Comparing the Chinese Construction Industry with Other Developing Countries to Identify an Applicable Solution to Low Construction Performance

The Chinese Construction Industry (CCI) has become one of the largest in the world within the last 20 years. However, due to its rapid growth it has been experiencing issues causing the industry to struggle with delivering high performing projects. Due to the differences between developed and developing countries construction industries, research from other developing countries that were similar to China (Vietnam and Kingdom of Saudi Arabia) were used to help identify solutions to improve the CCI. Previous research has identified the major risks in Vietnam and Saudi Arabia. It has also been identified the only solution that has documented evidence that it can improve construction performance is the Best Value Approach that was developed in the United States at Arizona State University. A literature research was performed identifying the major risks and issues that have been documented in the CCI. These risks were then compared to that of the Vietnam and Kingdom of Saudi Arabia’s construction industry risks. It was identified that the majority of the top risks were similar in all three countries. Identifying that developing countries have been experiencing the same issues. This also identifies that the Best Value Approach might be a solution to help improve the CCI.


China Construction Industry Issues
In the last 20 years China's Construction Industry (CCI) has grown to be one of the largest in the world. Each year China spends around $850 billion to support its population and business growth (Trading Economics, 2018). A study performed in 2009 identified it as the largest contributor to the international construction industry (Zhao et al. 2009). This rapid growth and the size of the CCI has caused many issues dealing with the performance and efficiency of construction projects, and the quality of the construction being built. There have been multiple studies that have been performed to verify these issues, but due to the physical size, number of people involved in the CCI, and the amount of projects that are being performed each year, it has been difficult to accurately verify how extensive and severe these issues are affecting the CCI. Few studies have been able to collect documentation on the performance of construction projects in the CCI. The research that has been performed has found the following: 1. Productivity and efficiency are poor (Shen et al. 2011, Li 2003, Zhao et al. 2009) 2. Perceived performance issues, but little documentation of actual performance and quality (Yang et al. 2010, Hu et al. 2018 Comparing the Chinese Construction Industry with Other Developing Countries to Identify an Applicable Solution to Low Construction Performance ~ 82 ~

Low Productivity and Efficiency
The CCI plays an increasingly important role in the world. But its performance is poor compared with that of its foreign counterparts, and other developed countries. Despite the significant development of the CCI, the low industry performance in various domains is frequently criticized by researchers (e.g., Deng et al. 2013;Liu et al. 2013;Liu and Deng 2009;Sha et al. 2008;Wang 2004;Wang et al. 2006;Shen et al. 2006;Wei and Lin 2004). One set of research findings stated that compared to the U.S. construction industry, the CCI employed 31 times more people and the average output per person is only 5% of U.S.'s workforce and 6% of output of the average Japanese workforce. Although CCI spends more than the U.S., it still delivers 23 times less construction services than the U.S., which shows the major issue the CCI deals with regarding their low productivity and inefficiency (Zhang et al. 2008, Xu et al. 2005. Insufficient expenditure on machinery and equipment also affects the labor productivity negatively. In the year 2005, the equipment fee accounted for less than 7% of the total project fee in China, while it accounted for 20% in the U.S. The official statistics revealed that in 2006: 1) the overall labor productivity in terms of value added is Chinese Yuan 25,741 per person; 2) the value of machines per laborer is Chinese Yuan 9,109 per person; and 3) the power of machines per laborer is 4.9 kW per person. All these figures are very low compared with western construction industries (Zhao et al. 2009).

