Enhancing Company Financial Transparency for Contractor Selection Process through XBRL: A Conceptual Framework

Received: 21-03-2021 Revised: 20-04-2021 Accepted: 22-04-2021 Published: 26-04-2021 Abstract: Amongst the predicament in selecting a contractor for project implementation is to identify a resilient partner who can withstand the financial impact posed by project risks and constraints. For that matter, decision-makers require full transparency of financial information of the candidates for an effective contractor selection process. In the context of Malaysia, authorities are adopting Extensible Business Reporting Language (XBRL) to convey information about companies financial standing. This study is aimed to develop a conceptual framework in utilising the increase of information brought along by XBRL implementation to facilitate transparency as required by decision-makers during the contractor selection process. This article is also articulating on factors to promote adoption of online business reporting to increase information integrity, recency and contextually to increase the transparency.


Introduction
Contractor selection process plays a vital role in ensuring the success of a project as most of the resources, services and materials are commonly sourced through third parties. As pointed out by Jafari (2013), that many successful projects are associated with the successful selection of competent contractors. Plebankiewicz (2009), identified five main criteria in the contractor selection process that diverge from the conventional scope, cost and time prequalification measures, and apparently, Financial Standing (FS) is one of the prominent criteria. This claim was supported by Acheamfour, Kissi, & Adjei-Kumi, (2019) and Rashvand, Majid, & Pinto, (2015). Expressively, these researches establish that selecting a financially sound contractor increases the prospect of project success. Correspondingly to good contractor selection, decision-makers require full transparency of FS to make a wellinformed judgement in selecting reliable contractors. In Malaysia, the companies financial statements are kept under the stewardship of Companies Commission of Malaysia (SSM) which undertake the role of National Companies and Business information custodian (Companies Act 777, 2016). Hence, SSM is accountable to provide an efficient channel to promote better FS transparency by the government. The latest initiative to promote efficient handling of Companies FS by SSM is the introduction of XBRL technology base system called Malaysian Business Reporting System (MBRS) (Yahaya, 2018). On XBRL research area conversely, academic debates are still slowly but actively prospering (Erkus & Chiu, 2014). Although Henderson, Sheetz, & Trinkle (2012) and Perdana, Robb, & Rohde (2015) has illustrated that trend of XBRL discussion has recently settled gradually as compared to between 2009 and 2013, an indepth study of the impact of XBRL to secondarily impacted areas is still much needed. Given all the facts mentioned, and due to lack of research studying on the impact of XBRL on procurement management process, this paper explores the correlation of XBRL implementation towards a success contractor selection, particularly in the context of improving FS transparency. With the understanding of the relationship, project decision-makers are expected to be able to forecast the risk level of each candidate before contractual engagement is signed-off.

Background
The demand for transparent financial standing become more prominent in the wake of the Enron scandalous historical event that marked the collapse of a giant conglomerate due to deliberate misinterpretation of income of an organisation (Hubbell, 2019). Hubbell (2019), also mentioned that the pressure for companies to demonstrate their financial worthiness is motivated by the need to gain the trust of stakeholders.
Contextually, Procurement function that supports projects sourcing is among main stakeholders to be impressed upon by the contractors (Thomson, 2011), for a better chance of gaining business opportunity and as a means to ensure business profitability. This situation has prompted accountants and related societies around the world to retrospect on the reporting standards. Studies like Ilias, Abd Razak, & Abd Razak, (2014) and Shanmuganathan, mentioned that, in the middle of this significant reform, Hoffman (2017), has introduced XBRL, an evolved version of extensible markup language (XML) technology which initial inception was to standardise websites developments (Mousa, 2016). As XBRL is hoped to fill the gap mentioned above, studies describe the features that can sufficiently explain the context of each information in FS. XBRL allows descriptive information and relationship about data to be tagged along with the instances (as the actual information consists in FS), (Mousa, 2016). This descriptive information is called metadata, which is organised in taxonomies (La Torre, Valentinetti, Dumay, & Rea, 2018). The metadata is also flexibly extensible to represent an actual context and attributes of the instance (O'Riain, Curry, & Harth, 2012).
Ever since the establishment of XBRL, the business communities and authorities around the world has shown great enthusiasm in adopting this technology to promote efficient information exchange between stakeholders (Ilias, Ghani, & Azhar, 2017). Similarly, in Malaysia, although the excitement was triggered as early as 2014 (Ilias et al., 2014), XBRL has only been adopted recently by SSM (New Straits Times, Sept 27, 2018). The move is expected to facilitate the statutory requirement for all companies to reveal its FS. This is because Financial Reporting Act 1997 (Accounting, Act 558, Parliament, 1997), says that it is mandatory for a company to disclose its financial position, management, and operations to enable stakeholders and investors to assess its performance for the fiscal period (Amran, Manaf Rosli Bin, & Che Haat Mohd Hassan, 2008;Abdullah, Almsafir, & Al-Smadi, 2015).
Janssen, van der Voort, & van Veenstra, (2014) maintain that XBRL could be a solution to complex project dynamics which allow fast data exchange between stakeholders based on a case study conducted in the Netherlands. Further study should be conducted on project management areas to understand the effect of efficient data exchange by the implementation of XBRL.
Preliminary studies conducted by researchers as listed in Table 1 shows that the interest to understand the impact of XBRL implementation in Malaysia were noteworthy in the business and accounting world. However, most of the studies were carried out years before the first implementation of XBRL with the focus on implementation success factors. This paper, on the other hand, is aiming to pursue the effect of XBRL towards and efficient contractor selection process explicitly in the Project Management realm. Extending from the need to study on XBRL and Contractor Selection (CS) correlation, this article is proposing a conceptual framework based on models proposed by prior researches conceptualising prominent theories related to online transparency which improves the contractor selection process.

