Using AHP for Contractor Selection: A Construction Management Report

This report delves into the application of the Analytical Hierarchy Process (AHP) for selecting contractors in construction projects. It begins by outlining the research aim, objectives, and problem statement, emphasizing the importance of effective contractor selection for project success. The report provides a comprehensive literature review, exploring the impact of selection procedures on project performance and the advantages of AHP. The methodology section details the application of AHP, including the development of criteria, sub-criteria, and the use of pairwise comparison matrices. Results and findings are presented, showcasing how AHP can assist in prequalifying contractors. The report concludes with recommendations for implementing AHP in construction and provides references for further study. The report highlights the benefits of AHP in improving decision-making, ensuring quality outcomes, and addressing the complexities of contractor selection within the construction industry.

Assignment on construction management
2017

Analytical Hierarchical process
Contents
1. Introduction:........................................................................................................................2
Research Aim:........................................................................................................................3
Research objective:.................................................................................................................3
Problem Statement..................................................................................................................3
Background.............................................................................................................................4
2. Literature Review:..............................................................................................................6
Impact of selection procedure undertaken for the contractor on the performance of the
project:..................................................................................................................................12
3. Research methodology:.....................................................................................................14
Application of AHP on the Hypothetical case.....................................................................17
4. Results and findings:.........................................................................................................27
5. Conclusion and Recommendation:...................................................................................38
6. References:........................................................................................................................39
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Analytical Hierarchical process
Title: Application of the AHP in prequalifying contractors to deliver construction project
1. Introduction:
The successful construction of the project depends on the expertize contractor for completing
the activities. The competitive advantage can be gained with the effective selection of the
contractors which helps in bringing proficiency in the developed projects. The failure of the
construction project is due to the unawareness of the risks associated with the project
activities. The good quality construction output can be achieved with the implementation of
the selection criteria for contractor to complete the construction project undertaken. It has
been seen that the selection criteria is mostly based on the lowest bid encountered by the
contractor but this affect the quality of the construction project in meeting the requirement
proposed by the user. The Alternative hierarchical process is the methodology which works
best in selecting the contractor for providing good quality outcome. This system designed the
alternative action plan for encouraging the decision making quality of the project manager by
providing relevant information about the different contractors to him in the synchronized
manner. The effectiveness of the AHP methodology can be improved by setting the relative
priorities to the techniques used. The aim of this methodology is the quantification of the
priorities for setting the ratio scale to enhance the decision making capabilities of the project
manager. The systematic arrangement of the tangible and intangible components associated
with the project helps in taking the right decision for the betterment of the construction
project. The comparison in the contractors helps in identifying the criteria which helps in
selecting the best suitable contractor for undertaking the construction activities within the
baseline of the project (Lin, 2004). The development of the multiple decision criteria helps in
resolving the issues associated with the complexity of the project. The AHP methodology
helps in resolving the prequalification problem associated with the criteria used for selection
of the contractor. The hierarchical structure is prepared for resolving the issues associated
with the overall complexity of the project. The sub-criteria are developed of the decision
making criteria undertaken for selecting the best contractor for the effectiveness of the work.
The judgement process can be easily enhanced with the delivery of relevant information
about the selected contractor which are taken in the study. The setting of the priority is the
major step of the AHP methodology which helps in development of the comparison matrix
for predicting the highest value provided to the contractor (Nikolic, 2015). The pairwise
methodology helps in clear demonstration of the facts and figures associated with the
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Analytical Hierarchical process
working culture of the contractor. The non-linear approach should be undertaken for
resolving the proportionality and changes associate with the relationship between the
elements chosen for preparing research study of the contractor (Pandit, 2012). The project
can be effectively completed with the efficient and expert contractor chosen for completing
the construction activities to give the desired output as asked by the consumer in their
requirement specification plan. The AHP methodology is useful for the project manager to
take accurate decision in selecting the right contractor for continuing the project activities.
