Planning For Claims - An Ethnography of Industry Culture
Planning For Claims - An Ethnography of Industry Culture
Planning For Claims - An Ethnography of Industry Culture
To cite this Article Rooke, John, Seymour, David and Fellows, Richard(2004)'Planning for claims: an ethnography of industry
culture',Construction Management and Economics,22:6,655 — 662
To link to this Article: DOI: 10.1080/014461904200026324
URL: http://dx.doi.org/10.1080/014461904200026324
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Construction Management and Economics (July 2004) 22, 655–662
Claims by contractors for additional payments have been identified by commentators as a major source of
difficulty in the industry. Ethnographic research with industry members reveals some key features of planning
practices that underlie such events. Claims are sometimes planned at tender stage and sometimes during the
course of a project. One practice at tender stage is a pricing technique that minimizes the tender price while
maximizing the out-turn cost of a contract by exploiting mistakes in the bill of quantities. Another is the
programming of work to maximize its vulnerability to delay. More reactive techniques may be employed during
the course of the project, often to make up for an unanticipated increase in costs. These and other similar
practices may be reported as features of an integrated culture, defined in such a way as to encompass activity and
reject Cartesian dualism. The unique adequacy requirements of methods are suitable criteria for the evaluation
of such reports. The claims culture arises from economic conditions in the industry, which include low entry
barriers and competitive tendering. However, removal of these conditions alone cannot guarantee that the
practices will cease.
a behavioural aspect that is excluded from many nar- There are two unique adequacy requirements, a weak
rower definitions (cf. Hofstede, 1980) and facilitates one and a strong one. The weak requirement is that ‘the
an ethnographic approach that allows for the literal analyst must be vulgarly competent in the local produc-
description of actual practices, in preference to a statis- tion and reflexively natural accountability of the phe-
tical presentation of indicators referring to an underly- nomenon’ (Garfinkel and Wieder, 1992, p. 182). Thus,
ing theoretical construct. The latter approach assumes to analyse a management setting adequately, we must
an understanding of the cultural formation to be know what any member of that setting would ordinarily
investigated and attempts to measure its prevalence. A know about that setting. This can be regarded as a crite-
number of papers of this type have recently appeared in rion for adequate ethnography. Thus, the ethnographer
the construction management literature (cf. Fisher and can produce an adequate account only to the extent that
Ranasinghe, 2001; Tam et al., 2001). In contrast, the s/he appreciates the understanding of the setting that
intention in this study is to achieve a deeper under- any other member of that setting would have. The ques-
standing of the culture, leaving the question of its tion of whether that understanding has been achieved
prevalence as a matter for managers to decide in is a matter for the judgement of any other competent
practice. There are several reasons for adopting this participant.
approach. First, severe theoretical reservations have A properly EM account should also meet the strong
been expressed regarding attempts to measure culture requirement of unique adequacy. The strong require-
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(Seymour and Rooke, 1995). Second, research into ment is founded on the principle that the methods of
covert practices, such as those described here, requires a analysis used to describe a setting should be derived
degree of tact, flexibility and depth of approach that directly from that setting. This assumes that the
presents peculiar obstacles to the application of ques- methods that participants in a setting use to make their
tionnaires and other survey approaches. Third, this meanings clear to others are sufficient to the purpose of
type of finding may be more immediately relevant to producing an account of that setting. Furthermore, the
managers’ practice. use of any other methods to describe that setting must
involve some distortion. It would involve the researcher
introducing a theoretical account alien to the setting’s
Methodology members. Note that the strong requirement involves a
decision to exclude from the ethnography any judge-
Ethnography, or participant observation, is a research ments as to the effectiveness or efficiency of participants
practice in which a researcher enters a setting, say a site practices, unless these originate from and are attributed
meeting or an estimating department, and learns about to participants.
