across many different projects

(Tommelein and Ballard, 1998). It is noted that subcontractors play a significant role in

the success of construction projects. This is because main contractors use subcontracting

as a means of surviving the volatility of the construction business cycle.

Uncertainty in construction is almost unrelated to input supply but is related to demand

changes. First, given that capital investment is small and technical knowledge widely

spread, the risk of technological obsolescence is lower than in manufacturing. Second,

suppliers do not have substantial bargaining power since most construction inputs are of a

general type and are supplied by competitive industries (Hillebrandt, 1989; Ball, 1988).

Also, the discrete nature of production reduces market liquidity by making supply and

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demand more difficult to adjust. This increases uncertainty because the activity level of

the firm depends on tenders as well as on just a few contracts (Gonzalez et al., 2000).

In relation to the construction industry, Druker and White (1995) mentioned that main

contractors use subcontractors for two main reasons. These are: (1) down-loading

financial risks and (2) off-loading direct employment responsibility. Moreover,

subcontractors play a very important role in a construction project as they make up for

the lack of manpower, technical know-how, etc. of the main contractor (Pietroforte and

Costantino, 2002). They carry out most, if not all, of the works on site.

Subcontracting does have its strengths and weaknesses as illustrated above. From the risk

management point of view, subcontracting allows the main contractor to transfer some of

the risks and financial burdens of a large project onto other numerous subcontractors’

organizations (Pietroforte and Costantino, 2003; Yau 1993). On the other hand, the main

contractor relinquishes some degree of control over the work by subcontracting. If high

waste generation occurs and other difficulties arise, the main contractor’s task of

responding and making corrections to the deviations will be more complicated and

sometimes almost impossible, because of the lack of direct control due to the multi-level

subcontracting which is often involved. Nonetheless, the main contractor will need to do

a cost and benefit analysis to weigh the advantages and disadvantages of subcontracting

as he decides which portions of the work to turn over to the subcontractors.

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4.6 The relationships between the subcontractors and the main contractors

The “Rethinking Construction” report by Sir John Egan set out to revolutionise the UK

construction industry and responded to the observations made by the Latham Report

(Latham, 1994). One of the key issues identified by this report was the need for greater

efficiency (Egan, 1998). In this sense, it was argued that the main contractors and

subcontractors could collaborate to reduce construction waste generation within the

construction process to achieve higher efficiency and cut costs.

There exists a mutual relationship between the subcontractors and the main contractors.

The quality of work the subcontractors deliver affects the performance of the main

contractors. Normally, the working relationship between the main contractor and the

subcontractors extends beyond one project. It is due to mutual trust and past working

experiences between both parties that the cooperation continues (Lim, 2003a).

In Japan, the relationship between the subcontractor and the main contractor is unique

(Bennett et al., 1987). The main contractor depends on the subcontractors to execute his

work. The main contractor is obligated to improve the capabilities of his subcontractors

by extending benefits such as financial assistance, provision of training, technical and

management guidance, and guarantee of the subcontractors’ profit level (Bennett, 1991).

Such features are not found in Singapore. Firstly, it is not common for a subcontractor to

remain exclusively at the service of one main contractor. Secondly, the main contractors

in Singapore tend to address their own interests first (Debrah and Ofori, 1997).

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Since it is of the lowest priority, the main contractor neglects the welfare of the

subcontractors (Bennett, 1991), it affects their performance, which, in turn, affects the

industry (Debrah and Ofori, 1997). The main contractor-subcontractor relationship has

been a focus of interest in the literature (Kale and Arditi, 2001), yet its impact on waste

generation remains a virtually unexplored area in the construction management literature.

In the production aspect of the construction process in Singapore, the main contractor is

usually regarded as the principal player. He has very few direct employees on a project,

beyond the managers and engineers deployed for project coordination and quality control.

This is because he relies on a pool of subcontractors, each offering a specialized trade.

