Selection of Contractors For A Housing Development Project in India by Using An Integrated Model

International Journal of Sustainable Construction Engineering & Technology (ISSN: 2180-3242) Vol
9, No 1, 2018
Selection of Contractors for a Housing Development Project in India by

using an Integrated Model
Rajaprasad, S.V.S.1
1
National Institute of Construction Management and Research (NICMAR), Hyderabad, India
*Corresponding E-mail: [email protected]
Received 22 January 2018; Revised 14 May 2018; Accepted 29 May 2018
DOI: https://10.30880/ijscet.2018.09.01.005
Abstract
The Indian construction industry forms an integral part of the economy and a conduit for a substantial part of its
development investment, is poised for growth on account of urbanization, economic development and peoples
rising expectations for improved quality of living. Housing construction is usually executed or coordinated by
contractors who specialize in one type of construction such as residential or commercial building. The completion
of housing projects within the projected time span has always been the most challenging task for the construction
organizations and it is found that many construction projects have been unsuccessful in delivering the projects at
time, cost and quality which the clients and their consultants had perceived before the starting of the project and
thus, it is important for the management to efficiently design a plan of action to achieve the goals and requirements.
To accomplish the requirements of construction planning, identifying and selection of an appropriate contractor
for housing development is a crucial decision making process. The study presented a method for solving a
contractor selection problem in an Indian housing development project using combination of analytic hierarchy
process and zeros one integer linear programming for allocating housing construction works to contractors. The
proposed integrated model will provide an encouraging result to select a contractor for a particular type of housing
construction to fulfil the quality requirements and completion of project on time.
Keywords: Contractor, Criteria, Analytic hierarchy process, Zero one integer linear programming
1.0 Introduction
To meet the challenges of rapid urbanization, India needs well-performing cities and the
integrated housing development will be the key. Private sector participation in housing is necessary to
bridge the gap between demand and supply. The real estate sector is one of the most globally recognised
sectors [1]. In India, real estate is the second largest employer after agriculture and is slated to grow at
30 per cent over the next decade [2]. The real estate sector comprises four sub sectors - housing, retail,
hospitality, and commercial. The growth of this sector is well complemented by the growth of the
corporate environment and the demand for office space as well as urban and semi-urban
accommodations. Real Estate sector accounts for nearly 5 percent of the country’s GDP [3]. The housing
industry of India is one of the fastest growing sectors. A large population base, rising income level and
rapid urbanization leads to growth in this sector.
To meet the requirements housing construction in India, contractors should be competent in

