Contribution-based profit-sharing scheme for joint ventures/Pelno pasidalijimo tarp imoniu schema, pagrista patirtomis islaidomis.

Hsueh, Sung-Lin ; Yan, Min-Ren

1. Introduction

The construction industry is characterized by sporadic projects and fierce competition (Cheng et al. 2001). Stepping into the globalization era, the construction industry will face a more severe business environment. Joint Venture (JV) is considered, by international construction firms, one of the most efficient methods of reducing financial risks (Bing et al. 1999a; Bing et al. 1999b). Today, in order to build competitiveness, construction firms may want to reduce costs and increase profits through coalitions (Proverbs, Holt 2000), while the established cost advantage can also bring more market opportunities to the participants (Lo et al. 2007). In addition, a strong coalition can enhance the team qualification, which is especially important for projects delivered by qualification-based selection system (Lo, Yan 2009). However, previous studies have indicated that construction firms are mainly provisional contracting organizations and thus are difficult to establish a long-term cooperative relationship (Koskela 2003; Wegelius-Lehtonen 2001). Moreover, large-scale companies may have a manipulative mind-set, which often causes profit-sharing problems adverse to benefit sharing. Such a partnership will lead to mistrust between the cooperating parties (McIvor 2001). Hence, it is difficult to realize coalition (Owen 1995) when there are unfair and inappropriate profit-sharing modes within the competitor partnerships unable to meet their expected profit.

To form a JV team, companies have to select partner(s), assign each party's work scope, and especially, negotiate the sharing of profits, which is usually done by arranging separate amounts of the expected total profits or by sharing proportionally, depending on the collaborating relationships among the JV team. However, since each JV party is pursuing its maximum profits, the conflicts of interest make the sharing of profits always a challenging task (Yan 2011). Conventionally, construction JV firms will negotiate their individual work range and ratio of investment before a cooperative agreement is reached, and then distribute the profits based on the ratio of investment. As such a profit-sharing mode only considers the capitals invested by the cooperative firms, and neglects other contributions of the individual firms to the project, the firm possessing core competence and contribution may often be dissatisfied with the profit-sharing. Although JV may bring benefits to the cooperative firms in different degrees, such as costs reduction (Proverbs, Holt 2000), financial advantages, information sharing (Simchi-Levi et al. 2001), resource complementation (Nicolini 2001), etc., there are few cases of long-term relationships between the cooperative firms in practice. The main reason is that the JV participators have not found an equilibrium point of interest distribution in the partnership. If the profit generated through JVs can meet the expectations of all participators, and the profit gained by each participator is higher than independent contracting, the firms will all be willing to participate in the JV. Meanwhile, both parties can gain better beneficial results through mutual sharing of helpful resources (Dainty et al. 2001).

This paper will initially review costs advantages and profit-sharing issues of JV firms, and then use cooperative game theory and Shapley Value to propose a model to calculate profit-sharing of construction joint ventures. Construction firms can use this profit-sharing model as an important negotiation basis in selecting JV partners. At the end, a case study is conducted to describe how a foreign construction firm and a local construction company achieve a successful partnership, earning higher profits for both parties than independent contracting, even though their profit-sharing is not based on ratio of investment.

2. Production costs and profits of JV

While selecting appropriate and good firm for JVs can reduce investment risk and escalate work efficiency, it is also crucial to make accurate estimation upon cost and gained profit comparing independent with JVs before cooperation (Hsueh et al. 2007).

In independent operations, the profit of individual contractor is shown in Eq. (1). Based on the cost structure and work items, the total cost of a project can be divided into many costs for sub-work items. However, in a coalition, the profit of the coalition can be increased by combining the specialties of the coalition members. Coalition between construction firms can obviously help enhance market competitiveness and reduce costs. The cost function of a coalition is shown as Eq. (2).

[V.sub.i] = [C.sub.a] - [n.summation over (j=1)] [C.sub.ij], (1)

[V.sub.c] = [C.sub.a] - [n.summation over (j=1)] min [C.sub.cj], (2)

[C.sub.a] = total project contract amount,

[V.sub.i] = total profit of contractor i,

[C.sub.ij] = contractor i's cost of work item j,

[V.sub.c] = total profit of coalition,

min [C.sub.cj] = the minimum cost of work item j.