The subcontractors are responsible for the supply of labour and capital to execute the

work. Therefore, the performance of subcontractors is as important as those of other

participants in the construction process (Lim, 2003a). Figure 4.1 shows the typical

organization structure for a construction project.

4.7 Types of construction subcontractors in Singapore

Subcontractors take various forms but they may be conveniently divided into two

categories. The first is commonly termed “trade subcontractor”. They are, in fact, groups

of tradesmen and workhands and are usually employed by the main contractor to

undertake labour intensive work as formwork construction and finishing work. The

second category of subcontractors performs specialist work on site such as the

construction of sheetpiles and installation of the air-conditioning or lift systems (Wong,

1990).

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 Developer / Client

Architect

Other
Consultants

Main Contractor

Subcontractor Subcontractor Subcontractor Subcontractor

Figure 4.1 Typical project organization structure in Singapore

Source: Wong (1990)

The system of contracting can be divided into the direct labour system and the

subcontracting system. Under the subcontracting system, the subcontractor may supply

materials only, labour only or both. Figure 4.2 illustrates the present system of

contracting in Singapore.

Domestic subcontractors refer to those to whom the main contractor sublets part of the

work entirely at his own discretion. In Singapore, domestic subcontractors are commonly

engaged in labour-intensive trades such as formwork, roofing, tiling, and painting. They

are also employed in trades where a large portion of their work requires special

machinery and plant for a short duration, for example, excavation and piling (Lim,

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2003a). However, the contractor shall not engage any subcontractor without prior written

consent of the architect (Wong, 1990). In practice, architects do not usually withhold

their consent and the main contractors seldom seek such approval (Lee, 1996).

System of Contracting

The Direct Labor System The Subcontracting System

Supply Labour Only Supply

Materials (‘Kepala’ Materials
only System) and Labour

Figure 4.2 The present system of contracting in Singapore

Source: Author

On the other hand, the employer may wish to take over the right of subcontractor

selection and then specify to the contractor the identity of the subcontractor to be used.

The reasons may include the requirement for more control over critical aspects of the

work performance so that the client can be assured of the cost and quality of the work.

The subcontractors may be nominated or named, depending on the means by which the

employer exercises his selection rights. Nominated subcontractors are in trades such as

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piling, plumbing, air-conditioning, lifts, fire fighting and prevention, and other

specialized works (Lee, 1986; Yeap, 2000).

In spite of the well-touted advantages of subcontracting, excessive reliance on this

strategy creates difficulties for both employers and employees; the main problems for

employers being: (a) declining standards of quality and (b) falling productivity levels

(Debrah and Ofori, 2002). Moreover, the work of subcontractors’ workers is difficult to

coordinate, supervise and monitor as they have a temporary and insecure relationship

with the firm (Heery and Salmon, 1997; Debrah and Ofori, 2002). Also, subcontracting

has adverse effects on workers’ wages, working conditions, bargaining and union

representation (Underhill and Kelly, 1993; Austrin, 1980; Debrah and Ofori, 2002).

An alterative to the labour subcontracting system is the direct labour system. According

to Leong et al. (1994) and Lim (1996), among many other authors, the direct system of

employing labour is seldom used in Singapore’s construction industry. Where contractors

hire direct skilled labour such personnel are mostly in the basic trades: concretors,

bricklayers and carpenters. Small teams of such skilled staff are hired directly by the

contractor as their services are required throughout the project, and hence there is not

much risk of redundancy. Direct workers are also engaged to undertake work where the

quality of workmanship is of utmost importance or where the work is complicated or is

not sufficiently definable to be subcontracted. These include general housekeeping and

work at the interfaces of different trade operations (Ofori and Debrah, 1998).

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Morton and Jagger (1995) presented the argument for a return to direct employment,

proposing that a project that offers continual employment has its advantages: (i) it

enables employing contractors to use workers more efficiently and therefore less

expensively, and (ii) it is more likely to generate a sense of commitment and shared pride

in the work from employees. It is generally recognized that the major disadvantage of

employment instability is the effect it has on training and skills. The characteristic

method by which construction workers are employed has reduced the level and

availability of skills and made the control of quality on sites and the allocation of

responsibility more difficult.