applying planned and scheduled tasks into physical actions, as well as effectively communicate with
their in-site team in order to be able to follow-up the implementation of tasks on site according to the
original plan. Moreover, the contractors should be able to adequately manage interferences among
materials’ delivery schedules and master the work schedule as not to allow for any detraction from the
original plans. In this regard, contractors should utilise monitoring and optimisation tools to precisely
identify any deviations in scheduling in order to rapidly address such deviations to other stakeholders
for necessary corrective action with no cost implications. Today there are increasing disputes and
Published by: Universiti Tun Hussein Onn Malaysia(UTHM) and Concrete Society of Malaysia (CSM) 58
http://penerbit.uthm.edu.my/ojs/index.php/IJSCET
9, No 1, 2018
differences arising out of contractual relations between contractors and owners whether owners are
individual, firms or public. Construction contracts have very sensitive arrangement of weaving many
different agencies to perform various obligations to execute the job. Contractors’ effectiveness in
following up and controlling on-site teams and in resolving their related conflicts affecting schedule
performance, as well as their competence in incorporating and managing the work schedules of
subcontractors and suppliers (within the main project schedule), are also seen as important
considerations. The competence of contractors in providing a high level of reliable and detailed inputs
and deliverables in the early planning stages is crucial for the implementation of project planning in
construction projects [4]. Understanding of performance aspects and management roles of project
contractors is crucial for the best likelihoods of having more achievable outcomes from the execution
of construction projects [5].
Now a day’s housing projects are getting more complex. Because of that, the contractors that
build these projects have to meet specific demands. Nowadays, the most important criterion for
tendering in the Indian construction industry is price. This means that the contractor that offers the
lowest price gets the work. Lowest price tendering might not be the best way to select a contractor.
Accepting the lowest price is the basic cause of the project completion problems because very often
lowering the price means lowering the quality and it is especially important to properly evaluate the
contactor’s capabilities. [6]. The opportunistic behaviour of contractors in low-bids models has been
detected from many researchers in various countries and many studies of low bids have found that for
the best economic results and good quality, the lowest bid is not considered sufficient to ensure the
desired results [7].
It would be better to select a contractor and build in a team where the participants can trust each
other, and work for the same goal leading to better working situations and more value for every partner
in the team. One of the most important steps in every construction process is the selection of a contractor.
The style of selection will vary according to needs, environment and contractual situations. Most of the
clients are still following adhoc procedures which does not give contractors confidence that the system
is sufficiently well considered. As a result, the current practice of selection does not guarantee the
selection of able contractors. In the construction industry, experienced contactor is a strong requirement
for the project’s life. Thus, choosing the right contractor is one of the most key decisions in any project.
Selection of the best contractor is a vital process in construction projects. Many factors that must be
taken into consideration when selecting contractors. Improper selection of contractors might lead to
poor quality of work, and delay in project duration. A contractor selection problem is a multi-criteria
decision making process. The main objective of the study to select the appropriate contractors for
different housing projects by using the analytic hierarchy process and zero one integer linear
programming by considering a case study in India.
2.0 Literature Review
Project planning needs to be considered as a key in determining the overall success of a project
rather than as a preliminary function used for developing project schedules and resource plans. The
results of planning should be fully integrated and communicated to project contractors. [8]. The purpose
of construction project management is to plan, coordinate and control the application of project
objectives in the most effective way according to stakeholders’ needs[9] It involves many processes and
sub-processes and includes the definition of project scope, cost estimating, roles and responsibilities of
the project team, project stakeholder management, as well as the utilization of planning and control
methods and tools. These require knowledge of the fundamentals of project management in order to
develop successful project plans and schedules [10] which are necessary for the delivery of the project
to time, cost and quality objectives [11, 12].Where there is a lack of knowledge, the application of
project management concepts will result in incomplete project plans and, hence, loss of project
performance [13].
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The roles of particular project stakeholders (i.e. owners, contractors, and site-based planners)
in the development and control of construction planning should be clearly defined and coordinated for
a successful project [4]. A number of these research studies have highlighted some initiatives regarding
the assessment of potential effects of various factors, pertaining to the main participants including
contractors in a project, on the success of project performance [14 -18].A questionnaire comprising of
46 factors was analyzed statistically to select subcontractors in Egyptian construction projects revealed
that the flexibility and cooperation when resolving delays and reputation are the vital [19]. In the
construction field, choosing an appropriate contractor is of key importance to quality. A mechanism was
proposed which accounts for the assessment of the subcontractor not only during the construction stage
of a project but also after construction in Poland.[20] In construction projects, especially in building
projects, approximately 90% of the construction work is carried out by subcontractors. There are several
reasons behind this high level of subcontracting, such as need for expertise in certain work packages,
need for skilled labor to carry out several construction activities, utilization of specialized subcontractors
for shortening time, increasing quality and decreasing cost, and sharing risks with subcontractors to
protect themselves from uncertainties and unstable conditions of the market[21-25]. Selecting the right
subcontractor for the right job is critical for not only for the successful completion of the project in
question but also for the reputation and business continuity of the general contractor[26] In the literature,
there are number of studies that focus on contractor selection practices in the construction industry.
These studies can mainly be categorized into two groups, the studies that aim to identify the contractor
selection criteria and their importance levels and the tools, techniques and/or methodologies for
selection [25]. A study was conducted in Turkey to develop a multi objective optimization model to
assist contractors in selecting the most appropriate subcontractors for all work packages based on time-
cost-quality performances using the genetic algorithm [27]. Selecting contractors in the Netherlands is
often done by the criterion of lowest price. This leads to a lack of innovation and a loss of quality in the
construction industry and suggested twelve criteria for the selection of contractors in the Dutch
construction industry [28]. Project construction must be managed in an effective manner. The selection
of a proper construction contractor increases chances of successful completion of a construction project.
It can also fulfil the client goals, and keep the schedule of the cost, time and quality. So it is extremely
critical to select an appropriate contractor in the process of construction management[5].Finding a new
route has become important to create the best model for contractor selection [29].
In the past several multi criteria decision making techniques such as technique for order
preference by similarity to ideal solution, analytic hierarchy process, simple additive weighting and
artificial neural networks were adopted for contractor selection in construction industry but in the
present study an integrated model using AHP and zero one integer linear programming was proposed.
3.0 Housing Project – A case study

