Implementing e-Tendering to Improve the Efficiency of ...

Implementing e-Tendering to Improve the Efficiency of Public Construction Contract in Saudi Arabia Eng. Moath Al-Yahya, , Saudi Arabia, [email protected] Dr. Kriengsak Panuwatwanich, Griffith School of Engineering, Griffith University, Australia, [email protected]

1 Abstract This paper presents an e-Tendering model developed for the public construction contract in Saudi Arabia to improve its efficiency. The research addresses the dilemma of traditional tendering and recommends the use of practical tools in order to improve the efficiency of the process. The demand from governments and the construction industry for paperless business processes has generated many commercial e-Tendering systems around the world. E-Tendering systems can be quite complex since they involve many stages or phases to meet the needs of both the public and private sectors. In the current study, numerous e-Tendering systems have been evaluated to provide background information to assist with the development of the proposed model. The proposed model is developed based on literature review, ten interviews, a focus group, and 52 questionnaire participants. The model allows a contractor to be involved during the design stage and participate officially during the design process. This feature seek to minimise the project’s time and maximise the quality and transparency of e-Tendering in the construction industry. The challenge, thus, revolves around adapting the Saudi construction contract into the form of e-Tendering. The implementation expectations are common across the government and the contracting industries. All participants can envisage an improvement in efficiency with the implementation of e-Tendering. The results also showed that the majority of the participants consider the distribution and receipt of the bids to, or from, the sub-contractors and suppliers as the factor that

can most easily be influenced by the efficiency of the e-Tendering process. Further, the findings highlight the importance of developing and maintaining ‘best practice’ for the IT requirements and for the configuration of the whole e-Tendering model. The inclusion into the proposed model of relevant insights obtained from the interviews, the questionnaire, and the focus group ensures that the model has both theoretical and practical validity.

2 Introduction Nowadays, tendering is considered one of the fairest means of awarding government contracts, and one that is most likely to secure a favourable outcome for a government in spending public money. Tendering processes are considered a suitable mechanism for governments to fairly assign contracts for construction projects. The demand for efficiencies to be created in the process has resulted in a significant number of governments implementing e-Tendering systems, and demand from governments and the construction industry for paperless business processes has generated many commercial e-Tendering systems around the world. Indeed, e-Tendering is a growing area of interest for a number of reasons, two of which are the development of IT (Information Technology) technologies, and the needs of technologies in the projects. Moreover, e-Tendering is attracting the attention of both the user and IT developer sectors. The continuous growth and expansion of e-Tendering in the construction industry provides opportunities for improved processes to increase efficiency and reduce reliance on paper transactions. This efficiency leads to a reduction in cost and time. Importantly, this outcome can be achieved through the implementation of e-Tendering and the use of the electronic environment. The practice of e-Tendering already exists, although it does vary from country to country, and sector to sector. Further, a number of studies have developed e-Tendering frameworks in different construction industries to improve the performance of construction contracts. However, studies into implementing e-Tendering for construction contracts have focused mainly on

document management, from a managerial perspective, without considering the complete cycle of tendering. In the current research, the focus is on addressing a range of concerns that will provide broad benefits to the construction industry from effective e-Tendering implementation. The current research illustrates how improving strategies to implement e-Tendering for the Saudi construction contracts will ensure better practices within the IT industry. In addition, this paper provides a comprehensive method for continuous improvement of the public construction contract. These goals are achieved through the following objectives: •

Addressing practical issues constituted in the adaptation of an e-Tendering model for the Saudi Arabian construction sector;

•

Identifying the benefits that can be achieved from implementing e-Tendering in the construction context; and

•

Detailing critical success factors, barriers, and drivers to achieving effective and efficient utilisation of e-Tendering in the construction sector.

3 Literature Review 2.1 The Concept of e-Tendering A large number of Electronic Procurement (EP) forms have received much research attention. Some EP forms are quite well defined and relatively well developed; others have still not reached the maturity stage; some will mature, while others will never reach that stage. This section focuses on one of six EP forms that are quite well defined and relatively well developed, namely (Boer, Harink, & Heijboer, 2001): E-MRO, Web-Based ERP, E-Sourcing, E-Informing, E-Reverse Auctioning and E-Tendering. 2.2 E-Tendering: Relevant Definitions According to Boer et al. (2001), Electronic Procurement (EP) can be defined as the use of Internet technology in the purchasing process. This definition excludes old purchasing applications, such as ordering by telephone or by fax. At the same time, the definition is

relatively wide, encompassing the use of Internet applications in the purchase process, as well as the use of the intranet and extranet applications. An example of an EP form is ordering office supplies by using a supplier’s website catalogue. E-Tendering is defined by Betts et al. (2006) as, “the procurement process simply conducted online, i.e., supplier registration/expression of interest, contract download, submission of bid document, evaluation of tenders”. Importantly, e-Tendering is a growing and developing system that is available to both the public and private sectors of the construction industry for the efficient procurement of goods and services. Traditionally, the tendering process has been a paper-based system; however, three main factors have led to the growing application of electronic tendering, including (Betts et al. 2006): •

The increasing use of technology within the construction industry;

•

The exchange of information between parties; and

•

Concern for the environment (minimizing the use of paper and materials).