Eq. (2) demonstrates the possibility to reduce project cost by a proper coalition. For example, if a foreign firm with high technological capacity cooperates with a local firm, the cost advantages of both parties can be integrated to reduce total project costs.

Foreign construction firms possess affluent capital, technology, and large-scale construction equipments, and are therefore, advantageously positioned for projects requiring high-level technology. However, as foreign construction firms are usually not familiar with local environments, they will face higher costs in acquisition of human resources. In addition, their administrative and marketing costs will be high due to unstable project sources. The projects contracted by local construction firms are usually of lower technological levels. Most local firms lack high-level engineering staff and equipment, and will pay a higher cost when contracting projects of higher technological levels. Hence, they seldom contract such projects.

Local construction firms can promote business volume and reduce costs through coalition. Independent operating construction firms have less project sources due to capital limitations and qualification limits for bidding on some construction projects. As mentioned above, foreign construction firms can provide local firms with professional technology and equipment, and local firms are relatively familiar with local operation rules and can provide foreign firms with adequate human resources. Through JV, foreign firms can reduce indirect costs and increase bidding opportunities in local construction markets. In addition, local firms can save a large sum of expenditures on equipment and enhance their technological level to some degree.

3. Cooperative Games in JVs

It would be unfair especially for the party possessing with high technology and pose the barrier on a cooperative relationship, if the profit-sharing is set according to the proportion of capital invested. From the perspective of cooperative game theory, JVs take not only capital but also proficiency into consideration when distributing profit (Ferrero et al. 1997; Jia, Yokoyama 2003). Though the party with higher level of technology may have better profit-sharing, the profit gained through JVs is higher than independent construction pattern.

There are applications of game theory in construction industry. Ho (2005) modeled a bid compensation process as a non-cooperate static game to develop appropriate bid compensation strategies for project owners. Construction claims and financial renegotiation in PPP (public-private partnership) projects were approached as a dynamic non-cooperate game (Ho, Liu 2004; Ho 2007). Negotiations between BOT participants as well as risk allocations are also analyzed by game theory (Medda 2007; Shen et al. 2007). Studies in cooperative game are limited in collaborating formwork subcontractor (Perng et al. 2005) and subcontractors cooperation in time (Asgari, Afshar 2008). Few studies have been drawn on the construction JVs by using cooperative-game-theory approach.

3.1. Cooperative Game Theory

Game, refers to a confrontation state in which two, or more, players pursue their respective goals (Rasmusen 2001). The actions taken by the players to reach their goals are called strategy. The result of strategy implementation is called the payoff (Kreps 1990). The three factors to constitute a game are players, strategy, and payoff. In a game, in order to maximize their interest, the players may choose to compete or cooperate. The players will most often choose a method that is most advantageous to them. In the game theory, the game is divided into two forms: cooperative game and non-cooperative game. In a non-cooperative game, the players pursue their individual interest and choose their own strategy, and in deciding their own strategy, the players will often consider other players (Owen 1995). In a cooperative game, the players pursue a common goal to maximize the interest of the team under certain constraint conditions of the game. If the cooperation cannot generate a good result, the players will choose not to participate in the game. To form a cooperative game, the interest distribution between the players must meet the following two criteria:

1. Aggregation of the interest distributed to each player must be equal to the interest gained by the coalition formed by all the players.

2. The interest obtained by each player after participating in the coalition must not be less than the interest obtained in previous independent operations.

In the game theory, how to obtain an equilibrium strategy is regarded as a problem of the cooperative game in the form of coalition (or in a general form), such as the strategic coalition between a local construction firm and a foreign firm. When participating in the bidding for a project, the construction firm will choose operation modes based on evaluation of its own profitability. If the firm can obtain more profit through coalition to reduce total coalition costs, it is possible to form the coalition, and consequently the participants can share the profit in a proper interest distribution method. The premise of a cooperative game is mutual trust between the players and common pursuance of maximum group interest.

