Stakeholder Snapshot: Contractors

An overview of their relationship with the Construction (AEC) industry

The construction industry is an opaque and fragmented industry as there are players who stand to profit from the market’s current plight and failures. Due to this, by making claims, one can earn a sizable portion of the money. This was evident as the contractor’s charges for the simplest of works have doubled since the beginning of the pandemic. Information asymmetries and coordination failure exist amongst stakeholders. This results in significant time and cost overruns.

According to the McKinsey MGI Report, larger firms create 20 to 40 percent higher productivity as compared to the subcontracting businesses. However, in the more productive, heavy construction sector, players still have to deal with structural challenges, especially while working on satisfying cost and schedule obligations in infrastructure projects. Due to this, players often subcontract specialist trades.

The Construction Industry Development Council of India, or CIDC, acts as the governing body for India’s construction industry. For the benefit of the industry, the organization conducts research on a regular and pro gratis basis. According to a 2011 CIDC survey, there are about 31000 firms in the construction sector in India of which, approximately 29600 are small-scale enterprises, 1050 are medium-scale enterprises, and 350 are large-scale enterprises.

Recently, several digital service providers like Urban company, formerly known as Urban Clap, have played a major role in increasing the contractor’s service charges. A number of services were available at disposal for fixing appliances and various repairs at households. There was a high demand in major cities, and even in smaller cities, there was a noticeable rise. This in turn, increased the rates of the contractor services.

A contractor can be both an individual and a company. The construction industry is divided into two categories:

Major players or contractors:

• They primarily work on larger real estate, civil, and industrial projects.
• Responsible for supervising a construction project.
• One of their most significant duties is to find suitable personnel for completing the job.
• Other tasks include taking care of materials, equipment, and any other service needed for the completion of the project.
• To deal with specialized tasks, sub-contractors are hired by negotiating and signing contractual agreements.

Smaller subcontractors:

• They are involved in remodeling, refurbishment, or modest real estate projects.
• Contractors handle the entire project while subcontractors work on specific components of it.
• Subcontractors normally only work with contractors to negotiate contracts.

There are problems with the present contractual frameworks. These frameworks do not distribute the project’s risk to every stakeholder effectively. Instead, the entire liability of the project’s completion is shifted to the contractor. And these contracts do not define the scope of the job in a proper manner.

A contractor in the construction industry is the engine of the industry. Numerous tasks and responsibilities are to be dealt with by them. These tasks revolve around the project’s implementation, keeping a check on the safety of the construction site, and handling legal challenges. And there is no upfront or effective way while coordinating with the stakeholders. Furthermore, delays in payments from the client to the contractors result in haphazard management of the project’s daily finances. These factors altogether cause considerable delays in completing the project.

Bunty is a 35-year-old person working as a tiling contractor. Like any other individual contractor, he does not work on a consistent basis for a single company. Instead, he works for a variety of clients on an as-needed basis. They are classified as freelancers. Bunty works on large residential projects for a contractor. He also collaborates with an interior designer on minor house renovation projects. For Bunty, it is a huge headache to deal with the client’s suboptimal requirements and the subsequent misinterpretation of the client’s expectations by the design engineer. This results in huge delays in the project.

Being a contractor is a very tough job. The market is riddled with low-profit margins and fierce competition. A contractor must have firm control over the projects. At the same time, they should showcase steadfastness in solving the problems. Only then will they be able to avoid making costly blunders. Alongside, he has to deal with problems such as poor planning in purchasing materials. This results in material shortages and delays in seeking approvals. To handle these problems with care, prior experience is a must. In the past, contractors and millennial architects have had several disagreements over these issues.

During a construction project, a contractor must provide multi-purposed services.

Contractors are poor at executing and managing on-site work. Coupled with that, the presence of an untrained or semi-skilled workforce compromises project delivery. There is inadequate investment in new equipment technologies. And the industry is grappling with low levels of digitisation. To tackle the industry’s emerging issues, contractors have to embrace digitalisation.

Bunty has four children; one of them works as his assistant. He was forced to return to Kankroli, Rajasthan, due to the shutdown of building sites. When they work throughout the month, his family’s monthly income is 24000 INR. Several individuals and sub-contractors faced trouble in this past year because of which they had to change professions to earn a decent amount of income. Bunty is now producing brooms with his wife and daughters to save money and to return to the city.

About the Writer
Anchal Srivastava is an architect, urban planner, writer, researcher, and scholar. She is a certified GIS specialist from IIRS, ISRO, Dehradun. She is a graduate of the School of Planning and Architecture (SPA), Delhi, and Dr. A.P.J. Abdul Kalam Technical University (APJAKTU), Uttar Pradesh. She has experience working at the Town and Country Planning Organisation Delhi, Jabalpur Smart City Limited, Suresh Goel & Associates (SGA), APS Green Architects & Associates, and as the head architect at SSAP and Shantiniketan Buildtech Pvt. Ltd.

About the Editor
Naveen Kumar is a public policy and regulatory governance professional. He is a graduate of the Tata Institute of Social Sciences (TISS), Hyderabad. He has experience working at the Gitika Trust, Tata Institute of Social Science (TISS) Hyderabad, Krishi Vigyan Kendra — MYRADA, AID India Eureka, Larsen & Toubro Infotech Ltd. (LTI) and Eco Foundation for Research and Training (EFFORT).

About the Illustrators
Janhavi Deshpande is an undergraduate architecture student at the Sir JJ College of Architecture. She is an illustrator, designer and dancer. She is interested in photography and writes stories as a hobby. She is inquisitive about exploring new perspectives in art and architecture.

Meghna Singh is an architect, urban sketcher and design enthusiast. She is a graduate of the School of Planning and Architecture, Bhopal. She has won numerous national and international architecture design competitions, namely, NASA Mohammad Shaheer Landscape Trophy 2018, Heal+ Regenerative Housing for Kerala 2019, and the World Architecture Festival Student Charrette, Amsterdam 2019. She has experience working at Archohm Consultants Pvt. Ltd.