Contractor Liquidity Evaluation Model for Successful Public Housing Projects
Publication: Journal of Construction Engineering and Management
Volume 144, Issue 12
Abstract
A contractor’s continued financial health throughout a construction project is a basic requirement for successful project completion. Therefore, project owners must be conversant with the contractor’s financial capability from the bidding stage through project completion. Consequently, project owners adopt a prequalification (PQ) process to screen for poor technical and managerial capabilities during the bidding stage. Although the PQ pass rate in Korea is nearly 99%, contractor liquidity can still pose problems. In this situation, the most important construction management strategy involves monitoring the contractor’s liquidity status during the project. Accordingly, this study determines the symptoms of contractor decline at the corporate and project levels. Nineteen variables (17 financial and two nonfinancial) are selected through a symptom analysis. Moreover, this study develops a liquidity evaluation model (LEM) and its reference mode based on equations obtained by performing multiple discriminate analyses. These results demonstrate the practical feasibility of project owners to evaluate contractor liquidity using financial and nonfinancial information to prepare for possible financial problems.
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Data Availability Statement
Data analyzed during the study were provided by third parties. Requests for data should be directed to the providers indicated in the Acknowledgments. Information about the Journal’s data-sharing policy can be found here: http://ascelibrary.org/doi/10.1061/(ASCE)CO.1943-7862.0001263.
Acknowledgments
We are grateful to the Korea Land and Housing Corporation (LH) for sharing contractor information, the National Information and Credit Evaluation, Inc. (NICE) for sharing the financial information of construction companies, and the Korea Occupational Safety and Health Agency (KOSHA) for providing details on contractor safety ratios.
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Journal of Construction Engineering and Management
Volume 144 • Issue 12 • December 2018
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©2018 American Society of Civil Engineers.
History
Received: Dec 1, 2017
Accepted: Jun 11, 2018
Published online: Oct 1, 2018
Published in print: Dec 1, 2018
Discussion open until: Mar 1, 2019
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