A new approach for subcontractor selection in the construction industry based on portfolio theory

Abstract

Various challenges such as new technologies, growing complexity and competitive environment, require the main contractor to assign some of the project's tasks to other parties, the so-called subcontractors. Although subcontracting is a usual phenomenon in the construction industry, insufficient attention to the subcontractor selection strategy may pose some major threats to a project. Having in mind the significance of such risks, the optimization of subcontractor selection is essential for the success of the project. The importance of risk management in selecting subcontractors and the direct relation between risks and returns in most projects are two main motives for using the concept of portfolio in this paper. The main objective of this paper is to propose a model to allocate the best portion of project's task to some subcontractors in order to reach the optimized portfolio of subcontractors and main contractor. This is a new approach in the subcontractor management; therefore, after presenting the model, an illustrative example will be presented for better understanding.

Keywords:

• subcontractor
• portfolio
• genetic algorithm
• fuzzy theory

Additional information

Notes on contributors

Hamidreza Abbasianjahromi

Hamidreza ABBASIANJAHROMI. He is the PhD Candidate in Construction Engineering and Management at Amirkabir University of Technology, Tehran, Iran. He is member of Iran Project Management Association. His research interests include subcontractor management, decision-making problems in the construction, application of fuzzy set theory in the construction, project selection, risk management.

Hossein Rajaie

Hossein RAJAIE. Dr, Assistant Professor of Civil Engineering Faculty at Amirkabir University of Technology, Tehran, Iran. He is member of Concrete Research Center of Amirkabir University, academic member of Building and Housing Research Center, Tehran, Iran. His research interests are portfolio management, decision-making problems in construction, project selection, contractor selection, material Selection in construction industry.

Eghbal Shakeri

Eghbal SHAKERI. Dr, Assistant Professor of Civil Engineering Faculty at Amirkabir University of Technology, Tehran, Iran. He is member of Iran PMA, hydro-power dam association, Iranian ICT association and director of education committee of Iran PMA. His research fields are construction management areas, contract strategy, public private partnership strategy, risk management, private sector participation in promoting giant projects.

Omid Kazemi

Omid KAZEMI. He is the student of civil engineering at Amirkabir University of Technology. His research areas are contractor/ subcontractor selection, model development, computer programming and evolutionary algorithm.