Data-driven assessment on the corporate credit scoring mechanism for Chinese construction supervision companies

Abstract

Construction supervision companies (CSCs) in China are engaged by owners mainly to ensure a project is constructed safely and to the quality standards as required under the law in a supervision system that has existed for decades, their credibility and integrity being vital for project safety assurance and quality control. Recently, the Chinese government has proposed a credit scoring mechanism to assess the credibility of CSCs and requested the incorporation of credit scores into the CSC selection processes for public projects. This study investigates the status quo of the credit scoring mechanism and evaluates how credit scores have impacted the competitiveness of CSCs when bidding for supervising public projects by analyzing the bidding results of 5582 public projects and credit scores of 514 CSCs in Nanjing, the capital city of Jiangsu Province in China. The results show that (1) the average CSC credit scores have followed a downward trend in recent years; (2) the score weights in the selection process have significantly increased and the scores start to impact on bidding results when their weights are at or above 4%; (3) signs of local protectionism have been observed as local CSCs have significantly higher credit scores than non-local CSCs; and (4) high scoring CSCs are more competitive than others in terms of revenue generation. The study provides an insightful understanding of China’s existing credit scoring mechanism and its impact on the selection of CSCs for public sector projects, often a major concern of policymakers, researchers, and industry practitioners.