Perceived Performance Issues
Currently, the CCI does not have a lot of information on construction performance. Failure of performance measurement in the construction industry has been criticized in literature, including a review by Yang et al. (2010). Another study also identified that there was minimal literature that simultaneously measures overall performance, efficiency, and effectiveness (Hu et al. 2018). A preliminary literature research revealed that there is no documentation on the CCI's overall performance published. There were only a couple of studies performed that found performance information on construction projects in China. One study researched stakeholder satisfaction. It found that out of 200 construction projects in China in 2005, 24.3% had violated related regulations and only 13% could be ranked as "good quality" (Zhang et al. 2008). Similarly, one study surveyed 139 construction firms in China which one result indicate that 'improving construction quality' as the most common competition method, indicating the significance of quality issues for Chinese firms (Wang et al. 2006 (Zhang et al. 2008).
The CCI, along with many other developing countries, often looked to more developed construction industries to find solutions to their issues (Chen, 2020). However, many developing countries have not found success in using developed countries' solutions (Chen, 2020). This could be contributed to the fact that developing nations do not have the same issues as developed countries, thus their solutions do not address the need of the developing country. Another reason for this is because solutions created by developed nations often do not resolve the issue (Chen, • Research conducted in the U.K. has documented construction performance in showing minor improvements from 2000 to 2011 in certain areas, but continues to suffer in others (Kashiwagi, 2013, Rivera, 2016 (Kashiwagi, 2013, Rivera, 2016: o Productivity has decreased by 0.8% annually. o Construction companies have the second highest failure and bankruptcy rate of 95%. o Over 90% of transportation construction jobs are over budget (Lepatner, 2007). o Almost 50% of time is wasted on the job site (Lepatner, 2007). o The average percent over budget amount and percent delay amount is 28% and 53% (Rivera, 2016).

Comparing Other Construction Industries to the China Construction Industry (CCI)
In a previous study conducted by the researcher (Chen, 2020), it was found that the CCI and its conditions are very similar to other developing nations (10 in total. See Table 1.1). Of the 10, only Vietnam and the Kingdom of Saudi Arabia (KSA) were identified as the two countries most similar to the CCI. The factors used to identify similarities with the CCI were the following (see Table 1.1): 1. Construction GDP % 2. Corruption Index 3. Construction GDP Increase Table 1 shows the breakdown. Of the similar countries, the researcher was only interested in countries that were most similar to the CCI. Five countries [Bahrain, Indonesia, Mongolia, Thailand, and Turkey] were disqualified because they were not the most similar in all three factors. Of the remaining 5 that were most similar to the CCI, the Philippines and Oman were disqualified due to a lack of documentation on their construction industries. This made it impossible to do further research on them (see Table 2). India shows the lowest GDP growth with only a 14% increase. Given this, India stands out as an outlier among the five comparable countries, so it was disqualified. The only two countries remaining that had documentation were Vietnam and KSA. These would be the countries the researcher used as the primary comparison with the CCI. Table 1 shows that Vietnam, KSA and China's construction industries all contributed a similar percentage to their countries overall GDP. They also had close corruption index scores showing that the environment and stability of the country's industry is similar [all within 7 or less from each other]. Lastly, all three were found to have large growths in the last 10 years of their construction GDP.

The Best Value Approach
The Best Value Approach (BVA) has been the only project delivery approach that has repeated documented testing with improved project performance. It has been tested in the entire supply chain (construction and non-construction services) (Rivera, 2017).
It was derived from the industry structure model (IS) (see Figure 1). The IS model splits the industry up into two main quadrants: 1. The Best Value quadrant that has high competition and performance; and 2. The Price Based quadrant that has low competition and performance. The model identifies that low performance is caused due to buyers trying to manage, direct, and control (MDC) vendors. The only way to move to the Best Value quadrant is to utilize the expertise of the vendor, by moving the management and control of the project to the expert vendor.
The IS model identifies the following buyer traditional activities that are used to MDC vendors (Kashiwagi, 2018;PBSRG, 2018): • Creating technical requirements and specifications.
• Partnering and developing relationships with vendors to enable the client to be involved with the management and development of the service. • Using the contract as leverage over the vendor.
• Using a project manager to manage a vendor after they were awarded a contract.
The IS model also identifies that the following activities will enable buyers to utilize the expertise of vendors: • Minimize involvement in technical details of services. • Move buyer activities to that of quality assurance (ensuring the vendor has created a plan and is measuring their performance through non-technical metrics) instead of quality control (ensuring the vendor is performing all their technical work correctly). • Require vendors to tell the client what the technical specifications and requirements should be. • Utilize internal buyer personnel to help and protect the vendor.
The BVA was developed to help buyers to understand and move perform the activities that enable them to utilize the expertise of vendors. The BVA splits a project up into three major phases (selection, clarification, and execution) (see Figure 2):