3.2. The Shapley Value

Shapley Value is an important topic in the cooperative game theory. It is the expected marginal amount contributed by a player to a coalition (Shapley 1953). Thus, the concept of Shapley Value can be used for sharing profit of JV projects based on the contributions of each JV participant. By using Shapley Value, the interest obtained after cooperation can be fairly shared. The distribution model is based on the following three axioms (Shapley 1953):

Axiom 1, axiom of symmetry. The rewards of each player is only in influenced by its contribution to the game, and not affected by its own preference or status.

Axiom 2, axiom of efficiency. The rewards generated by the game must be completely distributed to all the players.

Axiom 3, axiom of aggregation. If a player is simultaneously presented in two games, the rewards of this player are the aggregation of its rewards obtained from both games.

For each participator i, the Shapley Value calculates the aggregation of the contributions made by i to all the coalitions, as shown in Eq. (3):

[[phi].sub.i] = [summation over (S[subset or equal to]N)] (s - 1)!(n - s)!/n! {v(s) - v(S - {i})}, (3)

[[phi].sub.i] is the Shapley Value of participator i, and is the aggregation of the contributions made by i to all the coalitions in which it may be present.

N represents the set of all the members that may participate in the cooperative game, and the number of elements included is n.

S is the cooperative coalition, including member i, and is a subset of N. The number of elements included in S is s.

v is the profit gained by a coalition made up of multiple players, and v(S) is the maximum possible profit gained by S coalition.

v(S-{i}) is the maximum possible profit gained by S coalition, not including member i.

(s - 1)!(n - 5)1!/n! represents the possibility of i joining the S-{i} coalition.

In the circumstance of JVs, the coalition formed is two construction firms T{1, 2}. V(1) represents the profit gained when the first firm (P1) contracts the construction project independently, V(2) represents the profit gained when the second firm (P2) contracts the construction project independently, V(12) represents the profit gained when the two firms cooperate in the form of a JV in contracting the project, and V([phi]) represents the profit when the firms do not contract the project.

Hence, according to the definition of Shapley Value, the reward of P1 ([phi] 1) in the coalition is: [phi] 1 = 1/2{ V(1) - V([phi])} + 1/2{ V(12) - V(2)} }; The reward of P2 ([phi] 2) is: [phi] 2 = 1/2{ V(2) - V([phi])} + 1/2{ V(12) - V(1)}.

4. Case Study

The majority of construction projects in Taiwan are located in western areas, and local development of construction in eastern areas has been slow for decades. In order to promote industrial and economic development in eastern areas, the Taiwanese government began construction of the "National Su Hwa Highway" in 2003, to be constructed concurrently with both the West Taiwan Highway and Expressway Network to form a complete highway network around Taiwan, and realize the government goal of balancing local construction development. The planned "National Su Hwa Highway" is 102 kilometers long and the project costs are as high as NT$178.7 billion, with an investment scale second only to the national high-speed railway plan in Taiwan. As East Taiwan is mountainous, most projects are tunnelling works. Due to lack of technology in tunnelling works, the local construction firms in Taiwan must cooperate with foreign firms in the form of JVs.

This section uses the case of cooperation between a medium-sized Taiwanese construction firm and a Japanese construction firm to illustrate how a foreign firm uses the Shapley Value to evaluate and select a local partner when attempting to enter the local market and to reach an agreement on profit-sharing with the partner.

4.1. Background of the JV project

The project, in which both foreign and local firms are engaged in a JV team, is "No. 9 Tunnelling Project Southern Section". The length of the tunnel is 5.5 kilometers, and the contract amount is NT$3,229 million. In line with the agreement between the cooperative firms in forming for a JV project in order to reduce production costs and indirect overhead costs, the project is divided into civil work and main tunnelling work. The local firm is mainly responsible for the civil work and the foreign firm is mainly responsible for the tunnelling work. Details of the JV project are shown in Table 1.