Another definition for e-Tendering relates to the issue and receipt of tender documentation through electronic means, which facilitates the procurement of construction work and the awarding of contracts (Tindsley & Stephenson, 2008). Dawson et al. (2006) also recognises the demand for a legally compliant and secure e-Tendering system within the construction industry. Additionally, Betts et al. (2006) defines e-Tendering as the “electronic publishing, communicating, accessing, receiving and submitting of all tender related information and documentation via the internet, thereby replacing the traditional paper-based tender processes, and achieving a more efficient and effective business process for all parties involved”. Thus, e-Tendering electronically manages a construction tender; this includes sending the tender documents via email, contacting and notifying bidders, downloading documents, drafting, and responding to tenders through the website. Numerous e-Tendering systems and programs are available to the construction industry. These systems offer similar communications capacity,

document management abilities, and auditing tools. Their functionality and processes are comparable to and reflect the paper tendering system. Betts et al. (2006) compares the general steps adopted in the tendering and e-Tendering process. As noted above, the e-Tendering process is a “suitable mechanism for governments to fairly assign contracts for construction projects and procurement” (Betts et al. 2006). The increasing demand for efficiency in the construction industry has created a shift toward implementing eTendering in government sectors. As a consequence, the electronic environment presents solid prospects for improved communication and interaction between tender parties. 2.3 Public Construction Contract and e-Tendering The construction industry is moving away from the traditional paper tendering process, and towards e-Tendering, which efficiently utilises the electronic media. The electronic environment allows for data and information to be shared and distributed between the relevant parties. This approach reduces the costs of production by eliminating the materials and resources used when following the paper tendering process. Amit and Sott (2001) posit that, “E-business has the potential to generate huge new wealth”, specifically by altering the way that the business and tendering system was conducted for the paper tendering system (Lou & Alshawi, 2009).

Importantly, the continuous growth and expansion of the e-Tendering process in the construction industry provides further opportunities for improving the processes. Consequently, there will be an increase in efficiency and a reduction in the industry’s reliance on paper transactions. Overall, through the implementation of e-Tendering and the use of the collaborative electronic environment, there will be a reduction in both cost and time (Betts et al. 2006). The collaborative nature of the electronic environment permits construction industry personnel to communicate and work together to address the project’s requirements and needs. Importantly, the electronic environment offers an equal advantage to all parties wishing to be involved in the

tendering process. The elimination of previous difficulties, such as geographical location (or the tyranny of distance), is a positive advantage of e-Tendering. Four tender applications that benefit from the use of electronic processes are Communication, Data and information exchange, Data storage, and Archiving (Lou & Alshawi, 2009). 2.4 E-Tendering Environments The main driver behind the e-Tendering environment is competitive advantage achieved through improved work processes; efficient information sharing and reuse; better returns on investment; strategic partnerships (“win-win” culture); availability of project information management strategy; improving “build ability” and whole life costs with the supply chain; as well as public and private initiatives. Further, by harnessing the benefits of e-Tendering environments, competitive organizational advantage improves efficiency, speed, data accuracy, and effectiveness in everyday business processes and management (Lou & Alshawi, 2009). The largest barrier to the adoption of e-Tendering environments is the employees themselves, as opposed to technological barriers. These employee-related barriers include a lack of awareness, no quantifiable measurements or indicators of success, limited skilled workers, transparency in the CI, poor cross-disciplinary communication, a fragmented supply chain, and poor industry standards for information interchange (Lou & Alshawi, 2009). Overcome by their traditional mindset, industry players are reluctant to adopt or consider changes to everyday processes and, therefore, pay less attention to the advantages and benefits of IT. To date, there are no recognised quantifiable methods to measure and quantify the benefits of IT systems in organizations. This situation reflects the perception that IT is complicated and high risk (Lou & Alshawi, 2009). Further, the transparency of work processes in the CI remains questionable, particularly as project information is not being shared, resulting in a waste of knowledge, resources, and intelligence. Additionally, poor communication is a bottleneck for performance improvement, reinforcing a confrontational and blaming culture. Inferior data and information exchange

standards, derived from different developing standards, also prevent computer systems from talking to each other; thus, the exchange of information and data is virtually impossible. This issue is discussed contentious issue across all industries. Project failure in IT has long been of interest to the public. A primary explanation for the extent of project failures, and the size of the ultimate write-offs, is the presence of agency problems, especially the escalation of commitment on the part of the managers (Keil 1995). The definition for such escalation relates to the continued commitment of resources following negative feedback about a project. A most important feature of the electronic environment is that it allows for IT integration through the exchange and reuse of data and information (Lou & Alshawi, 2009). Undertaken in a cost-effective manner, the construction industry and tender processes are able to proceed, efficiently and productively, into the future (Sarshar, Tanyer, Aouad, & Underwood, 2002). 2.5 Drivers and Barriers Numerous barriers and drivers affect the implementation of e-Tendering in the construction industry. The analysis and design of e-Tendering to overcome these barriers contributes to the critical success factors in the use of e-Tendering. The following sections outline the barriers and drivers that influence e-Tendering within the construction industry. 2.5.1

Drivers

A driver is a benefit derived from the implementation of e-Tendering in the construction industry. One of the benefits is to centralize the tendering process and documents, which allows for easier access to tender documentation by all parties. Eadie et al. (2007) assessed the existing literature to establish the following list of e-Tendering drivers: •

Price reduction in tendering;

•

Reduction in time to source materials;

•

Reduction of administration costs;

•

Reduction of staffing levels in procurement;

•

Gains in competitive advantage;

•

Improvements in communication;

•

Enhancement of decision making and market intelligence; and

•

Reduction in operating and inventory costs.

The main benefit of the collaborative electronic environment is improved work processes, efficient sharing and reuse of information, formation of strategic partnerships within the industry, and reduced costs and time for preparation (Armit and Sott 2001). A competitive advantage can occur from the benefits of the collaborative electronic environment through increased efficiency, speed, data accuracy, and effectiveness in the tendering process (Lou & Alshawi, 2009). The benefits of implementing e-Tendering are different for the different parties involved in the procurement process. The benefits for the parties submitting bids for tender are as follows (Kajewski and Weippert 2004): •

Quick and easy access to tendering information;

•

Increased tender opportunities;

•

Improved access for geographically isolated organisations;

•

Increased market share and competitiveness; and

•

Reduced cost of resources.

The benefits for the public sectors and government organisations are as follows (Kajewski and Weippert 2004): •

Increased efficiency and effectiveness; and

•

Consistent tendering processes across the government.

