Review of Construction and Environmental Capital Law (No.21) | How to Solve the "Two Skin" Problem of the Consortium under the New General Package Policy?

The joint project department solves the "two skins" problem of the general contracting consortium.

In December 2019, the Ministry of Housing and Urban-Rural Development and the National Development and Reform Commission jointly issued the ''Administrative Measures for the General Contracting of Housing Construction and Municipal Infrastructure Projects' (hereinafter referred to as the ''Administrative Measures''), which clearly stated that the general contracting unit should have both the scale of the project. Adapted engineering design qualifications and construction qualifications, or a consortium formed by design units and construction units with corresponding qualifications. The "Administrative Measures" require that my country's general contracting projects must adopt the "dual-qualification" independent contracting or "dual-qualification" consortium model. Subject to the trading and management habits that have been formed by the separation of design and construction and the fact that the relevant laws of our country cannot avoid the provisions of the consortium, the consortium model is not a short-term model. However, due to the inconsistency of corporate culture, management system, salary system and project objectives among different enterprises, the phenomenon of "two skins" is common in the general contracting consortium, which is bound to have a certain impact on the development of the consortium model and even the general contracting model. This paper intends to draw lessons from the formation mode of PPP project SPV company and real estate project company, and puts forward a concept of joint project department (JPD) with unified organizational structure, unified management system and unified salary system in Project general contracting Department, in order to provide an innovative solution for the development of general contracting mode in China.

In the 1950 s, China began to introduce the Soviet construction model. Due to the institutional reasons at that time, China formed a construction model with the separation of design and construction, which is still in use today. The relevant laws of our country stipulate that the design enterprise is responsible for the design drawings, the construction enterprise is responsible for the construction according to the drawings, and the owner corresponds to two subjects respectively. Article 35 of the Measures for Construction Bidding and Bidding of Engineering Construction Projects stipulates that when bidding for construction projects, any subsidiary body (unit) of the tenderee that does not have independent legal personality, or any legal person and any subsidiary body (unit) that provides design and consulting services for the preliminary preparation or supervision of the bidding project, are not eligible to participate in the bidding of the bidding project.

In accordance with the provisions of the above-mentioned laws and regulations, China's special construction enterprises or comprehensive Class A, industry Class A design enterprises, even if they have the corresponding design qualifications or construction qualifications, but in the actual implementation of the project by legal restrictions, can not participate in the design and construction of the same project independent bidding. The design enterprise is responsible for the design, the construction enterprise is responsible for the construction of the pattern, has solidified and formed the trading habits and management habits.

At present, domestic EPC projects are in a stage of vigorous development, but from the perspective of the entire construction market, EPC projects still account for a low proportion of construction projects in the housing construction and municipal fields, mainly concentrated in government investment projects. In the current market environment, both design enterprises and construction enterprises, there are a large number of or even most of the business for non-engineering general contracting projects, few design enterprises or construction enterprises in order to develop the project general contracting business to transform the entire enterprise into an engineering company. At this stage, the consortium model of EPC is still the regular model in the EPC market.

Combined with the actual situation in China, the operation and management mode of separation of design and construction will continue the traditional mode for a long time. The development trend of the general contracting market in the future should be the coexistence of "double qualification" independent contracting mode and "double qualification" consortium mode. The consortium model is an objective model, which has important practical significance for the exploration and practice of this model, mainly including the following aspects.

First, for some design enterprises and construction enterprises that are willing to transform into engineering companies, the consortium mode is the transitional choice in the process of transformation. Adopting the consortium mode to undertake projects is conducive to enterprises to gradually complete the adjustment of organizational structure and management system, as well as technology accumulation and talent accumulation on the basis of controllable risks and through mutual learning and project practice.

Second, even if some companies already have independent design and construction capabilities, for the sake of business diversification and efficiency, the use of the consortium model for project undertaking is a possible choice for their business development.

The third is that the consortium model can realize the technical integration of design and construction in the fastest way, give full play to the respective advantages of different companies, and form a strong alliance. This is also the vitality and value of the model itself.

At present, the general contracting projects are mostly undertaken in the form of consortia. The design enterprises implement the project design and the construction enterprises implement the project construction, which is not much different from the traditional management mode. The integration of design technology and construction technology required for general contracting projects is not obvious, and the phenomenon of "two skins" is still obvious.

The root of the phenomenon of "two skins" is that the business undertaking mode of China's construction industry has not got rid of the influence of the "Soviet model" (design and construction are separated from each other). Both design enterprises and construction enterprises have formed inertia in a long-term and single business state. There are significant differences between the two sides in corporate culture, management system and salary distribution. Under such circumstances, it is difficult for the consortium to form a unified operating system. Investigate its reason, mainly includes the following several aspects.