4.2. Evaluation and selection of partner

There are two local construction firms, who want to cooperate with a foreign firm specializing in tunnelling work. One is a medium-scale construction firm (local firm A) and the other is a large-scale construction firm (local firm B). Before the cooperation, each of the three firms had evaluated the feasibility and costs of contracting the project independently. The estimated project costs are shown in Table 2 and the estimated profits are determined based on Eq. (1). The foreign firm is a specialized constructor in the aspect of tunnelling work who can directly send technical staff and equipment to Taiwan, and therefore the engineering costs for the tunnelling work is low. However, as the foreign firm is not familiar with the local environment, it faces relatively high production costs for the civil work, which requires relatively more local human resources. Its indirect costs are also high. The local firms are characterized by low costs for civil work and low indirect costs. However, if they assume the tunnelling work independently, they will have to pay large sums of expenditures to purchase or lease extra equipment. Meanwhile, the local large-scale firm is more advantageous than the medium-scale firm in the aspect of technology and has lower direct costs but faces higher indirect costs due to the larger scale of the company.

Overall, the foreign firm estimated a project cost of NT$3,108.76 million if it contracts the project independently, the local large-scale firm estimated a project cost of NT$3,134.78 million, while the local medium-scale firm estimated a project cost of NT$3,234.58 million which would induce a loss of NT$5.58 million.

To make the project become more profitable, each firm is seeking a cooperative plan to increase profit. Hence, after evaluation, it is believed that the total project costs will be lower if the foreign firm cooperates with a local firm in the form of a JV to contract the project. The foreign firm can take the specific responsibility of tunnelling works, and all civil works and project management tasks can be assigned to the local firm. Although there may be some extra costs for coordination and integration between the two parties, the total costs can still be lower than independent operations.

The foreign firm wants to select one local construction firm as its partner and therefore evaluated the costs, after cooperation, with each local construction firm. Based on the individual estimated project costs in Table 2, the estimated project cost for each JV team can be determined (see Table 3). Since individual firms have relative low costs in handling at least one of the project tasks (civil work, tunnelling, or administration work), the work division of a JV team would naturally be based on the relative costs of specific tasks. For example, for foreign-local firm A JV team, the best work division of foreign firm is to handle tunnelling work and rely on the local firm for civil work and administration works. Thus, the estimated total project cost for the JV team would be the costs for tunnelling of foreign firm and the civil work and indirect costs of local firm, plus certain transaction cost (10%). According to the principle, the estimated project cost for each joint venture team can be determined.

The evaluation results show that, the total costs can be reduced to NT$3,053.69 million and a profit of NT$175.31 million if it cooperates with the local medium-scale firm, while the total costs can be reduced to NT$3,011.02 million and a profit of NT$ 217.98 million if it cooperates with the large-scale firm. However, the total project profit is only a general reference for cooperation, the profit amount distributed to each firm must be further calculated in order to determine which cooperative plan is better for both parties.

The profit distributed to each firm is calculated based on the concept of Shapley Value (see Table 4). In the first coalition, as the local firm may make a loss if it contracts the project independently, the profit is considered as zero. Hence, based on Eq. (3), the profit allocated to the foreign firm is 1/2(12024) + 1/2(17531 - 0) = 147.77 million, while the profit allocated to the local firm is 1/2(0) + 1/2(17531 - 12024) = 27.54 million.

In the second coalition, the profit allocated to the foreign firm is 1/2(12024) + 1/2(21798 - 9422) = 122 million, while the profit allocated to the local firm is 1/2(9422) + 1/2(21798 - 12024) = 95.98 million.

The results show that the foreign firm will obtain higher profit if it participates in the first coalition. Hence, the foreign firm has an incentive to cooperate with the local medium-scale construction firm.

4.3. Evaluation of the profit-sharing method

Based on the information gathered by the JV team and the bid evaluation, the coalition of the foreign firm and the local medium-scale firm could win the contract for this project at a price of NT$3,229 million. Pricing of this project is divided into 7 milestones. The project costs borne by each party based on ratio of investment are shown in Table 5, and the accumulated costs for the project are shown in Fig. 1.

