Impact of key management practices on overhead to direct cost ratio for specialty construction contractors

Currently, no widely accepted management practices for specialty construction contractors are standard in the industry. Review of the literature confirmed that, to date, scientific method has been applied to research about management practices in this industry. Also, less research has been devoted to the specialty contracting area than the general contracting area. There is no confirmed set of practices that are correlated to profitability. Instead, despite these practices having crucial impact on project safety, cost, production quality, schedules, and the firm’s overall business health, specialty contractors have had to learn and adapt their construction practices on trial and error experience. Total Quality Management and Lean Production Methodology do not go far enough. They lead to a framework and stop short of capturing prescriptive practices. To redress that gap in the industry, this research strives to identify a set of practices correlated with above-average efficiency in the specialty contracting organization. The term used here, “good operating practices” describes the actions that each contractor can execute continuously and exceed competitor’s financial performance. A methodology was developed to standardize specific, measurable, and efficient operating practices. Several industry sources contributed specific practices used for testing. This type of research is a new line of inquiry into the specialty contracting areas. The results of the study indicate that practices valued by the firm must be executed often. The financial correlation shows the level of disparity between importance and performance predicts whether a firm exceeds or does not exceed peer performance. There are some universal practices that are rated highest by all participating contractors. However, some variance exists in specific practices for each contractor depending on its characteristics. This paper concludes that specialty contractors must execute “good operating practices” consistently if they are to exceed their peer overhead efficiency average. This is the next step in the TQM and Lean journeys. This is a prescriptive system and not a set of guidelines.