The facts and figures of different contractors are collected for developing the comparison
table to make easy selection of the contractor. The data collected about the contractor in the
sector of past performance measurement, bidding, experience in the field of contract, efficient
utilization of the resources from the past history, distribution of the work load among the
participating units, and safety procedures utilized for completing the construction activities of
the project to deliver the quality outcome to the user. In this paper we are going to focus on
the application of the AHP methodology in the selection of the contractor.
Research Aim:
The aim of the research is to focus on the criteria for selecting the contractor to carry out the
related construction activities by using the methodology of Analytical hierarchy process.
Research objective:
The purpose of this paper is to present clear perspective view of Analytical hierarchy process
and how it is used in the construction field. We are going to focus on the procedure used for
implementing the AHP method and how it is conveniently used for setting the criteria for
prequalification and associated priority. The objective of the paper is to suggest use of AHP
methodology in different areas of construction field.
Problem Statement
The final selection of the contractor is the difficult job for the project manager for the smooth
flowing of the construction activities. The prequalification model helps in reviewing the
existing practices undertaken for making the selection on the basis of hierarchical process.
The AHP process is used for resolving the tender price and quality of the selected contractor.
The research is focusing on the AHP methodology for taking the decision to improve the
existing condition of the construction project.
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Analytical Hierarchical process
Background
In the previous work, we have analysed the advantage of using AHP methodology in
developing the selection criteria for the contractor to plan the activities according to the
requirement of the construction project. The decision making issues and challenges can be
resolved with the use of AHP model for making right choice of the contractor for
successfully completing the project. The scaling tools are used for managing the priority to
the qualified level of the contractor. The significance of the AHP process is to provide
structuring to the decision making process undertaken by the project manager. The criteria
should be developed for comparing the excellence of the contractor associated with the
working process of the construction project. The criteria which should be followed for
managing the hierarchy structure is based on financial capability, performance of the past
history, contractor past experience portfolio, resources and material required by the
contractor, management and distribution of the workload, and safety procedure used for the
development of performance. The high quality of the project construction outcome can be
achieved for fetching the goal of the project. The job of constructing the project should be
given in the right hand for completing the project with efficiency. The investigation and the
assessment are the basic techniques which are used for management of the prequalification
criteria. The examination of the processes helps in examining the performance of the
supplier. The suitability and the sustainability are the pillar of the selection procedure
undertaken for making the choice of the contractor. The tender is the basic platform for
knowing the position of the contractor. The capability of managing the resource is prior
important for the performance mesasurement of the contractor. The use of equipment helps in
determining the flow of construction activities to provide desired output to the customers.
The tender should be filled by the approved contractor for the bidding process. The decision
making process for selecting the right contractor according to the requirement of the
construction project is depends upon the analysis of the multiple option available for defining
the activities.
 Problem statement: The project manager should be clear about the requirement of the
undertaken project by analysing the requirement specification plan specified by the
stakeholders. The objective should be clearly defined to the project manager for the
selection of the contractor. The problem statement should be defined in brief to take
the clear advantage of the previous work done. The selection of the contractor
depends on the development of the action plan.
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Analytical Hierarchical process
 Data collection: The relevant information about the contractor should be collected on
the basis of criteria set for the effective selection of the contractor. The analysis of the
research result and the data collected should be done accurately. The selection of the
contractor is depends upon the information associated with the working procedure and
methodologies used in carrying over the construction activities. The areas which
should be covered for managing the relevant information associated with the work
done, position of the job criteria, previous work done by the contractor, and
assessment of the interview.
 Planning of the alternatives: The alternatives are the basic need for determining the
efficiency of the construction project. The project manager should take active decision
in providing the better alternatives in the emergency situation. The hierarchy of the
decision is based on the coordination between the working activities. The
differentiation helps in maintaining the hypothesized relationship between the
participating units. The criteria and sub-criteria are used for selecting the right choice
for the working construction project.
 Weightage associated with the alternative processes: The list of alternatives should be
create for assigning the weightage to the alternatives for determining the efficiency of
the project processes. The pair wise comparison matrix is used for determining the
importance of the contractor by taking criteria and sub-criteria under consideration.