In the past few decades, there have been significant differences in the social awareness of design companies and construction companies under the traditional model, and the social awareness of the industry by employees of the two types of companies: construction companies have long been dubbed "making money" as the first The image of the contractor with the goal; the design company is dubbed the image of senior intellectuals with "high technology content. The two types of enterprises form a consortium, because of their differences in corporate culture itself, there will be differences in the understanding of the project at the corporate level.

In addition, in the development process of the construction industry, the design market is dominated by brand and technology, that is, whether the owner favors a certain design company, mainly focusing on its product reputation, the "star effect" of high-end talents and technical strength. The construction market, on the other hand, is dominated by scale, management methods and construction technology, I .e., the choice of construction companies by owners is more focused on the scale of their local output value and project management capabilities.

In the long run, in the pursuit of the goal of the enterprise, the design enterprise as a whole is more inclined to design the value guidance and technical guarantee of the building, the social reputation of the architectural works and the word-of-mouth evaluation of the use unit, while the construction enterprise is more inclined to the research of construction technology and the maximization of the profit of the output value per unit time.

The differences in corporate culture between consortia bring about differences in project culture, which will lead to different perceptions of the same thing. The cultural identity and goal direction of the two sides are inconsistent, and the phenomenon of "two skins" will lead to the end of "split" between the two sides of the consortium.

In essence, the design enterprise is responsible for the design work and belongs to the intelligence-intensive enterprise; the construction enterprise is responsible for the construction work and belongs to the labor-intensive enterprise. There is a big difference between the two enterprise management systems.

The difference in the nature of the enterprise is accompanied by the difference in the management system, the management system of the design enterprise is more inclined to give full play to the designer's creation and research and development value, so the design enterprise in the design project is rarely in accordance with the project management ideas to manage. The construction enterprises need to be responsible for the progress of the construction site, the quality of the project, safety and civilization, so the planning, execution and procedure of their work are the top priority.

In the work, the construction management personnel need to wear safety equipment in strict accordance with the management system and guide the construction in the designated area according to the standard process, while the designers are more accustomed to discussing or reporting the design scheme in the office and conference room.

Using project management ideas to unify the two separate teams of design and construction, because of the differences in the management system of the enterprise itself, it is easy to lead to "incompatibility" between designers and construction personnel on the same project ". If the consortium design team and construction team are forcibly "bundled", the phenomenon of "two skins" will still be unavoidable because the enterprise system implemented cannot be unified.

In the traditional mode, due to the relatively short design cycle, the salary distribution assessment of the design enterprise focuses on the amount of work completed within the specified time, that is, the piece-rate system, and the income composition is usually the basic salary and piece-rate income. The distribution mechanism of construction enterprises is more based on the incentive system of project target assessment, that is, it is composed of basic salary and project target assessment award.

For a project, due to the large difference between the design cycle and the construction cycle, designers often put into the work of the next project immediately after completing the design work of the project, and the energy invested in the construction phase is extremely limited. But in fact, the design problems fed back from the construction phase are often the key factors that restrict the smooth progress of the project and affect the cost control. Therefore, the differences in the salary distribution system lead to a very uneven investment of design resources in each stage. The design team and the construction team in the same project with different objectives for assessment and distribution, the phenomenon of "two skins" is bound to appear.

In addition, the reasons for the "two skins" of the project general contracting joint model include not only the above three types, but also the management methods of the construction unit and the supervision (full consultation) unit to the consortium unit, and the construction department to the project general contracting The supervision method, etc., but the above reasons are the problems that have the greatest impact on the general contracting of the project in the existing system and need to be solved urgently.

The PPP model, that is, the cooperation between the government and social capital, is a project operation mode in public infrastructure. The participation of social capital, on the one hand, can help the government to improve the project quality and operational efficiency, on the other hand, it will also share the risk of construction with the government [1]. A common structure of the PPP model is an SPV company, which is a subsidiary with an independent legal person established by one or more parent companies for a special purpose. Such a company can borrow from a bank, raise capital from society, or be traded as an equity asset with limited liability. In the construction of infrastructure projects, both government and social capital are shareholders of SPV companies, through which SPV companies sign contracts with contractors for construction, and use the mechanism of SPV companies to assume only limited liability to reduce the risk of both parties [2].

The project company system for real estate projects refers to the development of a project by two or more real estate companies by jointly forming a project company and automatically disbanded upon completion of the project to achieve the project objectives at a lower cost. There are two main existing cooperation models: one is that local companies use their own land acquisition advantages to cooperate with companies with more project development capabilities to carry out project development to achieve "strong alliances"; the other is two or more companies. The project company is jointly established as a leader and member to achieve "complementary advantages". This combination of complementary advantages can effectively enhance the development strength of the project and help to eliminate the obstacles in the project development process caused by the management of multiple companies [3].