it principally through the instruction of other members A consequence of the application of the strong criter-
of those settings. It has been argued that this practice ion of unique adequacy is that studies of work can be
represents a paradigmatic shift from the formal research categorized according to whether or not the ethnogra-
methods that are conventionally employed in construc- pher has allowed his own preconceptions or theorizing
tion and project management research (Seymour and to intrude into the study. We believe that the applica-
Rooke, 1995). While others suggest that the two para- tion of these principles constitutes a rigorous test for the
digms may be successfully merged (Raftery et al., 1997), empirical status of ethnographic findings and enables a
ethnography remains a minority pursuit in construction clearer separation than is usual between findings on the
and project management and one which is still often one hand and theory and recommendation on the other.
regarded with suspicion. Thus, the body of this paper consists of an ethnographic
A major reason for this may be the difficulty of estab- report designed to conform to the strong requirement of
lishing clear criteria of adequacy for ethnographic unique adequacy. This is followed by a discussion and
findings. That competing sets of criteria exist can create conclusion that attempts to contextualize the findings
confusion. The report that follows is designed to meet within the broader context of the industry and the
one such set, derived from ethnomethodological studies changes it is currently undergoing. In line with our com-
(henceforth EM). It consists of the unique adequacy mitment to the strong requirement of unique adequacy,
requirements of methods (Garfinkel and Wieder, 1992; we refrain from attempting to constructively interpret,
Garfinkel, 2002). These criteria are founded on the or extrapolate from our findings; an activity that is
principle that the activities and procedures of persons in perhaps best left to our readers.
a setting can best be accounted for in terms of the The data was primarily generated from unstructured
understandings that those persons have of that setting. interviews. The essence of effective ethnographic
Thus, the task of the ethnographer is to render a clear interviewing is to establish a relationship in which the
description of those understandings, rather than offer informant/interviewee takes the role of teacher and
an explanatory theory. the researcher/interviewer, that of student (Spradley,
Planning for claims 657
1979). In line with this objective, the technique used in ways that defy formal description, but has been charac-
interviews was simply to encourage the interviewee to terized by Garfinkel as the ‘documentary method’.
talk on the subject of contract administration (usually Thus, for instance, the technique of programming work
with direct reference to the project on which they were to take place immediately following work by statutory
currently engaged) with a minimum of direction from undertakers was initially explained to the researcher in
the interviewer. The data were originally collected an interview. The consequences of such programming
as part of a project to examine the impact of cultural were later observed on a project entirely unconnected
issues on the introduction of the Engineering and with the original informant. On other occasions, inter-
Construction Contract (NEC). Thus, when the inter- view data, or data from direct observation, has become
view was initially arranged, participants were usually the topic of brief follow-up interviews (often just a
told one of two things, depending on whether they were phone call), which have enabled us to clarify and test
involved in the administration of an NEC contract our understandings with our informants.
themselves. If they were, they were informed that the The findings are a product of ethnographic research
researcher was interested in how they were finding across seven construction projects and additional inter-
working on the new contract. If not, they were told of views with members of the industry. The projects con-
the interest in the NEC and that the researcher wanted stituted a variety of building and civil engineering
to ‘look at other contracts for comparison’. Interviews
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ment) occurs via effective management of credit and (alternative, internal) organization costs. The incidence
cash flow and facilitates viable levels of profitability. of claims may be characterized readily in terms of the
They do not explore the methods by which this is transaction costs paradigm (often overtly opportunistic,
achieved. However, these are well known in the indus- in situations of specialist information and with major
try. A system of interim payment by clients, combined presence of asset specificity); the ‘Dutch auctioning’
with delays in payment to sub-contractors and suppliers of letting subcontracted work extends and is likely to
creates a favourable cash flow situation for the main accentuate the situation. It appears that the usual ex post
contractor. In this way, contractors can generate capital procedures are inadequate to deal with the matter and
for other businesses, such as house building. so, attention should be devoted to ex ante possibilities.