 Selection of the best alternative: The best candidate should be selected for completing
the construction project which is equipped with the high quality tools and
technologies expertize workers and labours, availability of good quality material and
resources, management of services provided, adequate of funds associated with the
completion of the construction project, and others. The consistency of the alternatives
can be determined with the calculation of the consistency ratio, calculation of the
eigen vector, and determining the consistency index.
 Solution and selection: The selection of the contractor is associated with the signing
of the contract for completing the required project within the approved baseline and
cost. The milestone of the project should be made clearly specified in the contract.
 Monitoring of the progress: The laying down of the construction activities should be
monitored periodically for determining the connectivity between the construction
activities, availability of resources, and the completion of activities according to the
requirement specified in the action plan.
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Analytical Hierarchical process
 Reviewing of the planning activities: The activities should be changed according to
the changing demand of the customer to provide good quality product at the end of
the construction activities. The intermediate results should be reviewed periodically
for the measurement of the direction in achieving the desired result according to the
demand placed by the stakeholder.
2. Literature Review:
The process of AHP plays a vital role in the selection procedure used for determining the
criteria used for making choice of the appropriate contractor. The development of the
analytical hierarchy depends on the data collected through the process of questionnaire and
survey. The use of multi attribute value is used in the AHP methodology is used for
maintaining the multi criteria alternatives for resolving the complexity of the enterprise
(Harbi, 1998). From the research we have analysed that the following steps are followed in
the deployment of the AHP methodology for setting the criteria for supplier selection.
 The first step focuses on the determining the goal of the construction project
 The hierarchy should be developed for maintaining the intermediate result for
generating the alternatives for achieving the goal of setting selection criteria.
 The comparison matrix should be prepared for maintaining the measurement of the
relative measurement of the scale (Jiya, 2012).
 The set of matrix helps in enhancing the decision making capability of the project
manager to take an effective decision for selecting the right contractor according to
the requirement of the construction project (Vidal, 2013).
 The weight is allocated to the hierarchical synthesis table for lower down the sum of
the criteria.
 The consistency should be maintained for managing the matrix for pair wise
comparison table. The consistency of the judgement helps in checking consistency
ratio for the whole scenario (Balubaid, 2015). The reviewing of the processes helps in
managing the judgement of the comparison matrix.
The following table shows the numerical rating of the AHP preferences used in the
development of the pair wise comparison matrix.
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Analytical Hierarchical process
Numerical rating Preference related to the verbal judgement
9 Mostly preferred
8 It is in between to very strongly and
extremely
7 Preferred very strongly
6 It is in between strongly and very strongly
5 It is mostly preferred strongly
4 It is in between moderate and strongly
3 It is moderately preferred
2 It is in between equally and moderately
1 It is equally preferred
The manual implementation of the step followed in the AHP process helps in generating
numerous alternatives in the benefit of the construction project for selecting the contractor
(Tiwari, 2014). The capability of the judgement of the group members helps creating the
value chain of hierarchy for enhancing the quality of decision for the betterment of the
construction activities (Fong, 2000). The issues associated with the complexity of the
processes can be effectively developed for managing chaos in the working structure of the
project. The decision of the organization depends on the communication platform undertaken
for taking the effective and efficient judgement (Brown, 2008). The strategies should be used
for enabling the decision making capabilities for influencing the processes used for
determining the pre-qualification of the contractors. The following table shows the criteria
and sub-criteria used for analysing the prequalification for the setting the selection procedures
for the contractor:
Activities for pre-
qualification
Sub-activities Description
Financial situation of the
contractor
Financial statement
Financial rating of the
contractor by utilizing the
past history
Turnover of the company
Calculation of the leveraging
ratio
It helps in analysing the
financial stability of the
participating contractor so
that the construction
activities can be performed
efficiently.
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Analytical Hierarchical process
Calculation of the
profitability ratio
Ability of managing
activities
Organization of activities
Organization of the
knowledge
Deployment of the quality
program
Deployment of the project
management activities
Risk identification and
mitigation program
It focuses on the contractor
performance in the field of
management of activities for
the effective utilization of the
resources for achieving
quality product at the end of
the completion of the project.
