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ABSTRACT
The Palestinian construction sector is one of the key economic sectors and is the main force motivating the
national economy. However, it is complex and affected by many constraints and obstacles that influence its
outcomes. Therefore, this research was conducted with the aims to survey the construction contracting
problems in Palestine from the different local contract stakeholders’ points of view; namely: contractors,
owners, consultants and donor countries and institutions. 73 problems were collected and considered in this
research and grouped in eleven main groups; namely, financial, political, administrative problems and
problems related to the tender documents (contracts, drawings), specification and material adaptation
(quality), contract parties themselves, sector environment, natural environment, arbitration and dispute
solving, technology use and career ethics. A questionnaire was administered to evaluate the importance of the
construction related problems. 310 questionnaires were distributed as follows: (183) contractors, (21) project
owners, (92) project consultants and (14) donor countries and institutions. The results show that the highest
ten important problems that Palestinian construction sector suffers from are as follows: rates’ burning due to
intense competition between contractors, policy adoption of awarding the bid to the lowest price and not to
the most accurate one, delaying owed payments by the owner, currency exchange changing value, owner
deceleration in decision making, little size of projects in relation to the number of contractors, construction
materials’ changing prices due to inflation, decline in the country’s economic situation, some contractors’
maneuvers by downloading some prices on other items and presence of conflicts between tender documents.
One of the main success keys in construction obstacles of construction contracting in the West Bank
projects is proper contract management. Contract in Palestine from the combined view of the local
management can be defined as the process that enables contract parties (contractors, owners, consultants and
both parties of a contract to meet their obligations in donor countries and institutions).
order to deliver the objectives required from the
contract. Also, it involves building a good working LITERATURE REVIEW
relationship between customer and provider. It
continues throughout the life of a contract and involves A number of scholars studied factors affecting the
managing proactively to anticipate future needs as well construction industry in Palestine, while some of them
as reacting to situations that arise. The main aim of studied a particular related aspect of the construction
contract management is to obtain the services as agreed industry. Mahamid et al. (2012) conducted a study to
in the contract and achieve value for money. This identify and rank the delay causes in road construction
means optimizing the efficiency, effectiveness and projects in the West Bank in Palestine. Contractors
economy of the service or relationship described by the indicated that the top five delay causes are:
contract, balancing costs against risks and actively segmentation of the West Bank and limited movement
managing the customer–provider relationship. Contract between areas, political situation, progress payments’
management may also involve aiming at continuously delay by owner, delays in decision making by owner
improving the performance over the life of the contract and low productivity of labor. Consultants indicated
(OCG, 2002). that the top five affecting causes are: political situation,
The Palestinian construction sector is considered segmentation of the West Bank and limited movement
one of the most productive sectors that are associated between areas, awarding project to lowest bid price,
with the Palestinian Territory settlement process after shortage in equipment and ineffective scheduling of
the year 1994, where there was political stability, project by contractor.
especially by the establishment of Palestinian National Many local construction projects report poor
Authority (PNA) in the Gaza Strip and certain parts of performance due to many causes, such as (UNRWA,
the West Bank, which resulted in an active movement 2006, cited in Enshassi, 2009):
in the building and construction field (PCU/ 1, 2003). unavailability of materials.
The Palestinian Central Bureau of Statistics (PCBS) excessive amendments of design and drawings.
shows that the construction sector contribution to the poor coordination among participants.
Palestinian GDP is increasing since the PNA ineffective monitoring and feedback.
establishment to reach 11.1% of the Palestinian GDP in lack of project leadership skills.
2010. This is a large proportion covered by this sector, Mahamid and Bruland (2012) concluded that 100%
thus this sector is positively affecting other various of road construction projects implemented in the West
economic, social, educational and vocational sectors Bank suffered from cost overrun. Mahamid et al.
and other Palestinian institutions (PCBS/ 1, 2011). (2012) found that 70% of construction projects
However, during the past few years, many of the implemented in the West Bank experienced a delay
construction projects in the West Bank went beyond between 10 – 30% of the contracted duration.
