BENEFITS DERIVED FROM IMPLEMENTING ISO 9001:2008 IN THE

PHILIPPINES SME-BASED CONSTRUCTION FIRMS

Joseph Berlin P. Juanzon, PhD1 and Manuel M. Muhi, PhD2

1
Asst. Professor, Mapua Institute of Technology at Laguna, Malayan Colleges of Laguna, Pulo Diezmo Road, Cabuyao,
Laguna 4025 Philippines, Email: jbpjuanzon@mcl.edu.ph

2
VP Research and Development, Polytechnic University of the Philippines, Sta Mesa, Manila
Email: manuel_muhi@yahoo.com

Abstract: ISO 9001, one of the latest in the series of quality management standards issued by the International Organization
for Standardization, is being used by organizations involved in construction all over the world, mostly in European countries as
well as neighboring Asian countries. The construction industry in the Philippines has generally lagged behind other industries
and other countries in the acceptance and implementation of ISO 9001 standards.The main objective of this research paper is to
determine the benefits and advantages of ISO 9001 that will encourage SME-based construction firms to implement ISO 9001
in their organization. The methodology consists of a literature review and a survey distributed to a sample of 139 respondent
firms that have or have not received ISO 9000 certification. Survey result shows that only 6.47% of the total 139 respondents
are implementing ISO 9001 in their construction firm and were assessed on the benefits and advantages from implementing
ISO 9001 in their organization. After analyzing the gathered data, it was concluded that the main benefits for SME-based
construction firms currently implementing ISO 9001:2008 were (1) reduced in customer complaints, (2) helped them improved
their company image, and (3) improved their profit margin or lower their operational costs.

. Keywords: Benefits, ISO 9001:2008, Quality Management Systems (QMS), Small Medium Enterprise (SME).

1 words
Key INTRODUCTION TheSmall
: ISO 9001:2008, Quality Management Systems (QMS), implementation of ISO (SME).
Implementing a Quality Management System has been an
endeavor for some construction companies in the Philippines
for the last two years. While the concept is receiving the
utmost attention from large construction companies that seek
a competitive edge (Bubshait, 1999), small-and medium-
sized construction companies tend to hesitate and postpone
this step. Although they recognize the advantages of
implementing an ISO 9001-compliant Quality Management
System, the difficulty in fully perceiving the benefits
involved has kept many companies from moving ahead.
It has been five years now since the Department of Public
Works and Highways in the Philipppines has issued a
memorandum to large construction firms seeking to get
projects with the agency. Department Order No. 49,
Secretary Singson requires Large A, Medium B, and
Medium A contractors of DPWH projects to seek ISO
9000 certification from a recognized accreditation body to
ensure that the systems and procedures used by said
contractors were quality assured and conform to
international standards. The contractors were given two
years to comply with the said requirement. Thus, on January
01, 2013, the ISO 9000 Certification was an added
requirement in the eligibility screening or prequalification of
contractors for the procurement of infrastructure projects
costing P100 Million up to P 300 Million.
Medium Enterprise 9001:2008 in the Philippines is
lagging behind its neighboring ASEAN countries such as
Singapore, Malaysia and Indonesia. The level of awareness
of construction firms to implement ISO 9001 was still very
low especially with the Small and Medium Enterprises
(Juanzon 2014).
1.1 Research Problem and Objectives
The main objective of this study is to identify the benefits
and advantages that will motivate not only large construction
firms but as well as small-medium enterprises which
constitute more than ninety percent of the licensed
construction firms in the Philippines to implement ISO
9001:2008 in their organization.
2 REVIEW OF PERTINENT LITERATURE
ISO 900 Historical Background
Since the publication of the ISO 9000 series of standards in
1987 by the International Organization for Standardization
(ISO), quality management has received attention around the
world on an unprecedented scale. From Europe, the USA
and Japan, the acceptance of ISO 9000 and third party
certification has continued to spread to the newly
industrialized and developing economies of Asia because
many manufacturers in these countries export to
industrialized countries. Moreover, several multinational
corporations familiar with ISO 9000 have operations in Asia
and use local suppliers who are under pressure from these
key customers to become certified (Ofori, 2001).

