Analysis of survival factors of subcontractors in economic recession

Abstract

Subcontracting is a term which means giving a portion of the work or obligations to another party called as subcontractor (SC) under a contract. This was used in several industries but in the construction industry, it plays a vital role to complete the project with a higher quality of output. In gross domestic product (GDP) calculation of the national economy, the significance of the construction industry is very high. When a country faces an economic recession, it has a direct impact on the construction industry and the stakeholders of that industry. A small number of researches was available regarding how the construction firms handle the external changes like economic recession. In this respect, this research analyses the key strategies used by the SCs when they face an economic recession. Purposive sampling method was used for data collection and a questionnaire survey was selected as the basic technique to collect data. The respondents were first asked about their profile and then about the effect of recession and survival strategies in economic recession. Relative Importance Index (RII) method was used to rank the effects and the strategies according to its importance given by the respondents. Findings of the research were that there are various strategies which are most important to the survival of subcontracting firms “Increasing the focus on forming relationship with main contractors”, “maintain goodwill to get additional financial support from bank”, “Implementing stricter site management to reduce material and time wastage”, “Implementing stricter financial management on company cash flow”, and “bidding for more projects that are within the firm’s resources and capabilities”. Finally, practicable suggestions were identified for SCs to survive in the construction industry during the economic recession period.