The situation is made more complex by a tendering
strategy adopted by contractors. This strategy is
described in more detail in the ethnography. It involves Ethnographic findings
submitting tenders at prices that reflect the expectation
that the ultimate price of the job will be inflated by Proactive claims: planning for claims at tender
claims. As will be seen, there is no element of specula- stage
tion in this approach. Claims are carefully planned and An important element in the contractor’s approach is
the value of the expected return is calculated with a the planning for claims at tender stage. This section
degree of accuracy that allows the contractor to submit contains a description of two methods by which claims
tenders at prices that, if quantities were to remain are designed at tender stage and of the context in which
unchanged, would render a negative profit. they applied. The first of these methods is concerned
This strategy of planning for claims has the effect of with pricing the bill of quantities. Measurement is
creating barriers to entry into the market. In an industry central to the contracting process. As one engineer, an
with such low capitalization, the threat of new players estimator for a large contractor put it:
undercutting established firms is always severe. How-
contracting is all about pricing in accordance with the
ever, only large contractors can afford to employ the
conditions of contract, in accordance with the specifica-
numbers of staff, of sufficient levels of expertise, needed tions, in accordance, more than anything, with the
to successfully manage claims on the scale needed to method of measurement. And if it says, if on a job there
turn what might be an apparent twenty-five percent loss are ten measurements and somebody’s only measured
into a profit of three or four percent. This means three of them, you don’t point it out to them, you price
that smaller contractors who attempt bids can be elimi- the three. You know, whack it up. So when you measure
nated at tender stage. However, the resulting disputes the ten you get some profit. And you anticipate that
between contractors and clients have done much to profit off the profit you add on to the simple mark up. So
contribute to the industry’s negative image. you may even go into a tender with a negative profit,
A further problem is generated by the combined knowing it’s going to come out, because it will be
measured properly eventually by somebody and you’ll
effects of the two elements of the contractors’ approach;
recover it.
in the face of mounting claims, clients will often refuse
or delay payments, sometimes for several years. Since This short passage summarizes the essence of the
contractors need to maintain positive cash flow in order estimator’s work. Pricing a tender involves reading
Planning for claims 659
through bills of quantity often several inches thick, amendments in those five days, I mean come on.
pricing the individual quantities and thus coming to a There’s opportunity for you.
total cost for the job. The art of his work is in spotting The estimator described a highly systematic approach
mistakes which can then be exploited. As he describes to the planning of claims. It is impossible to say with
above, when he anticipates that the quantities needed certainty how widely this approach is practised. No
will be greater than those specified in the bill, he charges other informant confirmed this picture of the systematic
more for them. Thus, for a relatively low increase in the nature of planning for claims. It is likely that many of
tender price, he can generate a considerable profit when them were not aware of it, as the estimator observed,
the quantities are re-measured. Similarly, when he
anticipates a reduction in the quantities needed, he they don’t tell you these things to start with, y’know
charges less. He might even charge nothing for a when you start off. I was a freelance, I was doing a job
for them, so I knew what I had to do, I had to represent
particular item. This means that he will submit the
them. An’ then gradually as an estimator you price
lowest possible tender price, with a minimal effect on it and you go in to the final briefing and gradually you
the anticipated out-turn price. understand. And then you start and then you realize that
A second method of designing claims centres on the pricing the job is worth, y’know about half of it, the rest
programme for the work. Thus, programmes are of it is, in depreciating degrees.
designed in order to anticipate and maximize the cost
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Most of the boreholes drilled for the ground test had ground and weather conditions, these companies do
been sunk to depths of less than three and a half metres; have to perform discrete projects on the premises of
those few that went deeper had missed the slab by other corporate bodies; they have, moreover, additional
chance. problems attendant on the complexity and fast chang-
These conditions made piling impossible and the ing nature of the technology and the need to fit each
yorkstone had to be dug out and the site reinstated, at system to an individual client. If a common criticism of
a cost of £20 000. Since the contractor was responsible the construction industry is that the technology changes
for ground conditions, the client’s architect expected little and slowly, this might at least contribute to greater
them to carry this cost. The contractor, however, predictability of results.)