A housing developer in a major city in India was planning to construct five different types of
houses, single bedroom (P), two (Q), three bed room (R) independent houses, duplex houses (S) and
villas (T) with an aim to fulfil the requirements of all income groups. The number of houses under each
category is 42, 66,54,8 and 8 respectively. The plan of the project is represented in Figure 1.The
developer has established a project team to monitor the aspects of construction and decided to allocate
the execution activity to contractors. The developer has identified three contractors based on four criteria
required for the projects with an aim allocate the different housing construction among them. The basis
for identifying three contractors is to minimize administrative expenses and to improve the monitoring
of construction activity. This two stage supply chain with three contractors and five different types’
construction with an objective to allocate a set of contractor to a particular housing construction.
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Figure 1: Plan of the housing project

4.0 Methodology
The analysis proposed AHP to calculate criteria weights and the ILP to formulate the problem.
4.1 AHP Technique
AHP was proposed to compute the criteria weights. The AHP, introduced by Thomas Saaty
(1980), is an effective tool to solve complex problems involving multiple criteria and it is designed to
handle situations that consider the subjective judgments of individuals. Brainstorming, sharing ideas
and insights of the problem often leads to a more complete representation and understanding of the
issues [30, 31].
4.1.1 Step by step Procedure of AHP
Step I:
 To develop a hierarchy of the problem in terms of the overall goal, the criteria, and the decision
alternatives.
Step II: Procedure for Synthesizing Judgments
 Step II (A): Pair wise comparison of criteria and alternatives by Saaty scale
(1 – Equally preferred 3 – moderately preferred, 5 – strongly preferred, 7- very strongly
preferred and 9 - extremely preferred. Intermediate values between two adjacent judgements
are allowed in case of compromising situation. Sum the values in each column of the pairwise
comparison matrix [32].
 Step II (B): Construct normalized pairwise comparison matrix by dividing each element in the
pairwise matrix by its column total.
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 Step II(C): Compute the average of the elements in each row of the normalized matrix to
provide an estimate of the relative priorities of the elements being compared.
Step III: Consistency checking
An important consideration in terms of the quality of the decision relates to the consistency of
judgments that the decision maker demonstrated during the series of pair wise comparisons. AHP
provides a method for measuring the degree of consistency among the pair wise judgments provided by
the decision maker by computing a consistency ratio. The ratio is designed in such a way that values of
the ratio exceeding 0.10 are indicative of inconsistent judgments. If the degree of consistency is
acceptable, the decision process can continue. If the degree of consistency is unacceptable, the decision
maker should reconsider and possibly revise the pair wise comparison judgments before proceeding
with the analysis. Step by step procedure of estimating consistency ration is detailed below;
 Step III (A): Multiply the pair wise comparison matrix by the criteria weights to obtain a vector
of values labelled “weighted sum.”
 Step III (B): Divide the elements of the vector of weighted sums obtained in Step 1 by the
corresponding priority value.
 Step III(C): Compute the average of the values computed in step 2. This average is denoted as
λmax.
 Step III(D): Compute the consistency index (CI):
CI=(λmax–n)/(n–1),Where n is the number of items
 Step III(E): Compute the consistency ratio (CR); CR = CI / RI
Where RI is the random index, which is the consistency index of a randomly generated pair
wise comparison matrix. RI depends on the number of elements being compared and takes on
the following values. RI values for n is equal to 1,2,3,4,5,6,7 are 0.00, 0.00, 0.58, 0.90, 1.12,
1.24 and 1.32 respectively.
4.2 Zero One Integer Linear Programming
Integer linear programming problems are three types. In pure ILP, all the variables are integers, in
mixed type only some of the variables require to be integers; and in zero one ILP all the variables must
have integer values, either zero or one [33]. ILP was applied to ascertain optimal suppliers and order
quantity so as to maximize revenue [34], and to calculate optimal inventory lot sizing to reduce total
inventory cost [35].
4.2.1 Formulation of ILP
The mathematical model developed to illustrate the objective function involving the allocation of
housing construction to multiple contractors and vice versa so as to maximize the weightage. The
number of contractors for a housing construction mainly depends on the decision of the developer and
is treated as the first constraint. The maximum number of houses that can be allocated to a contractor is
treated as second constraint. The total number of contractor assignments require for a house is third
constraint. The formulated ILP model is presented hereunder,
Decision variable E xy = {1, contractor is allocated to house ‘y’; 0, otherwise}, where,
A = contractor index, x = 1, 2 ….T, T = Total number of contractor
B = Houses index, y = 1, 2…….V, V = Number of houses
Gxy = Weightage of contractor ‘A’ for the house ‘y’
C = Minimum requirement of contractor for the house ‘y’
D = Maximum number of houses allocated to contractor ‘A’
F = Total number of contractor assignments needed for ‘V’ number of houses
The objective function represents in Equation 1, the maximization of the preference weightage subject
to,
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T V
Maximize Z=∑ ∑GxyExy (1)
x =1 y=1
Minimum requirement of the number of contractor for each house is shown as Equation 2
T
∑Exy = Cy (2)
A=1
The equation 3 represents allotment of maximum number houses to contractor.
V
∑Exy≥Dx (3)
y=1
The equation 4 represents the total contractor assignments shall not exceed the availability.
TV
∑∑Exy≤F (4)
x=1 y=1
The equation 5 ensures non-negative conditions.