Kajewski and Weippert (2004) also found that industry benefited from the following: •

Reduced costs (up to 90% in preparing, copying and distributing tender documents);

•

Reduced time costs through efficient use of technology;

•

Equal advantage/disadvantage regarding geographical location;

•

Increased distribution speed of tenders;

•

Improved communication between parties;

•

Improved tender management; and

•

Reduced time spent on routine administration. 2.5.2

Barriers

A barrier is a restriction or deterrent that affects the implementation of e-Tendering within the construction industry. Eadie et al. (2007) identified the following e-Tendering barriers: •

Unclear legal position of e-Tendering;

•

Unaccepting company culture;

•

Lack of upper management support;

•

Lack of IT infrastructure;

•

Costly IT systems;

•

Lack of technical expertise;

•

Insecurity of transactions;

•

Interoperability concerns; and

•

Unrecognised business benefits.

The biggest barrier to implementing e-Tendering and adopting the use of a collaborative electronic environment is the employees themselves, mostly because of their lack of awareness of the technology available within the construction industry. However, the lack of skilled workers, and cross-communication and information exchange contributed to the e-Tendering barriers (Lou & Alshawi, 2009). Alshawi and Weng Lou (2009) found that construction industry companies were often set in their old ways of doing business. Further, they see the change to an electronic environment as unproductive. Additionally, the legal aspects concerning an electronic

environment were identified by Kajewski and Weippert (2004) as barriers, especially the lack of signed documents and face-to-face agreements between the parties on both sides of the tender documents. This traditional and formal way of undertaking business was problematic for the employees, as were the contractual restraints that were no longer apparent with e-Tendering. 2.6 Current Status of e-Tendering in Saudi Arabia In the Saudi Arabia, the Government’s Procurement Regulation, Article 10, states: “It is permissible to provide the offers and opened by electronic way as determined by the Executive Regulation of this system, and government agencies announced the names of those who submitted their offers”. Thus, the Regulation allows for the use of IT in advance of the IT transactions. However, it appears that no one has yet used the full electronic tendering system or application. Additionally, less than 10 users appear to take advantage of more than just the basic features available in e-Tendering. E-Tendering can also be utilised by the Saudi Arabian portal called Saudi e-Government National Portal (www.Saudi.gov.sa). The main aim of this portal is to gather all the e-services within one site, which means that the site will be the distributer to the other government agencies. Recently, Monafast (2016) is the government service company that aims for announcing the bids and deliver the bid documents electronically. This bids is very, and it has different types of procurements include light construction works. However, this action is not serve the full eTendering cycle as explained earlier.

4 Methodology This section presents a discourse on the research methodology and design used to implement the e-Tendering for the Public Construction Contract in Saudi Arabia. A sequence of the research is undertaken using the mix method approach. The mix method approach is used widely and suggested by many methodologists. In this paper, the general guidance to conduct the research method is by following Creswell and Clark (2007) explanation, as well as specific consideration

to the Fellows and Liu (2008) suggestions to align with the construction best practice research methodology. Moreover, the section describes, in detail, the targeted research sample, the questionnaire distribution method, and data collection and data analysis techniques. Figure 1 shows overall research methodology diagram and illustrates the mix method in support of the achieving of the paper objectives. Insert Figure 1 here The data is collected in three stages; Table 1 summarises the data collection steps undertaken with their objectives for each pathway [Construction Engineering (CE) or Information Technologies (IT)] and the general outcomes. Insert Table 1 here According to figure 1, the method consists of five sequential stages to deliver the final framework. The first three stages relate to the data collection, while the last two stages present the data analysis and results: •

Stage 1: A discussion of the literature review addressing e-Tendering for construction contracts; the extensive literature review benefits/barriers, systems, and technologies. In addition, the stage also involves an interview (Interview#1) with two Information Technology (IT) experts. The interview sought to understand how the first proposed model (Fig. 2) would work, technically and practically.

•

Stage 2: Interview#2 was undertaken with eight procurement experts in construction with regard to the development of the research model, and the testing of the questions used in the questionnaire survey.

•

Stage 3: The development, distribution, and data collection method for the research questionnaire, including the focus group with IT experts to ensure that the process met the IT requirements.

•

Stage 4: All the data from both IT and CE integrated together for the final outcome; the analysis of the literature review, the interviews (#1 and #2), the survey questionnaire, and the focus group.

•

Stage 5: The results (derived from the outcome in Stage 4) were used to: define the final developed model; present the conclusions and recommendations; and address future research and limitations. The aim of the first proposed model was to link the design office with the contractors. In traditional tendering, the contractors do not have an opportunity (legal issue) to present their specific views in relation to the project, systems, construction methods, or economic duration of the project.

Insert Figure 2 here

5 Result and Analysis The data for the current study were collected using three data collection methods as follows: 1. Interviews: a.

Interview #1 was conducted in Australia with two IT experts. Their opinions were sought to gain additional background information for the development of the proposed e-Tendering model.

b.

Interview #2 was conducted in Saudi Arabia with eight engineering experts. These interviews were used to elicit information that would improve the questionnaire and enhance the data to be collected from it. Additionally, these experts were asked to provide feedback regarding the first proposed model (Fig. 2), as the first model has been developed based on the current practise in Saudi Arabia and the gathered data from the literature review.

2. Questionnaire survey is distributed to a selected group of approved contacts. These contacts are experienced in e-Tendering and did have an experience in the

procurement practice of a Saudi engineering organisation. Because of this selection process, the response rate is expected to be high. 3. Focus group was conducted in Australia. The task of the focus was to assess the proposed model so that improvements could be made that would overcome any barriers to its implementation. The purpose of the data analysis methods chosen was to improve the efficiency of the public construction contract system in Saudi Arabia. 1.1 Interview #1 Analysis (with IT experts) The interviews with the two IT experts were conducted in Australia. These interviews were undertaken to (1) gain a better understanding of IT systems, and how they could help improve the application and allocation of construction contracts, and contract tendering in particular; (2) identify how the initial proposed model could be improved; and (3) identify the programs and applications that would work well with the seven tendering components and different suppliers. The information obtained from the interviews provided the starting point for the IT discourse; it also contributed to the development of the first model (Fig. 2). 1.2 Interview #2 Analysis (with Engineering Experts) The main aim of Interview #2 was to test a number of factors that could influence the efficiency of e-Tendering. Additionally, the interviews also investigated any other factors related to the Saudi tendering environment. The second interview was conducted in Saudi Arabia. The participants were eight engineers working in the field of construction who had a position in the procurement or management areas within the government or construction sector. The main objectives were to identify other factors relevant to the questionnaire, and learn which factors were considered most efficient for use in the survey. While the majority of the engineers had heard about e-Tendering, they did not have a unified definition for it. Indeed, the volunteer interviewer had not heard of e-Tendering either. This unexpected outcome was determined not to

be a problem, as the issue would be validated by the questionnaire survey. Importantly, the first e-Tendering model was shown to the interviewees to help them gain an understanding of the eTendering process to obtain some feedback about the model. This approach worked as the interviewees provided valuable insights that led to the development of the second proposed model (Fig. 3). Insert Figure 3 here According to the interviewees, three issues prevent the contractors’ participation during the design stage: •