Financial Transparency in Contractor Selection Process
Contractor selection process conventionally focused so much on the deliverables of the contractor. Mohammed, Harris, & Dukyil (2019), identified that traditional criteria (TC) for contractor selection are typical via performance based on cost and quality (please see Figure 1).    That study proposed CS to also, take Resilience Criteria (RC) as a critical consideration. This consideration will view the agility and the flexibility of contractors to deliver project objectives as critical measurement.
Although Table 3, has not exhaustively listed out the whole criteria as discussed in the literature; however, the tabulation explains the similarity of criteria by most of the study about prequalification or selection criteria of contractors. Graphically, the criteria can be illustrated as in Figure 2, below; Since this study is centring on the value brought along by XBRL (used in reporting companies' financial statements), thus FS is the single criterion set to be the focal point of this paper. The focus on FS, however, does not discount the criticality of other evaluation criteria. Instead, it is meant to refine the FS evaluation method based on the XBRL capability complementing the data for the whole Multi-Criteria Decision Method (MCDM) used for overall evaluation purposes.   (New Straits Times & Radhi, 2018). Many studies conducted around the world to understand the success factors for XBRL implementation with several model adoption (Erkus & Chiu, 2014). Recent trend shows that XBRL adoption is best presented by Tornatzky, Fleischer, & Chakrabarti, (1990) Technology-Organization-Environment (TOE) framework (Ahmad, Abu Bakar, Faziharudean, & Mohamad Zaki, 2015). This framework covers internal and external factors which are in line with the scope of this paper, that addresses projects internal and external stakeholders.

XBRL to Increase Transparency of Financial Standing (FS)
Cross-Validation between proposed criteria by Endovitskii et al., (2017) and elements of XBRL introduced in Malaysia by SSM, (2018) shows that all internal factors are available in the SSMxT taxonomies, while external factors may require additional data massaging from XBRL and other available sources to device the indicators. (SSMxT is Malaysian standard XBRL taxonomy, or a dictionary of elements developed by SSM for Companies document online lodgement to SSM) (Yahaya, 2018). Based on this observation, an opportunity to propose a model for XBRL effect on Contractor Selection Process seemingly established.
As described by Pinsker, (2007) and Tarmidi & Roni, (2015), the value proposition of XBRL implementation among others are; efficiency, interoperability, timeliness and full disclosure of information. Tarmidi also further indicates that the values of XBRL implementation increase the transparency in FS reporting. This is also supported by Contract Theory and Principal-Agent Theory which prescribe asymmetric information in decision making requires full disclosure and transparency for better judgement (Bovis & Sanchez Graells, 2016;Li, Mishra, & Netessine, 2017). Thus, the increase of information disclosure by XBRL is expected to improve judgement in the contractor selection process. This correlation and conceptual framework can be described as graphically represented in Figure 5.

Conclusion
Technology advancement is a double edge sword to humankind. The invention of XBRL from the evolution of the Internet has shown both enthusiasm and resentful position by stakeholders. The value creation from the disclosure regime subscribed to XBRL is expected to increase transparency to stakeholders. This is more pertinent to project decision-makers as selecting the right contracting partner will increase the chance for successful project implementation. Studies from around the globe are struggling to understand the social behaviour towards the unprecedented innovation era, as the life-cycle speed of innovation may exceed human comprehension.
Although XBRL was introduced more than two decades ago and considered amid its lifespan, this paper is developing a view on how to take advantage of benefits that created by disclosure-based interorganisational interaction to cater for complicated project-contractor relationship. Thus, the significant of the study is to establish a financial standing assessment criteria framework for a good contractor selection process within the Project Management discipline. This study has also offered a new research opportunity to understand the outcome of the FS contractor selection framework and the influence of external factors on the success of contractor selection. This article is also a part of Doctoral Research for understanding the impact of XBRL on areas mentioned earlier.