Selection Phase
All vendors compete based on their level of expertise instead of their technical scope of work. During this phase, the vendors are not given technical requirements or specifications, but a list of expectations and explanation of "what the client thinks they want". They are selected upon their past performance metrics, ability to identify risk, and capability of their key personnel. The highest ranked vendor moves into the clarification phase.

Clarification Phase
This is the most important phase, as the vendor with the highest level of expertise is now required to create their scope of work and technical requirements which are required to: • Explain how they will accomplish the work efficiently and with high customer satisfaction • Identify their plan from beginning to end, all risks they do not control, all major milestones, how they will measure their performance, and justify their costs • Respond to the client's concerns and feedback about the vendor's plan and the vendor must address those concerns in their plan Regardless, if the concerns from the client are technical or non-technical, the vendor is required to resolve the concern using non-technical language. The contract is only signed when the client is comfortable with the vendor's plan, otherwise, the vendor will be eliminated from clarification and the next in line vendor will be notified for clarification.

Execution Phase
Upon signing the contract, the contractor can proceed to work according to their plan. Since the vendor was the entity that developed the plan and the metrics, it has now put them in full control of the project. Performance will be tracked and posted online for each contractor through Weekly Risk Reports (WRR) which the contractor will turn in on every Friday. If ever another stakeholder tries to control the expert, that is also reported on the WRR and the vendor identifies what the impact that control will have on the project's performance.  Many of these ideas are different from the traditional delivery models. However, BVA system has documented the following performance (Rivera, 2017;PBSRG.com, 2018): • 2,000+ projects and services delivered (construction and non-construction).
• $6.6B of projects and services delivered with a 98% customer satisfaction and 9.0/10 client rating of process. • Services delivered: construction, facility maintenance, IT, professional (design), redesign of systems and organizations and supply chain applications. • $18M in research funding generated, due to the effectiveness of decreasing buyer cost of services on average by 31% (57% of the time, the highest performing expert was selected and was the lowest cost). • Contractors/experts could offer the client/owner 38% more value and decreased client efforts by up to 79%. • 90% of all project cost and schedule deviation is caused by the owner's non-expert stakeholders. • Change order rates were reduced to as low as -0.6% (Rivera, 2017).
• CIB W117 has worked with over 123 unique clients (both government and private sector) and received 12 National/International Awards. • 5 to 30 percent cost savings are achieved on the projects.

Literature Research on the Risks in China's Construction Industry (CCI)
To identify the major risks in the CCI, a literature search was performed through 5 databases with more than 6891 journals. The five databases included: Six search terms were used to look for articles in each database (See Table 3). These terms were derived from looking at other research efforts that performed literature research on construction risks and the terms that they used. For each search term for each database the following information was tracked: 1. The number of articles that the search term brought up.
2. The number of articles that were relevant to the research topic.
3. The year the article was published.
The researchers read each abstract from articles published since 2003. Each abstract that was relevant to the research, the full paper was downloaded and read for information regarding risks in the CCI. Table 3 identifies the number of relevant papers that were identified from each database. The literature search identified 46 relevant publications on construction risks in the CCI. Those 46 publications identified 72 risks. Each risk was prioritized based upon the frequency in which they appeared in the studies. Table 4 identifies the risks that appeared most frequently in the studies and gives an example of how documentation was kept on each risk appearing in the different publications. Of the 72 risks identified, 42% were only found in one publication and 15% were found in only two publications. Only 43% of the risks were found in more than three of the publications.      In further analyzing the 72 CCI risks, the researcher grouped the risks into different categories to identify any patterns. The researcher identified seven main categories that encompassed all the risks. Table 6 identifies the seven main categories, the definition of each category and the percent of risks that were associated with that category. Legal and contract issues, change of scope due to a stakeholder of a project, decision making of the buyer, requirements and approvals, and government regulations.