There is not enough time for them to review the design;

•

The procedure does not give them the capacity to become involved in the design stage; and

•

There are no benefits to entice the contractors to participate, and further, they do not have the requisite qualifications to become involved.

Hence, the model proposed a way for the contractors to become officially involved in the process, that is, via the e-Tendering features. The following schedule explains how the five stages of the first model work. In traditional tendering, the contractors are not involved in these stages, but when the e-Tendering is used, the client becomes the “linker” between the design office and the contractors (Table 2). Insert Table 2 here

In addition, the interviewees were asked about their expectations if the e-Tendering process was implemented, and which area of the e-Tendering stage they thought would most affect the efficiency of the process. The majority expressed their belief that the Contract Documents Preparation was the area that would improve in efficiency the most through the use of eTendering. The remainder identified the Pre-qualification area; it appears that when the Pre-

qualification stage is not handled properly, then the system suffers, as the contractors are not qualified to manage this part of the project. Overall, the interviewees believed that if e-Tendering was implemented, there would be some improvement in the process. Additionally, a number (six interviewees) also saw an improvement in the transparency of the processes.

The interviewees also expected that some savings would be achieved if the e-Tendering was implemented. Thus, the interviewees identified a possible average time saving of 33% and cost saving of 28%. Further, most interviewees have decided to use e-Tendering for their next project if they have the chance. However, a few will continue to use both e-Tendering and traditional tendering. Table 3 presents the outcome from the interviews. Insert Table 3 here

1.3 Questionnaire Survey Analysis An online questionnaire survey was conducted in Saudi Arabia (April 2011). The questionnaire invitation letters were sent by email to prospective participants, with the questionnaire links to explain the research purposes and the survey requirements. The questionnaire invitation was posted in the Arab Engineering Internet Forum, Saudi Section, in an attempt to involve more engineers or experts who could not be contacted by email. The questionnaire, consisting of three parts (Part 1: General Information, Part 2: Experience in Traditional Tendering, and Part 3: Electronic Tendering), examined the current and proposed eTendering practices within selected Saudi construction organisations. The structure of the questionnaire is described below: •

Part 1 – General Information: including demographic information (e.g. years of experience, type of profession, and level of education), as well as background information of the respondents and their firms.

•

Part 2 – Experience in Traditional Tendering: including information related to the area of tendering and its effectiveness, the importance and satisfaction level of the current practice of e-Tendering, as well as the company’s specific waste management practices.

•

Part 3 – Electronic Tendering (e-Tendering): including respondents’ opinions on the implementation of e-Tendering for Saudi Construction Contracts, related to the stage of tendering that needs to be assessed, their level of importance, the tendering applications, the study scopes, and opinion of doing e-Tendering.

1.3.1

Completion Rate

Firstly, 152 participant viewed the questionnaires, most of them being engineers involved in construction and procurement activities. Eighty-one (81) participants are clicked through the survey link, only 59 questionnaires attempted to participate since 52 out of 59 completed the survey. Therefore, completion rate is 38.81%. Finally, a couple of participant were excluded from the analysis for not meeting the requirements of the questionnaires, namely: •

The respondent must be working in the construction field;

•

The respondent must be practicing, or have practiced, any tendering aspect in the construction field;

•

The respondent must be working, or have worked, in the Saudi Arabian Construction field; and

•

The respondent must finish the survey within a 4-minute interval, which is less than the accepted time to get quality answers.

1.3.2

Sample Size Requirement

As per the analysis, plan a priori test is conducted to see if the sample data collected is adequate for statistical analysis. The results are provided below: T-tests: Analysis: Input:

Means: Difference between two independent means (two groups) A priori: Compute required sample size Tail(s) = Two Effect size d = 0.9

Output:

α err prob Power (1-β err prob) Allocation ratio N2/N1 Noncentrality parameter δ = Critical t Df Sample size group 1 Sample size group 2 Total sample size Actual power

= =

0.1 0.90

=

1

2.9849623 = = =

1.6819524 42 22

=

22

= =

44 0.9017335

Based on the sample size requirement, analysis to determine sample size adequacy shows that the data collected from the completed participants (52 responses) meets the minimum requirement (44 responses) and is therefore suitable for independent t-test. 1.3.3

Experience in Traditional Tendering

The findings from the analysis showed that, on average, 72% of the respondents had practiced all stages of the tendering process for “many times”. In contrast, on average, only 26% of the respondents had been involved in the tendering process only once. The respondents’ involvement in construction contract tendering for the various areas, namely preparing or analysing the prequalification information (once 26%, many times 72%). Moreover, preparing or analysing the contract documents (once 22%, many times 78%); sending and answering the contract enquires (once 31%, many times 66%); analysing the bids or offers (once 26%, many times 71%); and making decision for the best offer (once 24%, many times 72%). An important issue in the current research is the question as to which period, in the traditional tendering process, was the most time consuming. For example, 79% of contractors believed that preparing or analysing the contract documents was the most time consuming. On the other hand, 53% of the Engineering and Project Management Office identified analysing the bids or the offers as the most time consuming, while 47% saw preparing the contract documents as the most time consuming. The government respondents were split between preparing or analysing the

contract documents (43%) and analysing the bids or the offers (36%). However, the average was 55% for preparing or analysing the contract documents, followed by 40% for analysing the bids or the offers (Fig. 5). Insert Figure 5 here 1.3.4