Exy=1or 0 (5)
5.0 Results
The subjective judgements of the team of project engineers are the main source of data in the analysis.
The previous experience of the project team with the contractors is vital in calculation of preference
weightages. The decision of the developer is final regarding number of houses allocated to a contractor.
The problem was formulated into integer programming model based on weightages calculated by AHP.
The criteria considered are the company attributes, experience, financial capability and performance
potential of the contractor. The developer and project team restricted only four criteria for selection of
contractors basing on the scope of the project.
5.1 Computation of Criteria Weights by AHP
The AHP process starts with construction of hierarchy diagram in two levels to prioritize contractor for
a housing type. The criteria for selection of houses and number of contractors were finalized by the
developer and the structure was depicted in Fig 2.
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Figure 2: Two level hierarchy
5.1.1 AHP Stage I

AHP was applied in two stages. In the first stage the weights were calculated for six criteria basing on
the subjective judgement of project team and weights are applicable for all the types of houses. The pair
wise comparison matrix between criteria and calculated weights by AHP procedure was presented in
Table 1.
Table 1: Pair wise comparison matrix and criteria weights

Company Experience Financial Performance Criteria Weights
Attributes Capability potential
Company 1 2 6 7 0.56
Attributes
Experience 1/2 1 1 5 0.21
Financial 1/6 1 1 6 0.18

Capability
Performance 1/7 1/5 1/6 1 0.05
potential
The consistency ratio was found as 0.097, which is less than 0.1 and the subjective judgements are
consistent.
5.1.2 AHP Stage II
In stage II, the pair wise comparison of contractors using single criteria for one type of house is
carried out. Single bed room independent house is considered to illustrate the process. Table 2 represent
the pair wise comparison and weights of wholesalers relating to quality criteria based on subjective
judgments.
Table 2: Weights of contractors to company attributes of Single bed room independent house
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Company Contractor 1 Contractor 2 Contractor 3 Weights

Attributes
Contractor 1 1 4 9 0.73
Contractor 2 1/4 1 3 0.20
Contractor 3 1/9 1/3 1 0.07
Similarly the weights were calculated for experience, financial capability and performance potential.
The consistency ratio was checked for pair wise comparison matrices relating to company attributes
experience, financial capability and performance potential and found to be 0.01, 0.00, 0.00 and 0.02
respectively and the comparisons are consistent as the ratio is less than 0.1. The consolidated weight of
criteria with respect to wholesalers is presented in Table 3.
Table 3: Weights of criteria vs contractors of Single bed room independent house

Company Attributes Experience Financial Capability Performance potential
Contractor 1 0.73 0.25 0.23 0.30
Contractor 2 0.20 0.07 0.08 0.10
Contractor 3 0.07 0.68 0.69 0.60
The overall weights of contractors in relation to project 1is calculated by multiplying the criteria
weights in stage I (Table 1) with the consolidated weights of criteria with respect to contractors (Table
3), as the hierarchy comprises of two levels and is presented in Table 4.
Table 4: Overall weights of contractors of Single bed room independent house

Wholesaler(WS) Overall weight
Contractor 1 0.5177
Contractor 2 0.1461
Contractor 3 0.3362
The procedure was continued for the remaining four types of houses and weights of
contractors for projects are presented in the Table 5. The consistency ratio is checked at every stage of
the analysis and the values are less than 0.1.
Table 5: Preference weights

Contractor Single bedroom Two bedroom Three bedroom Duplex Villas
1 0.5177 0.4587 0.3523 0.3051 0.4918
2 0.1461 0.3128 0.1677 0.5527 0.1934
3 0.3362 0.2285 0.4800 0.1422 0.3148
5.2 Formulation of ILP
The objective function is to maximize (as shown in Equation 6),

