Construction Company Subcontractor Risk Management in Project Procurement

Abstract

This thesis investigates subcontractor risk management and evaluation in the context of a construction company. The case company is a family-owned SME construction company operating in Northern Finland, and it uses subcontractors in its construction projects. The challenge for the case company was an unclear risk management process when selecting a subcontractor for a construction project. To make the process smoother, a tool was developed to guide the company's risk management process when choosing a subcontractor.

The thesis used qualitative research methods for data collection, such as semi-structured interviews and analysis of internal documents. The current state analysis of the case company´s subcontractor risk management in project procurement pointed to the strengths and weaknesses of the current process. Lack of risk management in subcontractor selection process has caused the company poor work quality and schedule problems with subcontractors chosen for projects. To a lesser extent, it also resulted in cost overruns, and risks to the case company's reputation due to the work performed by subcontractors. To tackle the identified challenges, the theoretical framework focused on the topics of risk management in procurement related to subcontractor evaluation and selection. The developed tool was tested and piloted according to the principles of action research.

As a result of this thesis, the case company obtained a subcontractor risk management tool as part of the subcontractor risk management process. With the help of the tool, the case company can identify and prepare for risks related to subcontractors. For the future, the case company was recommended to update the tool according to the criteria that will be identified as problem areas with subcontractors in the future.