The impact of technical standards on international project performance: Chinese contractors' experience

https://doi.org/10.1016/j.ijproman.2017.09.002Get rights and content

Highlights

  • Chinese contractors perceive significant difficulties in implementing foreign standards.

  • They perceive poorer cost and time performances when foreign standards are adopted.

  • They perceive poorer cost and time performances particularly in Middle Eastern countries.

  • Strategies of learning, cooperation and talent training are discussed.

Abstract

In international construction, Chinese contractors encounter an ongoing challenge to achieve expected project cost and time performances. This is often attributed to the use of various foreign standards, which are substantially different from Chinese standards. There are limited studies that investigate the reasons why the difference in standards are creating this challenge. This study explores the reason for the difficulties by using a mixed method research with survey data collected from construction companies involving 170 experienced managers who were involved in 115 international projects. It also involved interviews with an additional 76 managers. The findings confirm that Chinese contractors perceived significant difficulties implementing international projects due to the lack of knowledge of the foreign standards. It is concluded that an enhanced understanding of foreign standards, particularly in Middle Eastern countries, will improve cost and time performances in international projects. Strategies of active learning, inter-organizational cooperation and adjustment of talent training mode are suggested for the international contractors to cope with the issue of standards implementation.

Introduction

Over the last decade, global contractors have greatly increased their involvement and contracting revenue (i.e. from $189.4 billion in 2005 to $521.5 billion in 2014) in international construction markets (Reina and Tulacz, 2015). Chinese contractors therein are playing an increasingly important role and accounted for 17.2% of the international market revenue in 2014, acquiring a greater share than any other country's international contractors (Reina and Tulacz, 2015). According to National Bureau of Statistics of China (2016), Chinese contractors achieved $210 billion overseas contract value in 2015, with an average annual growth rate of 12.3% in the last decade. They have worldwide business across Asia (44.8%), Africa (35.6%), Latin America (10.6%), Europe (5.7%), North America (1.8%) and Oceanic and Pacific Islands (1.4%) according to their reported 2015 turnover (National Bureau of Statistics of China, 2016).

Unlike domestic projects, international projects generally involve participants with different backgrounds and are delivered in relatively unfamiliar locations (Javernick-Will and Scott, 2010). International contractors have to deal with challenges of institutional differences with regards to different regulative, normative and cultural-cognitive institutions in host countries compared with those in domestic markets (Javernick-Will and Scott, 2010, Orr and Scott, 2008). These differences generally cause additional transaction costs and misunderstandings between project participants, which may further lead to time delay and cost overrun (Mahalingam and Levitt, 2007). Many studies have investigated the issue of institutional differences in international project delivery. For example, Chua et al. (2003) identified five risk factors, i.e. business environment discontinuity, regulation obstacles, contractual issues, differences in standards and cultural differences, that can lead to cost overrun in the East Asian construction industry. Han et al. (2007) emphasized the importance of considering market differences and collecting information of host countries from the bidding stage to achieve good profit in international construction projects. Targeting legal differences, Ling and Low (2007) specifically investigated the legal risks that foreign firms encounter in China. Low and Shi (2001) identified cultural differences between Singapore and China associated with the impact of cross-cultural differences on Singaporean construction firms' project effectiveness in China.

As for Chinese international contractors, institutional differences remain a challenge, particularly differences in technical standards (Lu et al., 2009). In different regions or countries, the technical standards, e.g., design and construction standards, can vary significantly (Lee et al., 2016, Kwon and Kareem, 2013). Although scholars have noticed the issue of difference in standards in international project delivery (Javernick-Will and Scott, 2010, Lu et al., 2009, Chua et al., 2003), there is a lack of solid and specific investigation about international contractors' perceptions of standards difference. It is unclear whether the standards difference can affect the overall project performance of international contractors. Based on an empirical survey from Chinese contractors, this study aims to explore the difficulty level of standards implementation perceived by the contractors and the effect of use of standards on overall project performance. Project performances by using Chinese and foreign standards were analyzed by adopting a comparative test. Project performances by using foreign standards were further compared between different regions and different industry sectors. Current views are considered in the following literature review. This is followed in the paper by the research questions and hypotheses, research methodology and results.