The majority of the construction workers under the direct labour system in Singapore are

foreigners and many, although certified as skilled in their countries of origin, are not

considered as skilled in Singapore because they do not meet the stringent criteria for

skilled workpeople (CIDB, 1996). Since they are allowed to stay in Singapore for a

maximum for four years, most contractors are not interested in sponsoring them for off-

site training courses. Wilkinson et al. (1986) note that in Singapore, even where main

contractors employ direct operative workers, they are also ‘distanced’ as they too are

temporary. They are moved from site to site on very short notice. Under these

circumstances, subcontracting and direct employment are both peripheralization (Ofori

and Debrah, 1998).

The directly employed workers are daily-rated and paid fortnightly under a wage system

similar to that used by the labour subcontractors, but the direct workers receive some

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fringe benefits from the contractors such as a preference for living accommodation onsite

(Ofori and Debrah, 1998). Ofori and Debrah (1998) highlighted that there exists great

differences in the wages of the local construction workers and their foreign counterparts.

Contractors incur additional expenses with respect to foreign workers, including agents’

fees, a government levy on each worker, transport and accommodation.

4.8 The labour employment practice in the local industry

The Singapore construction industry has come under renewed pressure to reduce costs

and increase value. Locally, labour forms about 30% of the total local construction costs

(BCA, 2002). Efficient management and utilization, a productive and alert workforce can

and will lower costs and wastage, thus enhancing the firm’s competitiveness and quality

of work.

Wilkinson et al. (1986) describes the predominant labour-use system in the Singapore

construction industry as an elaborate practice of short term labour subcontracting. The

labour subcontracting system has been proven to be workable due to the existence of

many trades in construction, some of which are only needed for a short duration on a

project, and the high risk involved (Chong et al., 1996).

4.8.1 The ‘kepala’ system

‘Kepala’ is commonly known as a domestic labour-only subcontractor. In Singapore, the

most commonly employed subcontracting system is to assign the labour component of

each trade to one subcontractor known as ‘kepala’ (Wong, 1990). The main contractor

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supplies all materials, machinery and safety equipment, technical supervision and general

site and head office management and assumes contractual responsibility whereas the

subcontractor is responsible for the recruitment, payment to and control of workers, and

in certain trades, the supply of small tools. Sometimes, when the ‘kepala’ is engaged in

too many projects, he will further sub-let his work to another ‘kepala’ and earn a

percentage of profit on the work while remaining accountable to the main contractor for

the quality of workmanship (Wong, 1997).

In comparison to the direct labour system, the ‘kepala’ system is relatively easier and less

costly to manage. ‘Kepalas’ are most commonly paid as per work done, though some are

still paid on a man-day basis. Fortnightly, upon assessment by the quantity surveyor or

foreman of the work carried out, each ‘kepala’ is paid the total amount due less retention

and previous progress payment, if any. In any case of payment by man-days, the total

man-days recorded on site during the period are the basis for assessment (Wong, 1997).

The ‘kepala’ system has been the subject of blame for many ills in the construction

industry such as high wastage, poor workmanship, poor workers’ attitude and high

number of accidents. As the main contractors supply materials, ‘kepalas’ utilize them in

the easiest, least time-consuming and often uneconomic manner (Choo, 1986). Odd

pieces that could still be used are simply discarded and have to be disposed of at extra

cost. All these would directly lead to high wastage.

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4.8.2 Reasons for use

Employing a few ‘kepalas’ for the work on site is not uncommon for most of the big

contractors. Debrah and Ofori (1997) have established the rationale behind the use of this

system. One of the rationales is that the system provides flexibility for the main

contractors (Ofori, 1990).