schedule and cost, and many obstacles faced the Mahamid (2011) indicated that the most severe
contracting process for reasons believed to be outside factors affecting time delay in road construction
the control of both contractors and owners. Such projects in the West Bank in Palestine from the
problems and obstacles have given rise to many claims owners’ perspective are: poor communication between
and conflicts. Therefore, this study investigates the construction parties, poor resource management, delay
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Jordan Journal of Civil Engineering, Volume 10, No. 1, 2016
in commencement, insufficient inspectors and rework. construction tenders, with minimum level of conflicts
Al-Najjar (2008) concluded that the top affecting and maximum level of benefits for both contractors and
factors that cause time overrun in building construction clients. These were investigated throughout a postal
projects in Gaza Strip as perceived by contractors are: questionnaire which covered classified building
strikes, Israeli attacks and border closures, lack of companies, working clients and consultants in Gaza
materials in markets, shortage of construction materials Strip. The study results showed that the most critical
at site, delay of material delivery to site, cash problem factors affecting contractors' decision to bid or not are:
during construction, poor site management, poor financial capabilities of contractors and clients, the
economic conditions (currency, inflation rate,... etc.), financial value of the project, the clients' payment
shortage of equipment and tools at site and owner delay policy, availability of construction raw materials and
in freeing the contractor financial payments. stability of the construction industry.
Enshassi et al. (2005) identified the essential factors Abdalaziz (2009) discussed the main factors
and their relative importance that affect accuracy of affecting design and contractual documents’ quality in
cost estimation of building contracts in the Gaza Strip. construction industry in Gaza Strip, in order to assist
The results of analyzing 51 factors considered in a all stakeholders to plan effectively before starting a
questionnaire survey concluded that the main factors project, beginning with the design phase, by creating
are: location of the project, segmentation of Gaza Strip awareness and paying sufficient attention to minimize
and limitation of movement between areas, political the problems and eliminate extra costs incurred to
situation and financial status of the owner. make corrective actions in order to amend defective
Elghandour (2006) conducted a study that aimed at design. The study found that the most severe factors
identifying and evaluating the existing claim were: lack of qualified consultant's staff, lack of time
management process in the construction industry sector available for checking and correlating all the
in Gaza Strip. This was gained through using a information on all design documents, lack of
questionnaire survey on both contractors and owners experience on similar projects, designer’s unfamiliarity
and reviewing case studies. The research found that the with construction materials and techniques that will be
main causes of claims are: the vagueness in project used in the project and absence of an experienced
design and bill of quantity, awarding contracts to the overall design manager. On the other hand, it has been
lowest offer and border closure and main road closure found that the most occurring causes of design
resulting in delaying project activities and increasing deficiency were: reduced design fee levels, selection of
materials’ prices, which lead to the emergence of designers on the basis of lowest price selection
claims. The study also revealed that both contracting strategy, allocation of staff to more than one project at
parties had problems in handling claims, the the same time, unstable client’s requirements, last
supervision team was lacking the proper experience to minute changes by the client and unwillingness of
handle claims, the contractor failed to notify the owner client to pay fee commensurate with the design of high-
side in the propper time period and in a clear-cut quality services.
manner and that there had been no documented Mahamid (2012) conducted a study to identify the
procedures that could be tracked when checking factors that have the potential to cause contractors’
claims. business failure in the West Bank in Palestine and to
Karriri (2008) conducted a study to collect and determine their impact level from contractors’
categorize the factors affecting bidders’ participation in viewpoint. A survey of 84 contractors from the West
the construction tenders, so that to encourage the Bank in Palestine was performed. 44 factors were
bidders to participate and compete strongly in the considered in this study and were listed under the
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Identifying the Critical… Nabil Dmaidi, Ibrahim Mahamid and Inas Shweiki
following three groups: (1) financial, (2) Managerial the main important construction contracting problems
and (3) external. Contractors have ranked the following that the construction sector in Palestine suffers from.
factors as highly influential with huge potential to Then, the designed questionnaire was sent to some
cause contractors’ business failure: fluctuation in local construction experts to check its content and its
construction material cost, delay in collecting payments validation. Many amendments were conducted that
from clients, lack of experience in contracts, low improved the questionnaire prior to sending it to the
margin of profit due to competition and closure and representative research sample.