Electronic Tendering (E-Tendering)

The expert opinion for the implementation of e-Tendering for Saudi Construction Contracts was that it was a very important strategy that needed to be put into action. This finding was confirmed by literature review and the outcomes from the interviews. There were seven questions in the e-Tendering part of the questionnaire. For each question, the respondents had to rate the level of importance and provide a view about e-Tendering. Forty-six respondents completed the e-Tendering section. The respondents were asked to identify the stage that would most affect the efficiency of the eTendering process. As seen in Fig. 6, 28% considered this stage to be that of distributing and receiving the bids to, or from, the sub-contractors and suppliers. The choice of the other stages ranged from 11% to 17%. Insert Figure 6 here

An important question related to the impact of implementing the e-Tendering process. The respondents were asked to rank the impacts of implementing e-Tendering on the scale from 1 (significantly worsen) to 5 (significantly improve). The respondents ranked the impacts in the following order: significantly improve commutations (5); improve transparency (4.5); improve decision-making, accuracy, and project understanding (4); and only partially improve risk level of project (3.5). 1.3.5

Evaluating the Decision Toward E-Tendering

Moreover, independent t-test is conducted to illustrate how people involved in making decisions regarding Construction Contract Tendering evaluate the impact of E-Tendering. The following table shows the impact of E-Tendering on Tendering Price and Number of Staff in Procuring activity. The impact is illustrated by reduction (1) in factors means. Table XXX shows that people who were involved in decision-making for just one time do not have much confidence, but people who were involved in decision-making many times are excited about E-Tendering reducing Tendering Price. Both new and experienced decision-makers think that E-Tendering is going to reduce the number of staff involved in the procuring activity.

Group Statistics Involved Making decision Impact Tendering Price Only one times

Impact Staff procuring

N 12

Mean .0833

Std. Deviation .66856

Std. Error Mean .19300

Many times

40

-.3659

.66167

.10334

Only one times

12

-.2500

.86603

.25000

Many times

40

-.7317

.59264

.09255

The following table shows that the analysis is statistically significant at p < 0.1 (Sig. 2-tailed). Independent Samples Test Levene's Test for Equality of Variances t-test for Equality of Means

Impact Tendering Price

Equal assumed

Impact Staff procuring

Equal assumed

variances

F 1.38

Sig. 0.25

Equal variances not assumed variances

Equal variances not assumed

6.06

0.02

95% Confidence Interval of the Difference

t 2.06

df 51.00

Sig. (2tailed) 0.04

Mean Difference 0.45

Std. Error Difference 0.22

Lower 0.01

Upper 0.89

2.05

17.81

0.06

0.45

0.22

-0.01

0.91

2.22

51.00

0.03

0.48

0.22

0.05

0.92

1.81

14.15

0.09

0.48

0.27

-0.09

1.05

As noted earlier, there are a number of barriers to the implementation of e-Tendering, especially in the context of the Saudi Arabian environment. The results of the survey identified, from the

respondents’ perspective, three extremely important barriers: government procurement systems (4), security of transactions (4), and lack of IT infrastructure (4). Also, local legislation (3) and upper management support (3) were considered as important. These barriers are illustrated in Fig. 7. Insert Figure 7 here The following table shows the barrier to implementing E-Tendering. The intensity of each barrier has been measured on a Likert scale of 4, where: 1- Not Important, 2- Good to be considered, 3Important, and 4- Extremely Important. Table shows the scores obtained in each barrier. Anything above 2 should be considered as a barrier. Descriptive Statistics N Mean

Std. Deviation

Statistic 52 52

Statistic 3.0755 3.1321

Std. Error .12002 .12930

Statistic .87374 .94131

Barrier Saudi culture

52

2.4906

.13636

.99272

Barrier Upper management support

52

3.1887

.10794

.78585

Barrier Lack IT infrastructure

52

3.1132

.13378

.97390

Barrier Costly IT systems

52

2.4528

.12797

.93162

Barrier Lacking technical expertise

52

2.7170

.13025

.94822

Barrier Transactions Security

52

3.0755

.13429

.97762

Barrier Interoperability concerns

52

2.5660

.10609

.77234

Barrier No realized business benefit

52

2.3585

.11771

.85697

Valid N (list-wise)

52

Barrier Legislation Barrier Govt procurement sys

Additionally, eight elements, within the e-Tendering process, were considered to have either a positive or a negative effect with the implementation of e-Tendering. All the elements (tendering price, time to source materials, administration costs, staff in procurement department, operating and inventory costs, gaining competitive advantage, communication tools, and enhanced decision-making) were identified as creating an improvement by reducing, or increasing, some issues. Figure 8 provides the results in a diagrammatic form. From the figure, 78% of the respondents believe there would be a reduction in staffing numbers for the procurement

departments. Around 63% judged that the administration costs and time spent sourcing materials would be reduced. In addition, approximately 50% thought there would be a reduction in the operations and inventory costs, as well as reduction in communication tools and the tendering price (the documents price; 38%). In addition, approximately 62% of the respondents believed that e-Tendering would increase competitive advantage, as well as enhance decision making for the tendering process. Insert Figure 8 here 1.3.6

Barrier to Implementing E-Tendering from the Viewpoint of Decision-Makers

An independent t-test has been conducted to illustrate how people involved in making decisions regarding Construction Contract Tendering evaluate the barriers of E-Tendering. The table shows that the new and experienced decision-makers significantly differ in their opinion considering Costly IT systems, Interoperability concerns, and No realized business benefit being barriers to implement E-Tendering system. While new decision-makers think of them as important barriers, experienced decision-makers view them as good to be considered.

