Published online by Cambridge University Press: 24 August 2023
The construction sector shares many of its economic features with other industries but the combination of features in the construction process makes it unique. Rather than making a particular product or service for consumption, the construction sector is an enabling sector. It enables the rest of the economy to function. For example, it enables people to work in offices, make their purchases in retail outlets, travel between home and workplace by road or rail, and it provides the homes for people to bring up their families.
Construction is a highly fragmented project-based industry, with very low profit margins and a high risk of failure for the many firms operating in a very complex supply chain. In this book we try to explain how the industry functions and how the many firms throughout the supply chain collaborate on projects. We look at how construction markets operate, how firms survive in the industry, and how their business models work. We look at auctions and the tendering process and go on to discuss the construction procurement process in general, whereby construction firms are engaged by developers.
We also account for the conflicts in construction and argue that it is in the nature of the industry that disputes frequently arise in the construction process. We also discuss productivity and explain that the low productivity in construction, compared to other industries, is the price that the economy pays for a construction industry, in which business models tend to focus on the volatility of demand and managing risk at the expense of improving efficiency and productivity.
With this perspective on the construction industry, we hope that this book will enable at least some constructors to explain the reasons for the difficulties found in construction. They may then be able to give a reasonable account of their activities so that a new generation of developers and construction clients will appreciate the problems facing their contractors. Indeed, it is to be hoped that policy makers will also take note of the lessons to be found in this book when it comes to passing legislation and managing the regulation of the building process and all the firms engaged in it.
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