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0.5177E11+0.4587E12+0.3523E13+0.3051E14+0.4918E15+0.1461E21+0.3128E22+0.1677E23+0.5527E24
+0.1934E25++0.3362E31+0.2285E32+0.4800E33+0.1422E34+0.3148E35 (6)
Subjected to,
Constraint 2 is to assign each criteria to only one contractor so that sum of all the contractors individual
criteria equals to 1, so the constraint Equations 7 to 11 shows the condition.
E11+E21+E31=1 (7)
E12+E22+E32=1 (8)
E13+E23+E33=1 (9)
E14+E24+E34=1 (10)
E15+E25+E35=1 (11)
The constraint-2 is the number of houses allotted to contractor depends on the sum of weightages of that
wholesaler and the Equations 12 to 14 shows the condition.
E11+E12+E13+E14+E15≥2 (12)
E21+E22+E23+E24+E25≥2 (13)
E31+E32+E33+E34+E35≥1 (14)
The constraint 3 is the total number of contractor assignments for set houses shall not exceed fifteen
and this condition is shown in Equation 15.
E11+E12 + E13 + E14 + E15 + E21 + E22 + E23 + E24 + E25 +E31+E32+E33+E34+E35≤15 (15)
The last constraint is all the decision variables are binary and is shown in Equation 16.
E11,E12,E13,E14,E15,E21,E22,E23,E24,E25,E31,E32,E33,E34,E35=0 or1 (16)
The Equations 6 to 16 are solved by using LINDO v6.1 software and allocation a set of houses to a
contractor is shown in Table 6. The contractor 1, 2 and 3 are allocated with two, two and one category
of house respectively. The result of software is shown in Fig 3. From the output, E11, E15, E22, E24, and
E33 allocated with binary number ‘1’. E11 that is single bedroom independent houses is allocated to
contractor 1.
Table 6: Allocation of contractors to different houses

Type of houses Contractor 1 Contractor 2 Contractor 3
Single bedroom independent house 
Two bed room independent house 
Three bed room independent house 
Duplex house 
Villas 
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Figure 3: Results of the software
6.0 Conclusions
Contractor selection model using ILP was developed to select the contractor to construct a set of
houses.The formulation of ILP model is based on preference weightages for a set of houses by
contractors. The weightages are calculated based on the subjective judgements of project team by using
AHP. The number of criteria can be increased or decreased depending on the scope of the work and
clients requirements. In the present study, the team considered four criteria for selection of contractors.
The model is tested for construction of houses and is found to be effective. Selection of contractors and
construction of different houses in a housing development project is a crucial decision making process
otherwise it may lead to affecting the quality as well as progress of the work.
The results of the study are useful to the housing development project to select a contractor
based on criteria as it is difficult to fulfil all the criteria by a single contractor. Depending on the
importance of criteria, a particular contractor can be selected. Allocation of a particular house is based
on particular criteria makes construction process easy and it also creates competition among contractors
to improve other areas so that a competitive environment is created. The criteria based contractor
selection is crucial for housing projects requiring quality, reliability and completion of work during the
execution.
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International Journal of Sustainable Construction Engineering & Technology (ISSN: 2180-3242) Vol

Selection of Contractors for a Housing Development Project in India by

*Corresponding E-mail: [email protected]

Received 22 January 2018; Revised 14 May 2018; Accepted 29 May 2018

To meet the requirements housing construction in India, contractors should be competent in

2.0 Literature Review

3.0 Housing Project – A case study

Figure 1: Plan of the housing project

4.1 AHP Technique

4.1.1 Step by step Procedure of AHP

4.2 Zero One Integer Linear Programming

4.2.1 Formulation of ILP

The equation 5 ensures non-negative conditions.

5.1 Computation of Criteria Weights by AHP

Figure 2: Two level hierarchy

5.1.1 AHP Stage I

Table 1: Pair wise comparison matrix and criteria weights

Financial 1/6 1 1 6 0.18

5.1.2 AHP Stage II

Company Contractor 1 Contractor 2 Contractor 3 Weights

Contractor 2 1/4 1 3 0.20

Contractor 3 1/9 1/3 1 0.07

Table 3: Weights of criteria vs contractors of Single bed room independent house

Contractor 1 0.73 0.25 0.23 0.30

Contractor 2 0.20 0.07 0.08 0.10

Contractor 3 0.07 0.68 0.69 0.60

Table 4: Overall weights of contractors of Single bed room independent house

Table 5: Preference weights

2 0.1461 0.3128 0.1677 0.5527 0.1934

3 0.3362 0.2285 0.4800 0.1422 0.3148

5.2 Formulation of ILP

The objective function is to maximize (as shown in Equation 6),

Table 6: Allocation of contractors to different houses

Two bed room independent house 

Three bed room independent house 

Figure 3: Results of the software

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