Group Statistics

12

Mean 3.0833

Std. Deviation .99620

Std. Error Mean .28758

41

2.2683

.83739

.13078

Only one time

12

2.9167

.79296

.22891

Many times

41

2.4634

.74490

.11633

Only one time

12

2.7500

.86603

.25000

Many times

41

2.2439

.83007

.12964

Involved Making decision Barrier Costly IT Only one time systems Many times Barrier Interoperability concerns Barrier No realized business benefit

N

The following table shows that the analysis is statistically significant at p < 0.1 (Sig. 2-tailed). Independent Samples Test Levene's Test for Equality of Variances

F

Sig.

t-test for Equality of Means

t

df

Sig. (2tailed)

Mean Difference

Std. Error Difference

95% Confidence Interval of the Difference

Barrier Costly systems

IT

Equal variances assumed

.14

.71

Equal variances not assumed

Barrier Interoperabili ty concerns

Equal variances assumed

Barrier realized business benefit

Equal variances assumed

No

.08

.77

Equal variances not assumed .48

Equal variances not assumed

.49

2.84

51.00

.01

.82

.29

Lower .24

Upper 1.39

2.58

15.83

.02

.82

.32

.14

1.49

1.83

51.00

.07

.45

.25

-.04

.95

1.77

17.10

.10

.45

.26

-.09

.99

1.84

51.00

.07

.51

.28

-.05

1.06

1.80

17.37

.09

.51

.28

-.09

1.10

1.4 Focus Group Analysis Using the focus group was determined to be the best choice for the current study at this stage in the e-Tendering implementation, for the following reasons: •

The researcher does not have any IT experience;

•

There were no factors that require guidance; and

•

Hence, the IT experts were able to argue with each other about the various aspects being raised, with the final choice being the best choice.

Invitations to join the IT focus group were sent to 11 Saudi PhD students, all of whom had an IT background and were studying at three different universities in the State of Queensland, Australia. Their contact details were obtained from the Saudi Arabian Attaché in Australia. The decision to choose Saudi students reflected the need to: •

Understand more about the Saudi IT environment;

•

Have members of the focus group with similar experiences to provide a cohesive approach to the data collection;

•

Understand the Saudi Procurement System and how it works; and

•

Capitalise on the students’ research related to e-Government.

In the end, six ICT scholars attended the focus group. The meeting started with the facilitator introducing the research aims, objectives, and the stages, along with the results to date. A decision to looks at only two aspects are suggested; namely, implementation and configuration. Table 4 presents the identified factors that were agreed to by the majority of members. Insert Table 4 here 1.5 Proposed E-Tendering Model for the Public Construction Contract in Saudi Arabia The proposed e-Tendering model for public construction contracts in Saudi Arabia comprises three parts: the Model components, the Model framework, and the Model category. To be an efficient tendering model, all parts need to work together in a cohesive manner. The link between the parts is the e-Tendering application job. The study identified a number of recommendations in Section 5 that would improve the tendering activities by using e-Tendering. However, the findings also confirm that not all the model components need to be implemented at once. 1.5.1

Model Components

Interestingly, the model components for e-Tendering are the same components of traditional tendering. The functions of the components also match those of traditional tendering. Further, the model components will be in a web-based format, which will achieve the goal of e-Tendering. Moreover, the similarities to traditional tendering make the transition to the new e-Tendering format a smooth affair. Each of the model components is described below: 1. Publication and announcement: Using e-Tendering, the publication and announcement of the winning bid will be sent automatically to the unsuccessful contractors via an official email, letter, and fax, once the project has been allocated. The announcement will list the new projects, the biddings, and the views of the specialists for the contractors and design office. 2. Prequalification: E-Tendering will allow an advanced pre-qualification listing within the announcement to the design office, contractors, and subcontractors (production, material,

and field subcontractors). After qualifying, the bidders who are still interested in the tender can apply officially and pay online the requisite tender fees. 3. Communication tools: The most important component in the model is its ability to be a communication tool. However, a highly secure and flexible connection will be needed to meet all the requirements, such as emails, requests, reminders, updates, and clarity of videos. 4. Documents Management: E-Tendering allows all the bidding documents to be filed and accessed together, including the drawings, specifications, bill of quantities (BOQ), and contract documents. All documents will have their information classified so that, for example, the contractors can allow their subcontractors to access and forward data within their own field. 5. Blogging: In the traditional tendering model, contractors’ enquiries were called Questions and Answers. The new e-Tendering model will allow the contractors to post their enquiries under an anonymous name, while the client allows the design office to reply to the post. Additionally, subcontractors will be allowed to post their comments directly to the main contractor/s, using an approved request form. 6. Submissions of the offers: Traditional tendering in Saudi Arabia requires a selected official committee to open the bids received in person, in the tender box, or via the post. With e-Tendering, the contractors have a choice of two ways to submit their offers. They can send them electronically via the e-Tendering program (with a high-level secure connection), or they can be submitted, as was the case with the traditional method, into the tender box. Additionally, they can still deliver the tender in person or via the post. Both the e-Tendering and the traditional tendering options will give the bidders e-respite for their submission.

7. Analysing the bids: In traditional tendering, the bid analysis stage is long and protracted as it takes time for the analysis committee to review the bid. Additionally, other factors can cause delays during this period, such as entering errors proportion and data entry review. In contrast, the e-Tendering model allows for e-analysis, so the decision can be made easier and faster. The analysis takes place when the bidders upload their BOQ, within the submission, to the analysis tools. The analysis tools then analyse the offers according to the client requirements. Further, the analysis committee can perform their job at the same time, and then post their comments using the e-analysis tools. These e-Tendering features help to accelerate and shorten the bid analysis time. 1.5.2

E-Tendering Model Framework

Within the e-Tendering model framework (third proposed model; Fig. 9), there are links between the three parties: project owner (client), the designer office (consultant), and the contractors (tenders). For example, all three parties are linked together in the early stage, as they can participate in the design stage. Additionally, the links between the design office and the contractors during this stage will improve the efficiency of the contract document. The relationship between the client and the design office begins during the design stages. Insert Figure 9 here

They will be able to work with the full e-Tendering facilities, such as document management. Moreover, e-Tendering will simply link the qualified contractors to the project’s data within the web-based applications. As a consequence, the bidding time will be reduced and the communication between the parties improved. Clearly, the proposed model introduces the qualified contractors into stage 1, with the following benefits. They can: •

Use the dead time (the dead time happens when the contractors pre-qualify and are waiting for the design to be completed) to review the design outcomes;

•

Participate in these activities and, thus, increase their understanding of the project and increase their chance of winning the tender; and

•

Reduce the risk by investigate any minor issues within the tender document.

