Commodity vs Value-Added Contractor Services

Research Team 205 investigated the balance between value-added services of engineering and construction service contracts and those services that are undifferentiated or commodity-like. Owners and contactors are using different terminologies and definitions in such a dialogue, and as a result such dialogues often become frustrating and emotional. Because of the multiple definitions people use, miscommunication not only occurs between Owner and Contractor, but also within each of their organizations.

As a way to overcome this communication barrier and achieve an objective basis to conduct a detailed study, the Team developed a set of common definitions, and then ran a series of workshops with groups of Owners only and Contractors only. Although some criticism of the other side occurred during these workshops, it is interesting to note that comments during breaks tended to be similar to this quote from a Contractor: “We are often are own worst enemy and force the Owners to treat us as a commodity.” A similar quote from an Owner was: “We do not do a good job of articulating what features and functions provide benefits and thus the bid process is both vague and ambiguous for Contractors.” Following the workshops, the Team conducted a case study of a number of projects at one company, and then gathered and analyzed data from a large number of projects from both Owner and Contractor pairs to identify which offerings in the bid really added value and which ones did not.