Use of technical equipment
and innovative procedures
Skilled and expertise labour
Predicting the experience of
the employees
Use of experienced and
expertise of the employees in
the effective manner
Knowledge of the contractor
in the field of construction
activities
Work done in the past
Efficiency of the project in
the past
The past working procedure
should be undertaken for
analysing the working and
the technical capability of the
contractor for managing the
flow of construction program
Experience Completion of project done
in the history
Variation in the size of the
project done
Completion of the project in
time
Management of the chaos
and conflicts
Working capability of
managing the project
The variation in the project
done in the history helps in
taking the current project
according to the requirement
specification plan
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Analytical Hierarchical process
Undertaking of the
communication procedure
Reputation and goodwill of
the company
The good and healthy
relationship should be
developed between the
contractor and the sub-
contractor
It helps in raising the
satisfaction and trust of the
consumers. The work in
progress can be efficiently
maintained.
Effective utilization of the
physical and human resource
Distribution of equipment
Management of resources
Management of employees
Direct and indirect worker
The resources should be
distributed according to the
requirement of the
construction plan
Safety measures Managing safety measures
Managing the records and
documentation of safety
Deployment of the insurance
policy
The administration of the
safety methods helps in
insuring the life of the
working employees.
Quality control procedures Deployment of the quality
identification
Deployment of the quality
control
Deployment of the quality
assurance procedure
Response associated with the
complaints
The privilege is given on the
analysis of the quality control
methodology adopted by the
contractor for meeting the
selection criteria set for the
contractor
Environmental factor Activities related with the
disposal of the waste
associated with the
construction program
Recycling of the waste
The recycling of the waste
can helps in attracting the
project manager to give his
decision in the favour of the
contractor.
Planning methodology Maintenance of the
construction site
Organization of the quality
specification
The contractor should focus
on setting the tender price of
the project.
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Analytical Hierarchical process
Setting of the tender price
The choice of the project manager helps in resolving the complexity and the potential
problems associated with the working structure of the project. The arrangement of the group
session helps in examining the complex issues resolved with the AHP process. The
judgement helps in providing equal weightage to the participating units for the selection of
the contractor (Vavatsikos, 2007). The just in time approach is used for maintaining the
material supply according to the demand raised by the construction site. The productivity of
the working process can be enhanced with the active utilization of resources. The
development of the hierarchical structure helps in providing the structured format for
mentioning the criteria which is used for making the best choice among the list of contractor
who participates in the bidding process. The following table should be taken under
consideration for analysing the real situation of the contractor for managing the supply of the
material on the site location.
Decision criteria Factors Measurement of the
performance
List of alternatives
Selection of the
contractor for
carrying out
construction
activities
Location of the
contractor
Distance of the site
location
Availability of
material
Availability of funds
Past performance of
the contractor
Shortcomings of the
project completion
Inventory
management system
Quality of work done
Quality and the
quantity of the
material used
Local contractors
Non-local contractor
Builders
Vendors
Purchasing of the
material
Quality and quantity
of the material used
Purchasing of the
material according to
the project schedule
Uncertainty
associated with the
Shortcomings of the
project activities
Inventory
management system
Direct and indirect
Advanced supply for
three months
Advanced supply for
1 month
Daily supply of the
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Analytical Hierarchical process
scheduling of the
project activities
Data warehouse
capacity
Distance between
contractor and site
location
Availability of the
material
cost incurred raw material
Quantity of the
material purchased
Quality and quantity
of the material used
Purchasing of the
material according to
the project schedule
Uncertainty
associated with the
scheduling of the
project activities
Data warehouse
capacity
Distance between
contractor and site
location
Availability of the
material
Adequate
Shortage of the raw
material
Accuracy in
estimation
Less than estimation
More than estimation
The methodology of the AHP is based on the accumulation of multi-criteria used for
analysing the complexity of the problem area to take corrective action with regards to select
the right contractor for the project completion. The structural approach should be followed
for the implementation of analytical hierarchical process. It is comprised of four activities
which are categorised as defining of the problem area, comparing the importance of matrices
for the development of the building, accumulation of weights with the processes, and lastly
analysis of the processes and outcome (Sipahi, 2014). The pairwise matrix should be
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