This paper investigates the impacts of applying the multi-layer chain subcontracting system on project management performance with reference to Hong Kong construction industry. Multi-layer chain subcontracting system is widely used within construction industry as it is considered advantageous in many aspects such as better efficiency of subcontractors’ operation due to their unique skills. However, the fact of poor quality products in construction practice raises the doubt about the effectiveness of the chain system. Accordingly, the reasons why the applications of the system contribute to poor project performance are examined. A survey conducted in the Hong Kong construction industry demonstrates that the multi-layer chain subcontracting system, while widely adopted, is largely flawed. Based on the survey results, application of multi-layer chain subcontracting system contributes largely to the poor performance across the all major aspects including quality and time management, cost control, and communication and coordination performance. The association exists between poor project management performance and the increase of the number of layers in the chain of the subcontracting arrangement. The long communication chain because of the increasing layers of subcontractors results in various problems such as communication errors, poor supervision on the bottom-layer contractors. Consequently overruns in cost and time, and abortive and remedial works are common. Recommendations for improving the practice are suggested and explored, including change the practice of the “lowest bid” to an approach which incorporate both price and technical performance, limit the number of subcontracting layers, restrain the use of “supply-and-fix” subcontracting arrangement, and enforce the implementation of government regulations. The findings of this study provide useful references in examining the practice of subcontracting system in other construction industries and identifying the areas where the improvements can be made for gaining the benefits of using the system.
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