The main difference between the traditional tendering process and the e-Tendering process is the overlap between the design stage and tender stage. This overlap cannot be undertaken easily without the e-Tendering applications; otherwise, the benefits will be overwhelmed. The time is saved mainly within the bidding and analysing stages of e-Tendering. While there is no decrease in the time taken to complete the design stage, there are indirect benefits, including improvements in the quality of the design document, which the contractors have a chance to review, stage by stage; and an improvement in understanding the project’s elements due to the gradient of the study contract documents (drawings, specifications, and BOQ). 1.5.3

Model Category

A high-speed internet network (broadband) is very important for successful e-Tendering, as noted in the literature review and data analysis. However, some contractors do not have the ability or facility to work via the internet in remote location. Consequently, the implementation of the e-Tendering process in Saudi Arabia will need to accommodate this issue. Therefore, the contractors will be grouped into categories defined by the Saudi Rating Contractors Agency. The rating system includes five categories [compulsory using e-Tendering (first class), second class, alternatively using e-Tendering (third class), fourth class, and not required (fifth class)], within five project areas (building works, road works, water and sanitation, electrical works, and mechanical works), by the value of the project (from up to $1.5 M to more than $75 M). This rating system has been combined with the e-Tendering categories for the convenience of the study.

2. Conclusion 2.1.1

Research Outcomes

The current study sought to provide a conceptual framework for the development of a proposed model to improve the efficiency of the public construction contracts in Saudi Arabia. The model facilitates an investigation into how to establish good relations with the design office during the design stage, and how the contractors could use the normally dead time at this stage. The main outcomes of the study are summarised below: 1. The government sector and the contractors had similar expectations about the most important factors related to: •

The most time-consuming stage;

•

The stage that will most affect the efficacy of e-Tendering; and

•

The impact of implementing the e-Tendering process.

2. Only three stages had a perceived effect on the efficiency of e-Tendering: •

The preparation and analysis of the contract documents;

•

The distribution and receipt of the bids to/from the sub-contractors and suppliers; and

•

The analysis of the bids or the offers.

3. Twenty-eight percent (28%) of the respondents, as a profession group, or overall, identified the distribution and receipt of the bids to, or from, the sub-contractors and suppliers as the stage most easily affecting the efficiency of e-Tendering. 4. Three elements were identified as very important barriers to the efficiency of eTendering: the government procurement systems, the security of transactions, and the lack of IT infrastructure. 5. Almost 80% of respondents believe that e-Tendering would reduce the number of the staff working in the procurement departments, and 63% of the respondents thought that

there would be a reduction in administration costs and time spent on sourcing the materials using e-Tendering. 6. Around 60% of the respondents reported that e-Tendering would increase competitive advantage and enhance the tender decision-making process. 7. Based on the findings from the above analysis, a proposed model for implementing eTendering was developed. However, the conclusions of the focus group are an important tool for reviewing e-Tendering from an IT perspective. Three interesting comments related to the implementation and configuration of the model: •

The e-Tendering model can be implemented with well-known ERP systems, such as Oracle or SAP;

•

The use of expert international systems for e-Tendering would avoid many technical errors; and

• 2.1.2

The system should be in a web-based application format.

Implications for Saudi Construction Industry

Using the e-Tendering technique for tendering purposes will create a more efficient tendering process through the reduction in both time and cost. The process is practical, while the model can be very useful. E-Tendering could be easily implemented into existing organisations and industries. There are no significant alterations needed to transfer from the current traditional tendering system to the e-Tendering system, thus allowing for a smooth transition between the two systems. The following implications are listed for consideration by the Saudi Contraction Contact Industry: •

The development of e-Tendering should include other sectors beside the government sectors (e.g. Contractors, Design and Project Management Offices, and IT Consultants).

•

If the government has made a serious commitment to e-Tendering, then it should become compulsory for certain types and values of projects.

•

When developing the e-Tendering process, the developer would benefit from a review of the advantages of existing e-Tendering models and practices utilised by other countries. While each country has its own tendering process, lessons can be learnt so that Saudi Arabia can benefit from the best practice identified.

•

To avoid the duplication created by each government sector building their own eTendering system, a semi-government organisation may serve as a centralised eTendering provider for all government agencies.

2.1.3

Study Limitations and Future Work

The aim of this paper is to propose a framework for improving the efficiency of tendering in the area of public construction contracts in Saudi Arabia. As with all research, there were limitations to the study, for example: •

Investigating in detail the barriers to, and the solutions for, the implementation of eTendering in Saudi Arabia.

•

Testing the proposed model to determine its performance and suitability for construction contract projects in Saudi Arabia.

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R.

C.

(2010).

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of

contractors

classification

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(Oct 10, 2010). Amit, R., and Zott, C. (2001). Value creation in E business. Strategic Management Journal, 22(6 & 7), 493–520. Arslan, G., Tuncan, M., Birgonul, M., and Dikmen, I. (2006). E-bidding proposal preparation system for construction projects. Building and Environment, 41(10), 1406–1413. Betts, M., Black, P., Christensen, S., Dawson, E., Du, R., Duncan, W., et al. (2006). Towards secure and legal e-Tendering. Journal of Information Technology in Construction, 11, 89–102. Boer, L., Harink, J., & Heijboer, G. (2001). A model for assessing the impact of electronic procurement forms. Boer, L., Harink, J., and Heijboer, G. (2001). A model for assessing the impact of electronic procurement forms. 10th International Annual IPSERA Conference, 119–130. BravoSolution

(2011).

Public

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eTendering.

