Introducing management control systems for construction projects

Abstract

The construction industry plays an important role in the overall economy, social growth and development by its contribution to gross domestic product and employment. It is estimated that during the Sixth plan, the industry might have work potential of about Rs. 47000 crores in major sectors against an outlay of Rs. 82000 crores for the same sectors. The industry employed 11.83 lakhs of people in 1982 and the estimates indicate that above work potential might have generated 14000 million mandays of skilled and semiskilled labour and 6110 million mandays of managerial and technical staff. At the same time there is a growing concern about time and cost overruns on several projects already set up or being set up in India. Construction is one of the major phases of a project. Several reasons for such overruns are attributed to the nature of the construction industry. It is found that this industry is underdeveloped both in terms of trained manpower and essential equipment. Very few construction firms use techniques like networks for planning and delegation of authority at different levels leading to dilution of responsibility. Such dilution ultimately results in delayed during execution of projects. The objectives of the present study, therefore, were the followings: (1) To design a management control system for construction projects on the basis of general framework of control system and techniques of networks. (2) To identify problems of implementing a control system in a large construction firm and suggest solutions to such problems. (3) To test whether or not the organizational change arising due to implementing the new system is helpful to the organization, and (4) To develop measures of effectiveness of the control system. Methodology A large public limited construction firm was selected for the purpose of this study. Date for testing various hypotheses was collected through questionnaires. Pearson’s product moment correlation was used to identify the relationships. Step-regression was used to find out importance of various independent variables in explaining dependent variables. Major Findings (1) The Design and implementation of the management control system on the basis of general framework and techniques of networks were perceived to be leading to improved performance during execution of the project. (2) Implementation of the control system leads to changes in input information available to decision makers, changes in perspectives of decision-makers, and changes in decision process. (3) Perception of pay offs and increased level of communication are more important in affecting decision process. (4) The new system was perceived to be relevant, and people working with it showed higher commitment to and positive attitude towards the system. (5) Relevance of the system is associated with increased with increased level of communication, increased understanding of activities and usefulness of the system. (6) Commitment to the system is associated with felt-need for the system and commitment to the organization. (7) Attitude towards the system is associated with understanding of objectives, purposes and process of the control system. (8) Inspite of diverse requirements of clients and high competition for skilled manpower, R&D activities in construction methods are moderate. (9) The use of mathematical techniques in inventory control and use of computers in the industry are low. (10) Network techniques in planning and control of activities are used moderately.