limitation of movement of people between the West
Bank areas. Questionnaire Distribution
Four populations were targeted in this research:
RESEARCH METHOD contractors of the first, second and third categories who
have valid registration in the Palestinian Contractors
73 problems in the construction contracting sector Union (PCU), owners’ representatives, first class
in the West Bank in Palestine have been compiled consultants who have valid membership in the
through making interviews with some contracting engineering association and donor countries and
stakeholders (contractors, engineers, supervisors, institutions.
consultants and representatives of some donor The questionnaire was distributed to the randomly
countries and institutions), as well as by reviewing selected sample in the three main Palestinian cities
some local publications that reflect some local (Nablus, Ramallah and Hebron) representing the three
stakeholders’ sufferance in the construction sector. regions of Palestine (northern, middle and southern
Then, problems of similar nature were grouped regions). 310 questionnaires were distributed as
together; giving rise of eleven main groups: 1) follows: (183) contractors, (21) project owners, (92)
financial problems 2) political problems 3) project consultants and (14) donor countries and
administrative problems 4) problems related to tender institutions. The following ways were used to
documents (contracts, drawings) 5) problems related to distribution and collection the questionnaires:
specification and material adaptation (quality) 6) Direct distribution and collection by hand.
problems related to contract parties themselves 7) An electronic questionnaire to be filled
problems related to sector environment 8) problems electronically through a special website link; here is
related to natural environment 9) problems related to the questionnaire link: https://docs.google.com/
arbitrations and dispute solving 10) problems related to spreadsheet/viewform?formkey=dEtheW1nZTRQak
technology use11) problems related to career ethics. dwNWlUeDV5MTdlVkE6MQ
The problems were tabulated in a questionnaire form. Sending and receiving the questionnaire by fax.
The questionnaire was developed in order to evaluate
the importance of the identified problems. Data was RESULTS AND DISCUSSION
gathered through a survey, analyzed by using
importance index, taking into account the combined Respondents
view of owners, contractors, consultants as well as The results show that 59.3% of the research sample
donor countries and institutions. subjects were contractors, 25.4% were consultants,
9.5% were owners and 5.8% of the sample subjects
Questionnaire Design were donor institutions. Regarding the position of the
The collected problems were used in developing a respondents, the results show that 44.3% of the
postal questionnaire with the objective of investigating respondents were project managers, 27% of them were
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Jordan Journal of Civil Engineering, Volume 10, No. 1, 2016
site engineers and 25.9% of them were firm managers. which complicates fulfilling its obligations, leading to
This indicated that the questionnaire respondents where the emergence of the highly important problem of
almost the key persons in their firms. delaying paying the contractor-owed payments and
thus causing great losses to contracting companies.
Problem Analysis Another highly important problem which can be
Analysis of Financial Problems inferred from the analysis was problem number (1):
Figure 1 shows all the financial problems “the currency exchange changing value”. This problem
represented in a bar diagram, allocating the importance is attributed to high currency fluctuation during the
distribution of responses, their percentages and ranking past 8 years, sometimes reaching 25% and leading to
numbers according to their importance. huge losses to contracting companies, particularly
Analysis results show that problem number (3): because many tenders are pricing in dollars, especially
“delaying owed payments by the owner” is the most in financially supported projects.
important problem among the financial problems. Also, problem number (2): “construction materials’
Interviews with a number of contract parties in the changing prices due to inflation” scored a very high
studied sample illustrate that many projects are owned importance, mainly affected by high fluctuation in
by the Ministry of Woks. PNA is suffering from reinforcing steel prices during the past years.
financial crises due to its political circumstances,
Ranking 2 3 1 5 4 6 8 11 9 10 7
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
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Identifying the Critical… Nabil Dmaidi, Ibrahim Mahamid and Inas Shweiki
Ranking 7 2 6 4 3 1 5
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
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Jordan Journal of Civil Engineering, Volume 10, No. 1, 2016
“weakness of the Palestinian Standards Institution role” Also, difficulties appear in tender pricing due to lack of
is the most important problem among the problems clarity in specifying the items properly. On the other
related to specifications and materials. hand, many consultants avoid precise description so as
Interviews with a number of contract parties in the not to be accused by bias to the products of a specific
studied sample indicate that not specifying Palestinian company. Therefore, if there were a clear description in
specifications for materials and equipment to be the Palestinian specifications, then consultants
adopted in projects leads to consultants’ diversity in embarrassment would be avoided.
describings the BOQ according to their experience.