As ‘kepalas’ are usually paid based on the quantity of work done, the risk of completing

the work at hand, working overtime and getting more workers to complete the work on

time is partially transferred to the ‘kepalas’. As such, the main contractors view this as an

effective way of labour cost control (Lim, 2003a).

4.8.3 Drawbacks of the system

Although the ‘kepala’ system has various benefits, there are also drawbacks inherent in

the system that are detrimental to the construction industry as a whole. Ofori (1997)

highlighted 5 drawbacks of using the system:

1. wastage of materials as the kepala’s workers are most concerned with the

quickest, not necessarily the most efficient methods. Ling and Teo (2001)

also found that subcontractors play an important role in reducing wastage

of concrete;

2. poor workmanship as the ‘kepalas’ do not invest in training, and switch

workers from site to site to achieve the best return from the expenditure on

them;

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 3. improper usage of the main contractor’s equipment by the kepala’s

workers;

4. the kepala’s inability to retain workers, or seek their improvement and

welfare, leading to failure to develop a core pool of construction workers;

and

5. workers do not enjoy permanent employment; they also do not receive any

perks and welfare benefits normally related to such employment.

It can be seen that both the drawbacks and benefits preoccupy the different players of the

industry. On one hand, with no better alternatives, the ‘kepala’ system is beneficial to the

main contractors; on the other, looking at the industry as a whole, the above drawbacks

highlight the main causes of the high wastage and low productivity in the industry.

4.9 Waste problem caused by subcontractors

From sections 3.8.2 and 3.8.3, it has been identified that the kepala system has a problem

of employing unskilled workers who contribute to the amount of waste generated on site

(Yeong, 1998). Figure 4.3 shows the four possible causes of construction waste

generation that can be controlled if problems related to the kepala system are addressed.

Figure 4.3 depicts the four main causes of construction waste from the perspective of the

main contractors. The four main causes of construction waste generation (X) are:

wasteful practice of subcontractors (AA); incidence of rework (BB); efficient usage of

construction material by subcontractors (CC); and lastly integration and coordination of

team players (DD).

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Refer to file name: Figures.PDF for Figure 4.3 Factors affecting construction
waste generation

4.9.1 Wasteful practice of subcontractors

The wasteful practice of subcontractors stems from the fact that subcontractors lack the

proper training to engage in less wasteful practices and the development of more efficient

and convenient ways of dealing with waste. Misconception of waste and lack of

appreciation for the value of materials gives rise to wasteful practice among

subcontractors (Ofori et al., 2004).

Waste was perceived as an inevitable by-product of construction activity, and attitudes

were driven by pragmatism, with low residual values being attributed to materials left

over from construction activity (Lingard et al., 2004). Lingard et al. (2004) stressed that

there is a need to involve workers in identifying waste management solutions, to provide

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more information to all employees about practical aspects of waste management, and for

managers to visibly demonstrate commitment to waste management policy objectives.

Generally subcontractors felt that there were few benefits from taking the trouble to reuse

or recycle materials. To them waste minimization activities were merely another

workload burden perceived to be irrelevant to operatives’ jobs.

Often, the main contractor supplies construction material. Therefore, if the subcontractors

adopt a wasteful practice (AA), there would likely be an increase in construction waste

generation (X). Correspondingly, if the wasteful practice among the subcontractors is

diminished this would lead to a lower generation of construction waste. Thus a positive

relationship exists between wasteful practice and construction waste generation (z36).

4.9.2 Incidence of rework

Rework tends to be regarded as part of the construction process and is one of the main

causes of wastage of materials on construction projects (Love and Smith, 2003). The

incidence of rework increases the likelihood of project time and cost overruns, and

ultimately leads to client dissatisfaction (Josephson et al., 2002).

Love et al. (2002) found that contractors considered a portion of rework costs as

attributable to the poor skill levels of subcontractors leading to defective workmanship.