1
The creation of Quality Management Systems (QMS) has
gathered the attention in both the industry and the academe
sectors during the 1980s and 1990s. Total Quality
Management was favored and largely implemented in the
United States. The International Standard Organizations
ISO answer was the ISO 9000 set of norms (Cachadinha
2009). This set of norms was soon defining the industry
standard in certification of QMS in Europe. Although the
certification of QMS in several European countries,
including Portugal, has been concluded, that period has
mainly served to consolidate the accreditation networks and
certification bodies. Critics of the 1994 version of the ISO
9000 set of norms noted excessive complexity of procedures
and excessive bureaucracy (Bubshait and Al-Atiq 1999),
without correspondence in terms of the quality of the final
product and of customers satisfaction.
The ISO Standard
The ISO-9000 Standards are a model for a documented
quality system which focuses on the company and customer
needs and expectations. The application of the ISO-9000
Standards is voluntary and covers the entire company,
whether service oriented or industrial, with the purpose of
formalizing the methods or the processes of the company
(Salem 1999).
According to the original 1987 bulletin from the
International Organization for Standardization (ISO), ISO
9000 is "a series of international standards dealing with
quality systems that can be used for external quality
assurances purposes." The ISO was founded in 1946 to
develop international quality standards to facilitate
worldwide trade and help Western countries regain their
competitiveness. The organization consists of a coordinating
group of members from more than 90 countries. The U.S.
representative is the American National Standards Institute
(Barnes, 2000). Figure 1 shows the framework of ISO
9001:2008 based on Demings and Shewarts cycle better
known as PDCA (Plan, Do, Check, Act) cycle.
Figure 1. ISO 9001:2008 Framework
The acceptance of ISO 9000 standards in the construction
industries is not as wide as in other industries such as
manufacturing. There are special features in the construction
industry that limit the implementation of the ISO 9000
standard. One of these features is that a construction project
is usually a unique collection of people, equipment, and
materials brought together at a unique location under unique
weather conditions, while most manufacturing is a system of
mass production wherein all of these factors are consistent
with producing typical products over and over again (Phenol,
1994).
ISO 9001 Application in Construction
Due to the generic nature of ISO 9000, it has also been
implemented in the construction industry. Specifically, and
following the 1994 revisions scheme, ISO 9001 and 9002
can be applied to construction-related firms (Chini 2003).
Nevertheless, they have been adapted for construction
procedures and are believed by some parties to cover a wide
scope of quality related activities of construction-related
firms. Both Chung (1999) and Nee (1996) have illustrated
the interaction and application of the twenty requirements of
ISO 9000 in construction activities.
Construction firms for a variety of reasons pursue ISO 9000.
Ideally, the main motivator for certification should be the
achievement of quality in a companys internal procedures in
order to optimize resources and better satisfy customers
requirements. Many organizations are pursuing certification
in order to satisfy specific requirements from one or more
customers (Chini 2003). This is true for firms working or
targeting projects for owners that are either certified to ISO
9000 or require certifications for their suppliers.
In other developed countries such as Australia (Love & Li,
2000), clients now require contractors to be ISO 9000
certified. Also, under Swedish law, the construction firm
must submit a statement giving evidence of its quality
commitment (Landin & Persson, 1998). Construction
companies in the US and Europe acquired ISO 9000
certification soon after the QMS was formalized in 1987.
Since then, many studies have been undertaken on the
effectiveness of ISO 9000 in construction, and the costs,
benefits and long-term implications of implementing it in
construction organizations (Ofori 2001).
It is believed that a construction companys operations can
improve through the establishment of a quality system
designed to standardize corporate procedures (Chung 1999).
ISO 9000 is also considered as an effective control
mechanism that seeks to reduce waste and labor
inefficiencies in a process so that quality in the production
and delivery process can be ensured. From another point of
view, ISO 9000 certification provides proof that an optimal
level of quality is being obtained throughout all stages of the
products quality cycle (Love and Li 2000), therefore
expanding a companys marketing opportunities.
2
ISO 9000 has gained wide acceptance in the global