Ranking 5 4 1 6 3 2 7 8
120%
100%
80%
60%
40%
20%
0%
Figure (3): Analysis of problems related to specification and material adaptation (quality)
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Identifying the Critical… Nabil Dmaidi, Ibrahim Mahamid and Inas Shweiki
numbers. Results show that problem number (5): price and not to the most accurate one” is the most
“policy adoption of awarding the bid to the lowest important problem among the administrative problems.
Ranking 7 1 8 4 6 5 3 2
80%
60%
40%
20%
0%
Interviews with a number of contract parties in the from the matters of the project, owner or his
studied sample indicate that not excluding offers which representative not attending the project meetings
are less than the estimated cost sometimes leads to regularly or due to bureaucracy in decision making and
refer the tender to a contractor with poor experience. project management which leads to delays in the
Falling in execution delays and contractor losses projecr’s execution.
adversely affect the general financial situation in
Palestine. That is because contractor loss or bankruptcy Analysis of Problems Related to the Contract Parties
will lead to payment inability of the contractor which Themselves
adversely affects suppliers and causes financial losses. Problems related to contract parties themselves are
Analysis results also showed that problem number represented in Figure (6) in a bar diagram allocating
(3): “owner deceleration in decision making” is the the importance distribution of responses, their
second most important one among these problems. percentages and ranking numbers. The results show
This problem may occur due to the owner’s farness that problem number (7): “contractor team lack
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Jordan Journal of Civil Engineering, Volume 10, No. 1, 2016
Ranking 3 4 2 5 1
100%
80%
60%
40%
20%
0%
Poor Contractor Owner Owner Policy
structures dispersion deceleration deceleration adoption
in decision in decision
Ranking 7 8 5 2 4 6 1 3
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Identifying the Critical… Nabil Dmaidi, Ibrahim Mahamid and Inas Shweiki
Ranking 2 1 3 4
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Declining in the country The size of projects The prevention of open Interventions of some
global nearby
Ranking 2 3 1
40%
35%
30%
25%
20%
15%
10%
5%
0%
Adverse weather conditions The high level of noise The high level of pollution
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Jordan Journal of Civil Engineering, Volume 10, No. 1, 2016
numbers. Results show that problem number (2): “the Analysis of Problems Related to the Natural
size of projects is little in relation to the number of Environment
contractors” is the most important problem among the Figure (8) shows all the problems related to the
problems related to the sector environment. natural environment, represented in a bar diagram
Interviews with a number of contract parties in the allocating the importance distribution of responses,
studied sample indicate that this problem appears due their percentages and ranking numbers. The results
to the bad financial and political situation of the show that problem number (2): “the high level of
country. Also, it may be due to the improper noise” is the lowest important problem among the
contractors’ classification that leads to ineligible problems related to the natural environment and among
contractors’ appearance and thus to improper all other problems in all categories.
competition.
Ranking 5 3 6 2 1 8 4 7
100%
35.00%
35.10%
90%
37.40%
43.60%
44.30%
44.60%
46.00%
80%
70% 57.80%
60%
33.00%
35.50%
31.30%
50%
12.80% 31.40%
32.60%
35.70%
34.20%
17.30% 20.00%
40%
12.60%18.70%
30%
13.10%16.40%
8.00% 23.90%
16.30%
9.10%
15.70%
20%
12.20%
10.70%
6.50%
10%
4.90%
4.30%
0%
Analysis of Problems Related to Arbitration and problems related to arbitration and dispute solving,
Dispute Solving represented in a bar diagram allocating the importance
Figure (9) shows the analysis results of all the distribution of responses, their percentages and rank
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Identifying the Critical… Nabil Dmaidi, Ibrahim Mahamid and Inas Shweiki
numbers. The results show that problem number (5): responses, their percentages and rank numbers. The
“time length of judicial court procedures” is the most results show that problem number (2): “high cost of
important problem among the problems related to technology acquisition and staff training on it” is the
arbitration and dispute solving. most important problem among the problems related to
technology use. This result is consistent with (Osaily,
Analysis of Problems Related to Technology Use 2010), who indicates that “technology will be another
Figure (10) shows the analysis results of all the barrier due to high cost to attain technology for large
problems related to technology use, represented in a numbers of employees”.
