The influence of government targeted procurement strategies on the growth performance of construction small and medium-sized contractors (SMCs) in South Africa

Abstract

This paper examines government targeted procurement (TP) strategies in South Africa and whether these strategies have an influence on the growth performance of Small and medium-sized contractors (SMCs) in the construction industry. The rationale for this study stems from reports that while TP has been widely used as an instrument to improve the position of SMCs in the South African construction industry, three out of five SMCs do not become established firms. In addition, the nature of the influence of TP strategies on the growth performance of SMCs is not known. Following a review of existing literature, the study mainly adopted a quantitative research approach. Questionnaire surveys were administered to Construction Industry Development Board (cidb) Grades 3 to 6 contractors that have executed TP projects within the last 5 years. The collected data was subjected to descriptive and inferential statistical analyses –Spearman’s rank order correlationwas used as an index of association between the study variables. The study found that tendering equity is the most frequently used TP strategy, closely followed by preferencing and mandatory subcontracting. The study also found that positive significant associations exists among preferencing and turnover; third-party management and company assets; tendering equity, turnover and number of employees; as well as accelerated rotations, turnover and number of employees. The study concluded that government intervention through targeted procurement has the potential to achieve its intended results of improving the position of historically disadvantaged SMCs in the construction industry in South Africa if selected and implemented appropriately.