construction market. Construction has the third highest
number of certificates of all industrial sectors at a worldwide
level, behind only electrical and optical equipment and basic
metal/fabricated metal products. According to data published
by the International Organization for Standardization (ISO
2000), approximately 25,273 construction-related firms had
achieved certification up to 1999. This accounts for 7% of
the total number of certified companies in all industrial
sectors. Far East countries rank among the most vehement
advocates of standardization in the construction industry; in
fact, Korea (with 4,096 certificates in 1999) and China (with
2,051 certificates in the same time period) rank first and
third in the list of countries with the highest number of ISO
9000 certificates in the construction industry. In countries
like Australia, certification is becoming mandatory for all
construction organizations wishing to do business with
government agencies and major private companies. Europe
is increasingly requiring knowledge of ISO 9000 for
construction companies, with support from the European
Union. Countries such as Italy, the Netherlands, and
Switzerland have the most certifications in the construction
sector for the European continent; they rank second, seventh,
and eighth in the world, respectively. However, acceptance
of the standards in Europe still experiences problems,
especially since the European construction industry is
traditionally fragmented (Chini 2003).
SME Construction Firm
Micro, small, and medium enterprises (MSMEs) are defined
as any business activity/enterprise engaged in industry, agri-
business/services, whether single proprietorship, cooperative,
partnership, or corporation whose total assets, inclusive of
those arising from loans but exclusive of the land on which
the particular business entity's office, plant and equipment
are situated, must have value falling under the following
categories: By Asset Size, Micro: Up to P3,000,000; Small:
3,000,001 - P15,000,000; Medium: P15,000,001 -
P100,000,000; Large: above P100,000,000 (Leano 2006).
Based on the study conducted by Philippine Institute for
Development Studies, Small and Medium Enterprises
(SMEs) have played an important role in industrial
production in particular, and economic growth in general in
less developed, developing, and transitional economies
worldwide. They have generally provided the bulk of
entrepreneurs and employment in these economies, and the
necessary foundations for sustained economic growth and
rising incomes.
The SMEs are the core of the construction industry
development and play a main role in the urban and rural
building. With the professional subdivision, the increasing of
professional ability and the improvement of project sub-
contract system in the construction industry, the roles of the
Industry Cluster of SMEs will become more and more
obvious, including stabilizing economic development,
enlarging employment rate in the towns, and promoting
technology innovation (Liao Yuping, Yao Bing, 2009).
Benefits of ISO 9001
There are a number of benefits and advantages being cited in
different literatures regarding the implementation of ISO
9001 in large and medium construction firms.
According to Rayner and Porters 1991 investigation of the
standards impacts on 20 SMEs found that 70 per cent of
companies cited marketing advantages as the principal
benefits: customer retention, customer acquisition, entry into
new markets and fewer dissatisfied customers were the
specific outcomes of certification. The vast majority of firms
(85 per cent) felt their expectations had been met or
exceeded.
Lam et al. (1994) observe that implementing ISO has given
organizations an enhanced corporate image, increased
competitiveness and the ability to satisfy the customer's
needs to acceptable levels of quality. Other reported benefits
include increased efficiency and better co-ordination both on
projects and within the company as a whole.
The results of a study conducted by Manchester Business
School (1995) showed that among the 1190 respondents to
their survey, 69% felt that their expectations of the standard
had been met or exceeded. Only 5% claimed to be very
dissatisfied with the impact of the standards on their
organizations; 99% claimed that they had experienced
benefits from certifications. On the whole, large and
medium-sized organizations experienced greater benefits
than those with 10 or less employees. Other findings of the
study were summarized as:
1. The most important benefits of the ISO-9000 were
seen as better management control, greater
awareness of procedural problems and promotional
value.
2. Companies with ISO-9000 certification showed a
significantly higher rate of sales growth than the
national average.
3. Those most satisfied with the impact of ISO-9000
on their organizations had sought the standards for
better management control and improved customer
service, while those least satisfied with the