bar diagram allocating the importance distribution of
Ranking 3 1 4 5 2
Analysis of Problems Related To Career Ethics will increase abnormally to stay in the work area. The
The problems related to career ethics are second highly rated problem is problem number (2):
represented in a bar diagram as shown in Figure (11), “some contractors’ maneuvers by downloading some
where importance distribution of responses, their prices on other items”. Many reasons drive contractors
percentages and ranking numbers are allocated. to do this. They can adopt works and samples lower in
The results show that problem number (1): “rates’ specifications than those specified in the tender.
burning due to intense competition between
contractors” is the most important problem among the Top Important Problems
problems related to career ethics. The problems that have the highest importance and
Interviews with a number of contract parties in the arithmetic means are listed in Table (1). These problems
studied sample indicate that this problem occurs due to are considered the main problems that the Palestinian
the low number of tendered projects, so competition construction contracting sector suffers from.
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Jordan Journal of Civil Engineering, Volume 10, No. 1, 2016
Ranking 1 2 4 6 3 5
120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
Rates Burning contractors Lack of Lack of Engineering Fraud
maneuvers confidence commitment office defends contractor's
the design
errors
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Identifying the Critical… Nabil Dmaidi, Ibrahim Mahamid and Inas Shweiki
considered in this research and grouped in eleven main corresponds to the conditions and specifications. In
groups; namely: financial, political, administrative addition, offers inconsistent with conditions and
problems and problems related to the tender documents specifications should be excluded. This can be
(contracts, drawings), specifications and material achieved by receiving the tender offers during
adaptation (quality), contract parties themselves, sector bidding in two envelopes; technical offer and
environment, natural environment, arbitration and financial offer.
dispute solving, technology use and career ethics. Recommending offers’ examination commissions to
A questionnaire was designed to evaluate the make sure of price moderation for the lowest price
importance of the construction related problems. 310 offer corresponding to the conditions and
questionnaires were distributed as follows: (183) specifications.
contractors, (21) project owners, (92) project Compliance with paying contractors owed payments
consultants and (14) donor countries and institutions. on time.
The results show that the highest important problems Compliance with paying fines when delaying any of
that the Palestinian construction sector suffers from are the contractor's owed payments or disturbing his
as follows: work due to owner slowing down in decision
- Rates’ burning due to intense competition between making.
contractors. Fixing and identifying currency conversion rate for
- Policy adoption of awarding the bid to the lowest each project.
price and not to the most accurate one. Distributing the government’s and donor countries’
- Delaying owed payments by the owner. projects properly on the West Bank cities and on the
- Currency exchange changing value. largest possible number of contractors.
- Owner deceleration in decision making. Tender documents should be studied and checked
- Little size of projects in relation to the number of carefully before tendering.
contractors. Budget provision before tendering.
- Construction materials’ changing prices due to
inflation. 2) Recommendations for supervision team
- Decline in the country’s economic situation. Improving supervision team qualifications through
- Some contractors’ manoeuvres by downloading organized training courses on skills and capabilities
some prices on other items. required for each project.
- Presence of conflicts between tender documents. Replying without delay on the contractors’ demands
Based on the research findings, the following and not decelerating in decision making.
recommendations are suggested: Adopting rigorous supervision on contractors in
terms of work specifications’ commitment and
1) Recommendations for project owners and quality assurance.
donor countries and institutions Transparency in dealing with contractors, without
There must be a complete and accurate study for favoritism, for assuring ethical work climate.
tender prices by the owner side before tendering and
awarding the tender to the nearest price to the real 3) Recommendations for contractors
one. Caution against contractors’ reliance on the method
Recommending offers’ examination commissions to of downloading some prices on other tender items
award the tender to the lowest price bid which is at and rates’ burning because of their undesirable
the same time the best that technically consequences.
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Jordan Journal of Civil Engineering, Volume 10, No. 1, 2016
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