Based on the concept of SPV company and project company system of real estate project under PPP mode, in order to crack the phenomenon of "two skins" in general contracting mode, the author puts forward the concept of "joint project department" for the consortium mode of general contracting project, that is, to establish a joint project department for a certain project by drawing on the formation mode of SPV and project company. Compared with the original consortium model, the joint project department adopts a unified organizational structure and management system to achieve unified operational objectives and unified salary distribution on the basis of the formation of a consortium through internal agreements between design enterprises and construction enterprises. solve the problem of "two skins" caused by inconsistent objectives and difficulties in integration under the consortium model.

In terms of organizational structure, the personnel of both enterprises in the joint project department will be separated from the organizational structure of their respective enterprises, and a unified organizational structure will be reorganized according to different functions, which will be divided into leadership, project department management and business department executive level from top to bottom. Among them, the leadership is jointly formed by the two enterprises, representing the will of the two enterprises, making the final decision on the operation of the joint project department, and coordinating with the owners and subcontractors at the top. The management committee has the management decision-making power of the joint project department and coordinates the operation of all business departments under the will of the leadership. The executive layer of the business department carries out corresponding work according to different business sectors, such as design department, commerce department, engineering department, security department, engineering department, security department, quality department, security department, quality department and general department, etc. This kind of personnel organization structure makes the advantageous resources of the consortium effectively integrated, the responsibility interface of the business department will be clearer, the departments will cooperate with each other according to the needs, no longer need to go through the approval of the affiliated enterprise, greatly reduce the redundancy of the process, so as to improve the efficiency of solving problems.

Joint Project Department (JPD) organizational structure diagram

Under the guidance of the strategic objectives of the project, the departments at all levels in the joint project department will be truly integrated to carry out their work and resolve the obstacles ahead. For example, when the engineering department finds that the original design scheme has great construction difficulty or even construction danger, it can directly seek the cooperation of the design department and the security department to discuss the optimal solution of the problem. Under the constraints of the common project progress target and safety target, the design department and the safety department are bound to actively cooperate with the engineering department. for example, various schemes are proposed according to the actual conditions on site, and the final solution is obtained under the discussion of the three departments.

On the basis of a unified organizational structure and project objectives, the joint project department takes the business department as a unit and establishes a new management system for the department in accordance with the principle of "dispatching superior resources", that is, focusing on the original management system of the enterprise with more advantages in this business field, and appropriately absorbing the reasonable content of another enterprise, carrying out innovation and integration, and finally merging the management systems of each department into an independent overall management system of the joint project department. Under the unified management system, on the one hand, it helps to avoid the situation of different enterprises stationed personnel doing their own things; on the other hand, because the new system is transformed from the integration of the original systems of different enterprises, its operability under the new system can also be guaranteed to a certain extent.

The unification of the compensation system aims to mobilize the enthusiasm of all project managers and avoid differences in employee motivation due to differences in the compensation system of different enterprises. As an integrated project-level organization, the joint project department has a greater degree of freedom in terms of salary, and needs to establish a unified salary system, so as to more fairly bind the self-interests of the personnel stationed by different enterprises with the project objectives, form a community of interests and improve the enthusiasm of the work.

By unifying the project-level organizational structure, project objectives, management system and salary system, the joint project department will help solve the "two skins" problem caused by the differences in corporate culture, corporate management system and corporate salary system between the two parties in the consortium, and ensure that both parties The company can maximize its respective advantages during the operation of the consortium.

Undertaking projects with "dual qualifications" engineering companies or consortia will become the leading direction of future engineering general contracting projects, and realizing the deep integration of design technology and construction technology is the "soul" of engineering general contracting development ". In order to crack the "two skins" phenomenon of the consortium model, the most effective way is to unify the structure, personnel, management, technology, salary and other standards to a unified project-level assessment method based on projects. Through the joint project department, it is conducive to realize the deep integration of design technology and construction technology, give full play to the advantages of design technology and construction management technology, ensure the landing of design effect, and complete the construction task with high quality under the specified construction period and investment limit.(Thanks to Shenzhen Construction and Public Works Department and Residential Engineering Management Station for providing a pilot project department model, thanks to all participating units of Harbin Institute of Technology (Shenzhen) International Design Institute for their support and help in this research, and thanks to Yin Liang, Kou Han, Huang Yongfei and Wu Shanjie for their great assistance in this research)