standards had been motivated purely by pressure to
keep existing customers and use the ISO-9000
Standards as a promotional tool.
4. More respondents believed the standards to be cost-
effective than not; the majority said they would
recommend the ISO-9000 Standards to others.
5. 60% of the surveyed companies considered that the
ISO-9000 certification was an important step
towards total quality management (TQM).
6. The most common reason for seeking certification
was anticipation of future customer requirements,
especially among small-size companies.
3
Chew and Chai (1995) pinpointed some of the advantages of QMS implementation: the results show that the respondents'
implementing the ISO-9000 to a construction company as it: rating of this factor was zero.
1. Optimizes resources usage in the organization.
2. Improves awareness of company's objectives and
policies. 3. METHODOLOGY
3. Improves communication between various The respondents of the study were the operational
departments in the same organization. managers/supervisors and company owners of the SME-
4. Improves tractability of quality problems. based construction firms in CALABARZON, since most
5. Cuts down material wastage. number of construction projects were located in this area
6. Formalized systems ensure consistent quality during the time of research. Applying Precision Approach
services. (Onate 1990) for the population proportion, assuming
7. Provides useful documented reference. P=proportion of contractors aware of the ISO 9001:2008 and
8. Improves work quality with fewer rejects and less Q=proportion of contractors not aware of the ISO 9001:2008
repeated work. = 0.50 and targeting a C of the estimate as 7.5 percent the
9. Rectifies errors at early stage. sample size was determined using the formula:
10. Improves relationship with the owner,
subcontractors, engineer, architect and material n = NQ / PC2 (N-1) + Q (1)
suppliers.
11. Improves corporate quality image. where N = 613, Q = 0.50, P = 0.50, C = 0.075, resulting to n
12. Introduces continuous improvement through a = 139 or a sampling rate equivalent to approximately 22.5
review of the quality system. percent. Table 1 shows the allocated proportion of the SME-
13. Improves records and makes retrieval of contractors in each province.
information easy in case of litigation.
14. Helps project to be completed within the time Table 1. Research Sampling
frame stipulated in the contract. PROVINCE TOTAL SME SAMPLE
CONTRACTORS (N) POPULATION SIZE (n)
However, despite the benefits and advantages that ISO 9001 Cavite 96 22
discussed in other literature, Chew and Chai mentioned Laguna 115 26
some difficulties and obstacles in introducing the ISO 9001 Batangas 195 44
standards in some developing countries like Malaysia. These Rizal 137 31
were: Quezon 70 16
1. Customer practice of awarding contract to the TOTAL 613 139
lowest bidder.
2. Lack of skillful workmanship. Respondents were asked to rank five significant reasons on
3. Outdated construction technology due to lack of why they were implementing ISO 9001 in their organization
funds for research and development. and five significant benefits derived from implementing ISO
4. Lack of continuous professional development. 9001in their organization, using priority sorting with a rank
5. Poor building materials which do not meet value of 1 for the extremely significant, then the next
specifications. significant and value of 5 for least significant ranking.
6. Poor design by inexperienced architects and
engineers. Rating scale was used to measure the level of significance
7. Short construction period. for SME-based construction firms to implement ISO
8. Conflict of interest among the contractual parties. 9001:2008 as shown in Table 2. The data was analysed using
KruskalWallis one-way analysis of variance by ranks.
According to Ofori (2001), the two most important benefits
enjoyed by contractors were enhanced corporate image and Table 2. Rating scale of significant level
better operating procedures. Based on the result of their Rating Description
studies, also rated highly were increased competitiveness
1.00 - 1.80 Extremely Significant
and enhanced productivity. It is clear in their studies that
1.81 - 2.60 Very Significant
QMS certification helped the contractors improve their
2.61 - 3.40 Moderately Significant
internal activities and their interphase with the external
3.41 - 4.20 Slightly Significant
business environment by enhancing their operational
4.20 - 5.00 Least Significant
performance, and assuring their customers and the general
public about the quality of their products and services. The
first three benefits indicated by the responding contractors 4. RESULTS AND DISCUSSIONS
were among the four most important reasons why the
construction companies sought certification. The companies Survey result shows that only nine (9) or 6.47% of the total
did not experience significant cost savings from ISO 9000 139 respondents are implementing ISO 9001:2008 in their