23.7%
Non-Transparency Risks being caused due to issues in communication, misunderstandings, complexity, relationships, lack of accountability or support from management.

16.6%
Finance Risks caused due to financial aspects of a project or financial conditions of the country.
Market and currency instability, delay in payment to the contractor, contractor mismanagement of project funds, rapid growth of skilled labor cost and contractor lending issues.

11.4%
Vendor Capability Risks being caused due to the contractor/vendor not being capable of delivering high performing projects.
Lack of expertise and management skills, Inability to create quality design drawings, inability to manage labor supply, high worker turnover rate, no insurance, insufficient safety measures, and a lack of understanding of lean and efficiency principles.

Material and Technology
Risks caused due to not having access or a knowledge of the latest technology and materials.
Outdated technology, outdated construction methods, materials required to be replaced during construction, and unknown capability of materials.

Procurement
Risks caused due to how buyers select the contractor.
Type of procurement model, buyer low bidding projects, not hiring the right contractor, and the administration of procuring a construction service.

Lack of Information
Risks caused due to a lack of information of both the buyer and contractor.
Unforeseen risks and inadequate site information. 1.9%

Comparing the Chinese Construction Industry with Other Developing Countries to Identify an Applicable Solution to Low Construction Performance
~ 92 ~ After prioritizing the categories, the first two categories (MDC and Non-transparency) included more than 40% of all the risks. Interestingly, despite many different reasons for non-performance in the CCI, it was identified that the biggest issues did not deal with the Chinese contractors' ability to deliver high quality construction. It was identified that it dealt more with the interaction between the buyer and the contractor. This would also match up with the analysis on the individual risks (see Table 4), as Legal and Contract Issues and Relationships and Guanxi were the two most frequently occurring risks in the 46 publications that were documented.
It was also identified that although vendor capability only included 10.4% of all the risks, 3 out of the top 15 risks involved the vendor's lack of capability. For the categories of Financing and Materials and Technology, it was also found that each one of these had one risk in the top 15 most frequent risks.

Risk Research Performed on the Vietnam and Kingdom of Saudi Arabia (KSA) Construction Industries
In the last five years, two research studies at Arizona State University were performed by PhD candidates from the Kingdom of Saudi Arabia (KSA) and Vietnam on the major risks that KSA and Vietnam have documented and are currently facing. Both research efforts performed indepth literature research compiling all information on previous studies performed, on the KSACI and the VCI, identifying and prioritizing construction risks and issues. These research efforts also surveyed construction professionals in their countries to validate previous research and identify any risks the industries are currently facing.
Saudi Arabia Risk Research (Algahtany, 2018) In 2017, Mohammed Algahtany, PhD candidate researcher, performed research identifying risks and issues construction organizations were facing in the Kingdom of Saudi Arabia (KSA). Mohammed performed both a literature research and conducted a survey questionnaire to collect the information. The literature research performed, reviewed all previous research performed identifying major risks that had occurred on KSA construction projects from 1977 to 2017. The research found 24 publications [18 of which were published in refereed journals]. From these 24 publications, 32 risks were identified and prioritized by the frequency in which they occurred. Dr. Mohammed then surveyed construction organizations that were certified by the Ministry of Municipal and Rural Affairs, a KSA government organization in charge of delivering all KSA government construction. The survey asked the construction organizations to evaluate each of the 35 risks (3 risks were added due to consultation with a KSA construction expert) on a 5-point scale for both severity and frequency. The risks were then prioritized using the Importance Index, which considers both the severity and the frequency rating. Table 7 is an example of some of the top risks prioritized. To see the full list, please refer to the original study (Algahtany, 2018).   (Le;et.al, 2019) In 2018, Nguyen Le, PhD candidate researcher, performed research investigating the Vietnam construction industry and the risks that were most impactful to their construction performance. As with Mohammed's KSA construction research, Dr. Le performed both a literature research and survey research of the construction professionals in Vietnam. The literature research looked for any studies performed within the last 15 years that identified non-performance causes in Vietnamese construction projects. Dr. Le reviewed more than 100 published papers and identified only 11 studies related to non-performance construction causes in Vietnam. These studies identified 23 risks that Vietnam currently faces in their construction industry. These risks were prioritized based upon frequency. Table 8 is an example of some of the top risks prioritized. To see the full list, please refer to the original study (Le;et.al, 2019).