argued that they had been instructed to price in accor- However, organizational conditions are clearly also
dance with a site investigation report that had been important reasons for claims. Mistakes in calculating
provided by the client. Both sides insisted that they quantities, bad planning and ineffective communication
were in the right and refused to back down. The imme- have all been highlighted as reasons for the claims dis-
diate result was that work stopped and the site was cussed in this paper. It is also the case that a procure-
abandoned for some time. ment system that emphasizes tender price as the sole or
Eventually, the contractor moved a new project principle criterion of selection creates the conditions
manager onto the job, who negotiated a compromise in which contractors are encouraged to plan for claims
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with the architect. This involved each side paying half from the very inception of a project; a situation
the cost of the extra work. While this deal got the project exacerbated in periods of economic recession in which
moving again, it was not considered by the contractor to ‘buying work’ by underbidding at tender stage may be
be a satisfactory outcome. As the new project manager commonplace.
put it: ‘We’ve done a fifty-fifty deal purely because we Particular problems were found in the public sector,
were desperate for money. Not because we thought we where three kind of pressure leading to inadequate
design were noted. First, in evaluating tenders, consult-
were wrong, because we think we were right’.
ants, especially in government service, experience con-
The project manager showed the researcher a second
siderable pressure to accept the lowest tender. It is often
claim he was pursuing, involving the misinterpretation
felt that any other course would leave the consultant
of a drawing. The issue in contention concerned a detail
open to charges of corruption. As one consultant put it,
in one corner of a crowded sheet, containing many
‘questions would be asked’. Second, time pressures can
similar details. The contractor had built the detail as
arise towards the end of the financial year, when inflex-
drawn, overlooking the fact that a note adjacent to it
ible budgetary arrangements lead to the need to spend
instructed him not to build it, but to build a second
any remaining money in order to avoid losing it. Third,
detail instead. The mistake made subsequent work
pressures from the numerous stakeholders that can be
more expensive. While admitting that he had made a concerned with public works can lead to uncertainty as
mistake, the project manager felt that it was an excus- to the requirements of the design. As one engineer put
able one, due to the confusing nature of the drawing. He it: ‘[you have to] submit your designs to the butcher, the
requested compensation for the extra expense. The baker, the candle-stick maker and you wind up with
client refused. Again, the project manager felt aggrieved seven different ways in which it may be done’. The
and was continuing to pursue the claim. result of this process can be that the design is never fully
completed; as intended for lump sum contracting (the
norm in the building sector) if not to the same extent
How opportunities for claims arise for measure and value contracting (the norm in civil
engineering).
It can be seen from the forgoing that there are several
different kinds of reasons for claims. Unforeseen
ground, or weather conditions will inevitably occur Discussion and conclusion
from time to time. Other problems too can arise from
the fact that the site of production is new for each It may be objected that in reporting these findings,
project and that projects do not take place on enclosed we have made no comment as to the justification, or
premises. Relations with neighbours, for instance, were otherwise, of the practices recorded. This has been a
often a major consideration on the projects in the study. deliberate omission. Claims are variously justified and
This set of conditions is unique to construction and condemned throughout the industry and our readers
undoubtedly has an effect on the predictability of price. will have their own views on these matters. We feel it
(Other industries face different variable conditions. would merely make accurate reporting more difficult,
It might be argued, for instance, that those faced by while adding nothing worthwhile to the analysis, to
IT companies are comparable. While not faced with introduce our own opinions here.
Planning for claims 661
and explore them in a holistic manner. These features Prescott, on the scope for improving the quality and efficiency
are (1) the predictability of claims and (2) their utility in of UK construction, Department of Trade and Industry,
both proactive and reactive planning by contractors. London.
The finding that both proactive and reactive strate- Fisher, T.F. and Ranashinge, M. (2001) Culture and foreign
gies are pursued raises the possibility of distinct variants companies choice of entry mode: the case of the
of the claims culture. We have found evidence that Singapore building and construction industry. Construction
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project and even in some companies, from individual to Garfinkel, H. (1984) Studies in Ethnomethodology, Polity Press,
individual. However, we lack sufficient data to give any Cambridge.
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of the prevalence of claims culture. We have found Garfinkel, H. and Wieder, D.L. (1992) Two incommensu-
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