Technical standards, establishing the engineering and technical requirements for processes, procedures and methods, are important parts of knowledge about local institutions that contractors should be familiar with in international business (Yates and Aniftos, 1997, Javernick-Will and Scott, 2010). Technical standards from different regions can be substantially different, as the development of technical standards is mostly promoted in a specific country or based on a regional perspective and corresponds to local environmental, technical, legal, cultural and beneficial features (Lane, 1997, Yates and Aniftos, 1997, Geels, 2004, Blayse and Manley, 2004). For example, Lee et al. (2016) pointed out that the US standards about wind loads for the design of pipe-rack structures respectively display about 15% and 25% smaller than the Korean and Euro standards. As with Chinese contractors going globally, more and more Chinese experts and scholars have noticed the difference between Chinese standards and foreign standards, including design standards, construction standards, standards for building materials and components and standards for mechanical and electrical equipment (Gu et al., 2014, Qu, 2013, Tao, 2016, Yan, 2012, Xue, 2006). Table 1 details some examples of the more commonly required technical standards in the construction industry.

Chinese standards were established based on former Soviet Union construction system and can be rather different with the other widely used standards in the world, e.g., American standards, British standards and French standards (Lu et al., 2009). The establishment of Chinese standards system was dominated by government with the characteristics of a planned economy. For example, each sector (e.g., houses, roads, railway, hydraulic engineering, etc.) of the civil engineering industry in China has their own standards for concrete structure design and construction. In contrast, the widely used foreign standards systems such as American and European standards are developed and promoted mainly by industrial force with the principle of voluntariness. This helps western standards such as European concrete standards and American Concrete Institute standards as they consider a wide range of applications and show stronger versatility (Yan, 2012). The requirements of procedures, methods and value of specific parameters between Chinese standards and foreign standards can also be significantly different. For example, American and Chinese standards for design of hydraulic concrete structures (see examples in Table 1) are different in partial coefficients for structural design, design load combinations, minimum requirements of concrete strength, and minimum ratio of reinforcement. The road design standards from America and China (see examples in Table 1) are different in road classification, design vehicle dimensions, consideration of human factor, consideration of traffic volumes and traffic characteristics and sight distances. American concrete testing uses cylindrical or beam specimens, while Chinese concrete testing uses cubic or cuboid specimens. American and Chinese standards for concrete construction (see examples in Table 1) are also different in preparation for concrete placement, batching methods, transportation limits, compaction, curing and protection of works. Chinese and foreign standards for materials and equipment (see examples in Table 1), which are related to purchasing activities in international projects, can also be different in the likes of: product classification, quality requirements and testing methods.

The impact of technical standards on companies' international business can be complex. Mangelsdorf (2011) found that pure Chinese standards have negative influences while Chinese international standards have positive influences on European exports. This finding indicates that the effect of standards on international trade is related to the uniformity of domestic and foreign standards. The difference in technical standards can play a role of technical barriers for firms' international business. Chen et al. (2006) also found that technical standards in developed countries reduce companies' export in developing countries. The difference in standards can raise the cost of companies' export activities and reduce the likelihood of exporters' market entry (Chen et al., 2006). However, Marette and Beghin (2010) pointed out that the restriction of technical standards on foreign firms' international business also depend on the companies' own efficiency or capability. When foreign companies are more capable and efficient, the protectionism of standards will not exist and the difference in standards will not raise additional cost for them (Marette and Beghin, 2010).

Maskus et al. (2000) claimed that there was a lack of studies on how companies in developing counties respond to the difference between domestic and foreign standards when entering international markets. This research gap still exists in the international construction industry. As Chinese contractors are playing a significant role in international construction markets, their perceptions of the difference in standards and the extent to which their overseas project implementation can be affected by the standards difference are still unclear.

To understand the influence of standards implementation on project performance of Chinese international contractors, this study needs to answer the following questions:

  • What are Chinese contractors' perceptions of the difference in standards when delivering international projects? Do they perceive significant difference in implementing foreign standards and Chinese standards in overseas projects?

  • What are Chinese contractors' overall project performances? Does the adoption of standards affect Chinese international contractors' overall project performances?