On the other hand, if subcontractors are trained to avoid rework, the level of waste on site

can be minimized (Love et al., 2002). There is therefore a positive relationship (z37)

between incidence of rework (BB) and construction waste generation (X).

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4.9.3 Efficient usage of construction materials by subcontractors

Inefficient use of construction materials by subcontractors is one of the main causes of

waste generation on site (Ofori and Debrah, 1998). Skilled labour in the Singapore

construction industry is scarce. Thus, main contractors contract labour subcontractors

(‘kepalas’) who employ a large pool of unskilled labour. The unskilled workers tend to

use construction material in inefficient ways (Ofori, 1997).

The construction industry must seek to reduce wastage, especially when much of it is

avoidable if efficient usage of construction material by subcontractors is adopted (Lim,

2003a). The labour subcontractors on which the Singapore construction firms depend

have no responsibility for purchasing materials. Their main concern is producing work of

reasonable standard and complete the maximum quantity of construction work within the

shortest time possible; they are not interested in finding or adopting the most efficient

way of using materials to produce their output. As such, they are unlikely to concern

themselves with new working methods that reduce waste (Ofori, 1997).

Furthermore, a large proportion of the construction industry’s workforce is unskilled. The

availability of this large pool of cheap unskilled labor has contributed to not only poor

construction productivity but also high levels of wastage. Poor workmanship and the

incorrect use of tools also result in a need for much remedial works and operational

wastage (Ekanayake, 2000).

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Ofori (2004) stressed that subcontractors play an important role in determining the degree

of waste generation on site. Therefore, on site, subcontractors should practice efficient

usage of construction material (CC), otherwise, it would directly increase construction

waste generation (X). This results in a negative link between efficient usage of

construction material by subcontractors and construction waste generation (z38).

4.9.4 Integration and coordination of team players

Literature on construction waste emphasizes the importance of co-ordination and

integration mechanisms to minimize construction waste successfully within a

construction project. With multi-layered subcontracting in Singapore construction, there

is no integration and coordination of team players when they actually carry out their work

(Wong, 2003). Co-ordination and integration mechanisms, though tightly intertwined and

to some extent overlapped, are recognized by the literature as fundamental in determining

the impact of managerial levers on logistical processes across the supply network

(Kopczak, 1997). The understanding of co-ordination mechanisms can help managers in

the decision-making process to select the most appropriate action that needs to be

performed from a set of alternative solutions (Forza et al., 2000). Integration mechanisms

can help them define to what extent such action/ interventions should pass through

organizational boundaries between functions and between companies (Romano, 2003).

In this study, team players are defined as the main contractors, the subcontractors and the

suppliers. Although in construction, consultants are often regarded as one of the team

players, they are excluded from the model due to the scope of this research. It is

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important to note that greater integration and coordination of team players in relation to

waste minimization issues would result in a decrease in construction waste generation on

site (Lingard et al., 2001). Likewise if there is an increase in the integration and

coordination of team players, construction waste generation would decrease. This gives

rise to a negative relationship (z39) between integration and coordination of team players

(DD) and construction waste generation (X).

4.10 Conclusion

In the Singapore construction industry, subcontracting is widely practiced. This is due to

the high volatility of the labour-intensive construction industry. The adoption of the

Flexible Firm Model allows subcontractors to be used more efficiently. The employment

of ‘Kepalas’ results in having an unskilled pool of labour on site (see section 4.8) chances

are that there would be lower productivity and an overall increase in construction waste

generation on site (Yeong, 1998). With this in mind, four causes of construction waste

generation were developed from this particular controllable factor (see Figure 4.3).

The most common employment practice is the ‘kepala system. The flexible supply of

labour by labour-only subcontractors is beneficial to main contractors to solve fluctuating

labour demands. However, the system is problematic as the subcontractors’ workmen are

low-skilled and they are often inefficient in the usage of construction materials. Hence

high levels of wastage and low productivity occur. Four causes of construction waste

generation were developed from the controllable factors that cause waste generation (see

Figure 4.3).

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