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Commodity Vs. Value Added Services: Lost in Translation

Event Date

Jun 30, 2005

Type

Conference Presentation

Research Team

RT-205

Slides

Topic

Commodity vs Value-Added Contractor Services

DOCUMENT DETAILS

Abstract

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Abstract

The engineering and construction industry frequently struggles with the issue of “value-added services.” Are they truly adding value, or rather are some or all of them commodity services best obtained via open market competitive bidding procedures? Do owners and contractors, or even different parts of one’s organization, even agree to the terminology and definitions used in the “value-added” conversation? As a way to address these and other questions, CII established RT-205 to study the topic of Commodity vs. Value-Added Contractor Services. The team began by developing a set of definitions which were used throughout the research. The team then conducted a series of workshops separately with owner and contractor companies to further explore the issue, performed a case study of a number of projects from a single company, and finally evaluated paired data (i.e., both owner and contractor) from a large number of projects. Key conclusions from the study are: Owners and contractors view information in bids differently; many services believed by contractors to be relatively important are not viewed in the same way by owners, and vice-versa. The industry needs to use common definitions in order to address the issue. Both contractors and owners should be aware that many service offerings relate to “value-added” but only a select few relate to “net value-added.” The more owners emphasize price as the deciding factor in their purchasing decisions, the less “net value-added” is actually realized. In other words, owners buying on price miss out on net value-adding opportunities. Value can only be measured from the owner’s perspective.

Filters & Tags

Knowledge Area

Procurement & Contracts, Project & Program Management

Project Phase

Procurement

Project Function

Project Management, Procurement & Contracts, Business Development & Proposals

Industry Group

Light Industrial, Heavy Industrial, Buildings, Infrastructure

Research Topic

Commodity vs Value-Added Contractor Services

Keywords