4
construction firm, Six (6) of which are from Batangas Table 5. Benefits derived from implementing ISO 9001:2008
province, two (2) from Rizal and only one (1) from Laguna Benefits Mean Rank
province as shown in Table 3. Reduced customer complaints 2.14 1
Improved delivery time 3.00 5
Table 3. SME-Based Construction Firm that are Reduced defects 3.33 7.5
Implementing ISO 9001:2008 Shorter cycle/building time - -
IMPLEMEN PROVINCES Increased customer satisfaction 3.00 5
-TING ISO CAV LAG BAT RIZ QUE TOT % Increased employee productivity 4.00 10.5
9001:2008 Improved machine efficiency 3.00 5
YES 0 1 6 2 0 9 6.47 Improved profit margin/Lower 2.75 2.5
NO 22 25 38 29 16 139 93.53 operational cost
TOTAL 22 26 44 31 16 139 100.00 Superior quality 3.67 9
. Improve Company Image 2.75 2.5
Based on the survey result on the nine construction firm Standardized process 3.33 7.5
implementing ISO 9001, the main reasons why they are Increased management commitment 4.00 10.5
implementing it in their construction firm are: 1) it is
required by their client, 2) to qualify for bidding, and 3) to 5. CONCLUSION AND RECOMMENDATION
improve company image, as shown in Table 4. This opposes
the previous studies by Ofori (2001), that contractors in Findings from the study clearly show that ISO 9001:2008
Singapore decided to adopt QMS mainly for assuring the was still not widely accepted as one of the quality
quality of their projects to their clients, improving their management concept or tool in the construction industry
operational procedures and increasing their corporate considering that only 6.47% of the SME-based respondents
competitiveness. Contractors in Singapore were not are implementing ISO 9001. This validates previous studies
motivated by the cost-reduction potential of ISO 9000 conducted in Malaysia by Said et al. (2009), that in general,
implementation although they indicated cost considerations the organizations were unaware about the benefits of QMS
as their prime project objective. because they lack in fulfilling commitment responsibilities,
and failure to disseminate organization policy to all level of
Table 4. Reasons for implementing ISO in their organization management. Furthermore, the organization also lack of
Top 5 competence skills to be applied in different levels of
Reasons Mean Ranking management. Another problem is inadequate QMS
Qualify for Bidding 2.57 2 monitoring, training and unawareness in abiding by the
Required by customer 2.00 1 standard requirement. It was highly evident on the previous
Increase employee productivity 3.33 5 studies and survey results in the current study that only
Reduce customer complaints 3.80 7 improve in company image as the only common reason
Increase profit margins 3.50 6 and benefit derived from implementing ISO 9001. It can also
Improve company image 2.6 3 be concluded that the requirement of construction firms to
Increase customer satisfaction 3.00 4 be ISO certified by the directives of DPWH as a prerequisite
Deliver projects on 4.00 8.5 to qualify for bidding is one of the best motivation for
schedule/Reduce delays construction firm to implement ISO 9001 in their
Use resources more efficiently 4.00 8.5 organization, given that the top reason for implementing ISO
in their organization are, if will be required by the clients
As shown in Table 5, the top three benefits derived from and to quality for bidding. ISO 9001 certification has the
implementing ISO 9001:2008 are: 1) Reduced customer potential to upgrade the construction industry, and for this to
complaints, 2) Improved profit margin/Lower operational be achieved, construction firms should be encouraged and
cost, and 3) Improved company image, based on statistical supported to derive maximum gains from the
analysis by ranking. This contradicts previous studies implementation of the QMS and purposefully seek to make
reported by Manchester Business School (1995) that the progress along the quality path.
most common reason for seeking certification was
anticipation of future customer requirements, especially ACKNOWLEDGMENT
among small-size companies. However, improving corporate The Authors would like to acknowledge the members of
quality image is listed as one of the advantage in committee of the Inter-Specialty Group especially to its
implementing ISO 9001 according to Chew and Chai (1995), chairman Robert S. Licup, Ph.D., to Engr. Eustaquio T.
which ranks 3 based on survey results. Coronel, Jr., chairman, Project Management and
Construction Engineering Specialty Division and of course
to the incumbent President of PICE National Engr. Eugenio
R. Pipo Jr. for giving us this opportunity to present this
paper in the 41st PICE National Convention.

5
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