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Table 1. Methodology of data collocation stages

Research Stage

Construction

1st Stage

2nd Stage

Literature review

Interview #2 (eight Questionnaire survey

Engineering (CE)

3rd Stage

one-on-one interviews)

Objectives

Find the link between Factors that can affect Test and examine the IT and CE tendering efficiency

factors

futures

Find

Survey factors Expectations implemented Tendering

more

for relationships between e- the

e-Tendering

components

and

factors. Information

Interview

Technologies (IT)

one-on-one

#1

(two Not applicable

Focus group

interviews) Objectives

Greater understanding Not applicable

Ensure the model can

of how the IT works

be implemented

with

More practical rather

the

proposed

model General outcomes

First model

than theoretical only Second

model

(the Final model

developed model)

Stages investigated

Survey factors

Find stage

the

efficient

Table 2. The proposed relation and tasks when e-Tendering is adapted between the design office and the contractors

Stage

The Design Office

The Clients

The Contractors

First

Working in the first stage

The client prequalified the Under contractors

Second

Upload the outcomes of the

•

first stage

Open the reviews for

•

Upload the outcomes of the

•

second stage

to

the

•

Open the reviews for

Re-post feedback

•

the

•

Design Office Fourth

Upload the outcomes of the

•

third stage

Open the reviews for

•

Provide

all

the

outcomes

of

Adding

their

Reviewing

the

stage

the to

the

•

Design Office Fifth

the

outcomes of third

Re-post feedback

Reviewing

comments

contractors •

their

second stage

the to

Adding comments

contractors •

the

stage

the

Design Office Third

Reviewing

outcomes of first

Re-post feedback

qualifying

process

contractors •

the

tender Hand the document to the

Adding

their

comments •

Reviewing

the

documents with electronic contractor

bids as an official

copy, required numbers of

documents now

copies for the contractors

Table 3. Interview #2 with engineering expert

#

Question

Answer

Frequency

1

Have you heard about e-Tendering?

Yes

6

No

2

2

When you hear the phrase e-Tendering, what Invitations does that is mean for you?

3

6

RFP (request for proposal) 4 Prequalification

8

Document management

6

Submission of the offer

8

In traditional tendering, what areas consume the Receiving bids

1

most time?

6

Analysing bids

Distributing bids to the 4 sub-contractors

and

suppliers Contract

documents 4

Preparation Contractors Invitation 4

Indeed, the research is “Implementing E- Pre-qualification Tendering to Improve the Efficiency of Public Contract

1 3

documents 5

Construction Contract in Saudi Arabia” as the Preparation model shows. So, what area of the e-Tendering process do you think will most affect the efficiency? 5

What is your expectation of implementing the Good improvement

8

e-Tendering process for the Public Construction More transparency

6

Contract in Saudi Arabia?

Fast to take a decision

2

Decreasing the risk for the 1 project 6

So, as a primary expectation, what do you think Cost

−28%

the effect will be on cost and time when using Time

−33%

e-Tendering 7

If you can decide, or have the chance, to use the Use e-Tendering

6

e-Tendering process in your next project, what Use both traditional and e- 3 you will do?

Tendering

Table 4. Focus group analysis

1

Aspect

Themes

Implementation

The e-Tendering model is for the Public Construction Contracts; therefore, using current software is not the perfect solution

2

The e-Tendering model can be implemented with the well-known ERP systems, such as ORACEL or SAP

3

The availability of the current government procurement system procedures makes converting them to e-Tendering much easier and faster

4

Creating an outsourcing semi-government company will make the implementation easier

5

Using expert international systems for e-Tendering will avoid many technical errors

6

Using a create your own e-Tendering system for Saudi Arabia is not practical

7

Having different programs in the e-Tendering system will increase the training costs

8 1

Therefore, there is a need to design a framework or model Configuration

The procedure should be very clear and within the IT data flow diagrams

2

The system should be web-based application

3

The cost and time for building the program is uncertain

Figure Citations

Fig. 1. Overall research methodology Fig. 2. First proposed model Fig. 3. Second proposed model Fig. 4. Involved in construction contract tendering Fig. 5. Most time consuming of the tendering period Fig. 6. Important stage will affect the efficiency in e-Tendering Fig. 7. The important barriers for the implementing Fig. 8. The affected factors when the e-Tendering is implemented Fig. 9. Third proposed model

Fig. 1

Fig. 2 First Stage

Design Office

PPA

PPA The Bidder s

PPA

The Second Stage

Design Office

qualified

PPA

The Bidde PPA

The Third Stage

Design Office

qualified

PPA

The Bidde PPA The

Forth Stage

Design Office

qualified

PPA

The Bidde PPA

PPA Fig. 4

sends

the

Involved in Construction Contract Tendering 80% 70% 60% 50% 40% 30% 20% 10% 0%

Preparing or analysing the prequalification

one once

26%

Preparing or analysing the contract documents 22%

many times

72%

78%

Sending or answering the contract enquires

Analysing the bids or the offers

Making decision for the best offer

31%

26%

24%

66%

71%

72%

Fig. 5

Preparing or analysing the pre-qualification

Most Time Consuming of the Tendering Period

80% 60%

Making decision for the best offer

40%

Preparing or analysing the contract documents

over all

20% Contractors and Private

0%

Analysing the bids or the offers

Sending or answering the contract enquires

Distributing and receiving the bids to/from the subcontractors and suppliers

Government sectors

Engineering and Project Management Offices

Fig. 6

Important Stage Will Affect the Efficiency in E-tendering requalification Other, please specify

Making decision for the winner

Analysing the bids or the offers

Contract documents handiling

Contractors' enquirers

Distributing and receiving the bids to/from the sub-contractors and suppliers

Fig. 7

The Important Barriers for the Implementing Legislation No realised business benefit

4 3

Government procurement system

2

Interoperability concerns

1

Saudi Arabian culture

0

Security of transactions

Upper management support

Lack of technical expertise

Lack of IT infrastructure Costly IT systems

4 Extremely Important 3 Important 2 Good to be Considered 1 Not Important

Fig. 8

The Affected Factors When the E-tendering is Implemented 80%

70%

60%

Axis Title

50%

40%

30%

20%

10%

0%

Tendering Price

Time to source materials

Administration costs

Operating and inventory costs

62%

Staff in procurement department 78%

Reduce

38%

64%

Increase

11%

13%

Communication tools

Enhanced decision making

49%

Gaining competitive advantage 7%

27%

9%

51%

13%

11%

62%

38%

62%

Fig. 9