Risk Comparison of the China Construction Industry (CCI) with the Construction Industries of Vietnam (VCI) and the Kingdom of Saudi Arabia (KSACI)
According to the data found in the literature search, 100% of the VCI and KSACI risks are found in the CCI (see Table 9).  Relationships and Guanxi 3.
Lack of expertise in construction services x 5.
Management Skills x 6.
Project Financing x 7.
Skill level of labor x 8.
Bureaucracy in organizations x 10.
Government Instability and Politics

Applicability of the Best Value Approach (BVA) with China's Construction Industry (CCI)
From the risk analysis of the VCI and KSACI, it was identified that the CCI is experiencing all the same risks in their top risks. However, 5 of the top 10 CCI risks (50%) were not risks found in the VCI and KSACI. Due to past research suggesting that the BVA effectively addresses issues created by all of the VCI and KSACI risks identified and 50% of the CCI's top 10 list, the researcher proposes that the BVA can also help the CCI's low construction performance (Algahtany, 2018;Le;et.al, 2019).

Conclusion
Due to the rapid growth of China's Construction Industry (CCI), it has been difficult to maintain a high level of performance on its construction projects. Compared to other similar developing countries (Vietnam and the Kingdom of Saudi Arabia (KSA)) that have also seen a large growth in their construction industries in a short amount of time, they are also experiencing the same issue.
Literature research found that both Vietnam and the KSA have both had research performed to identify the major risks they are facing and the solution that could best help them overcome their issue of construction non-performance. Both research results identified that there has been only one delivery approach that has documented evidence showing that it can minimize the risks these countries are facing and improve their construction performance. This delivery approach is the Best Value Approach (BVA).
A literature research was performed to identify the major risks the CCI is facing and compare them to the Vietnam Construction Industry (VCI) and the Kingdom of Saudi Arabia Construction Industry (KSACI). The results of this research identified that the CCI is facing all of the top risks identified by the VCI and KSACI. However, the VCI and KSACI differ from the CCI because only 50% of the CCI's top 10 risks are also found in the VCI and KSACI's top . This could be due to several factors. One of the major factors could be due to the socialist government of China, in which, the government becomes both the buyer and the contractor in most construction projects Zou 2007;Liu et al. 2013;Zhang et al. 2008;Xu et al. 2005). It has been concluded that due to the CCI having most risks similar to the VCI and KSACI, it is a candidate to utilize the Best Value Approach to help its low construction performance.

Recommendations
While this research suggests that China's Construction Industry (CCI) faces similar risks compared to the Vietnam Construction Industry (VCI) and the Kingdom of Saudi Arabia Construction Industry (KSACI), China is unique in its issues with government involvement. The researchers recommend additional research to investigate the Best Value Approach (BVA) as a potential solution for the CCI's non-performance issues. The researchers recommend surveying CCI stakeholders to investigate whether the BVA concepts can improve the CCI and the potential of the BVA being able to be implemented in the CCI.