  • When using foreign standards, is there difference about Chinese international contractors' overall project performances in different regions?

  • When using foreign standards, is there difference about Chinese international contractors' overall project performances for different industry sectors?

Foreign standards can be substantially different from Chinese standards not only in specific requirements but also in the underlying philosophical approach. Thus, it can be very difficult for Chinese contractors to adapt to the implementation of foreign standards. Once the difference in standards has been identified, contractors require additional resources to address the differences yet they still often encounter issues such as: errors requiring rework, delays as staff learn new practices and adapt to unfamiliar standards. These additional inputs and encountered issues can impede the achievement of overall project performances. Although Chinese contractors have strong commercial backing and enjoy an advantage of relatively cost effective workforce and materials, they are criticized for their poor efficiency of project management (Lu et al., 2009). Chinese contractors may not be competent enough to overcome the challenge of difference in standards by adjusting their management in a timely way. Thus, two hypotheses are proposed.

H1

When delivering international projects, Chinese contractors perceive greater challenges in the implementation of the foreign standards in comparison to the use of Chinese standards, in the areas of (a) design standards; (b) construction standards; (c) standards for building materials and components and (d) standards for mechanical and electrical equipment.

H2

The overall project performances (a) cost, (b) quality and (c) time of Chinese international contractors using Chinese standards are better than those using the foreign standards.

Apart from technical standards, other factors such as natural environment, social culture, political and economic conditions can also affect project delivery. In different regions, project performances of Chinese contractors can be different. In addition, as different industry sectors have different technical and managerial requirements, contractors' project performances for different sectors can be different. Thus, another two hypotheses were proposed.

H3

When using foreign standards, the overall project performances (a) cost, (b) quality and (c) time of Chinese international contractors are regionally dependent, considering (i) Southeast Asia vs. Sub-Sahara Africa; (ii) Southeast Asia vs. Greater Middle East and (iii) Sub-Sahara Africa vs. Greater Middle East.

H4

When using foreign standards, the overall project performances (a) cost, (b) quality and (c) time of Chinese international contractors are dependent on the types of projects, considering power projects vs. transport and general building projects in the regions of (i) Southeast Asia; (ii) Sub-Sahara Africa and (iii) Greater Middle East.

Section snippets

Research methodology

The aim of this study is to investigate international contractors' perceptions of standards difference and to analyze its effect on overall project performance. To test the hypotheses, a mixed method combining quantitative and qualitative approaches was used (Creswell, 2013). The quantitative analysis using comparative tests presents the overall outcomes of Chinese contractors' standards implementation in overseas market. The qualitative analysis, done using interviews helps understand their

Survey results

The distribution of standards used in international projects of Chinese contractors from the survey data was presented in Table 3. Comparison of Chinese contractors' experience on implementation of foreign standards and Chinese standards (i.e. difficulty level of standards implementation and overall project performance) was conducted with the results in Fig. 1. The results confirm that when adopting foreign standards, Chinese contractors encountered more difficulty and obtained significant

Discussion

Implementation of technical standards is critical for the cost, time and quality performance of construction projects. Technical standards are closely connected with core project activities including design, construction and equipment and materials purchasing. Different technical standards can have different requirements of design modes, construction methods, and types and quality of equipment and materials, which further determine project cost, schedule and quality. Behind the explicit

Conclusions

As existing studies lack research on the influence of difference in technical standards on international project implementation, this paper conducts a comprehensive investigation of the issue of technical standards in international projects based on data collected from Chinese contractors. The research questions and hypotheses in Section 1.3 are investigated and tested with the findings as follows.

  • The study confirms that Chinese contractors perceived significant difference between foreign

Conflict of interest

There is no conflict of interest.

Acknowledgements

We would like to thank the National Natural Science Foundation of China (Grant Nos. 51379104, 51579135, 51079070), the State Key Laboratory of Hydroscience and Engineering (Grant Nos. 2015-KY-5 and 2013-KY-5) and Major Science and Technology Research Project of Power China (Grant Nos. DJ-ZDZX-2015-01-02, DJ-ZDZX-2015-01-07). Thanks are also expressed to the University of Melbourne (Grant No. 121914) for hosting a visiting scholar. Special thanks are also given to the respondents for their

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