Reducing construction costs: European best practice supply chain implications

Abstract

Contractors, being located at the vanguard of the construction supply chain, potentially offer the most effective means of improving construction industry cost performance. As a generalisation, cost remains the most important criterion for construction clients; so its reduction (most often than not) represents improved client satisfaction. The construction process remains highly labour intensive, therefore, any savings in this regard could reduce construction costs significantly. This paper presents a model for minimising construction labour costs based on European best practice, and discusses the implications of such on supply chains. A variety of European contractor performance data were analysed, to identify optimum construction solutions for achieving minimal cost on a particular build-type (insitu concrete construction). The generic concepts of the cost minimisation model emanate from the construction practices employed by contractors. It is subsequently argued that supply chains downstream from the principal contractor, i.e. forming part of these key construction practices (material suppliers, subcontractors, plant and equipment providers, etc.), should be targeted as a means of effectively reducing overall construction costs. The use of `downstream strategic alliances’ (DSAs) is advocated in this respect.