[FIGURE 1 OMITTED]

For the profits generated after the cooperation, a comparison is made between the distribution method based on ratio of investment and the proposed method (see Table 6). Fig. 2 shows the profits "distributed based on ratio of investment", "distributed based on Shapley method", and generated from "independent contracting" for comparison. As for distribution of profit in cooperation, the local firm, will gain more profit if the distribution is based on ratio of investment. For the foreign firm, however, the profit gained is even lower than independent contracting in spite of the risk of losing the contract after coalition. Hence, this JV plan is not attractive to the foreign firm. Relatively, if the profit is distributed based on the proposed method, the foreign firm will gain more profit than independent contracting and thus the plan becomes attractive. On the other side, the local firm still can benefit from the cooperation with the foreign firm and obtain a reasonable profit, while the local firm might face a certain loss if contracting independently. In conclusion, comparison of the profits distributed to the foreign firm and the local firm based on the proposed method and the profits generated from independent contracting, indicates a profit increase of NT$27.53 million for the foreign firm, and an increase of NT$33.12 million for the local firm. The closeness of increased profits for both parties demonstrates that the proposed method is more fair, rational, and feasible than the traditional distribution method based on ratio of investment.

5. Conclusions

Through coalition of JV, the construction firms can share professional technologies and resources and increase sources of new contracts by breaking through the bidding thresholds. The foreign firm can save indirect costs, while the local firm can avoid capital tied-up by saving a large sum of expenditures on equipment, and, to some degree, enhance its technological level. A win-win opportunity is thus created.

For a commercial perspective, a successful JV ensures all the participants to obtain more profits than performing the work individually. However, the traditional profit-sharing merely based on the ratio of investment might not satisfy all the JV participants in some cases. This paper proposes a profit-sharing model based on the cooperative game theory to make up for the deficiency of the traditional profit-sharing method and promote the relationship between JV firms. In the end, the case study shows that, the contribution-based profit-sharing model can ensure all the JV participants to obtain a profit more than their independent works. Thus, the proposed model can be used for supporting the partner evaluation and selection decisions, which facilitate construction companies to choose the most appropriate JV partners through prior profit calculation and find a profit-sharing solution acceptable to both parties. More successful JVs might be formed with the innovative solution to the conventional problems of profit-sharing.

doi: 10.3846/20294913.2011.580578

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Sung-Lin Hsueh (1), Min-Ren Yan (2)

(1) Tung Fang Design University, Department of Interior Design, No. 110. Tung Fang Rd. Hu-Nei Shang Kaohsiung Hsien, Taiwan, R.O.C.

(2) Chinese Culture University (SCE), Department of International Business Administration, No. 231. Sec. 2, Jianguo S. Rd., Da-an District, Taipei City 106, Taiwan, R.O.C.

E-mails: (1) [email protected]; (2) [email protected] (corresponding author)

Received 07 July 2009; accepted 28 June 2010

Sung-Lin HSUEH earned his PhD degree from the Dept of Architecture at the National Taiwan University of Science and Technology in 2006. Currently, he is an Associate Professor at the Dept of Interior Design in Tung Fang Design University. Concurrently, he is the Managing Director of SIN-YA International Engineering Consultants Inc (Taiwan) engaged in developing real estate of the Chinese market.

Min-Ren YAN is currently an Assistant Professor and Deputy Director of the Department of International Business Administration in Chinese Culture University (SCE). Concurrently, he is the Director of Quality Center for Business Excellence in his College and business consultant in web technology, marketing, and services industries. His research interests focus on strategic alliances, game theoretical analysis, project business economics, and decision models.

Table 1. Basic information of the JV project

Differentiation Foreign Firm Local Firm

Project Project type Tunnelling
 project
characteristics Tunnel length 5.5 kilometers
 Contract NT$3,229,000,000
 amount
 Ratio of 60% 40%
 investment

 Equipment Large-scale Small and
 equipment, i.e. medium-scale
 shield machines construction
 (Transportation) equipment

 Project team 4 persons 20 persons
 members

Remark * Funds for the project are partly contributed by
 both parties and partly loaned from banks.

 * Costs of bank loans are interest rates.

 * Funds for the project include all expenditures to
 be paid in cash, such as wages and sub-construction
 amounts.

Table 2. Estimated cost of independent operations

Contract amount 322900 Unit: NT$10,000

 Foreign firm

 Pricing Costs for Costs for Indirect
 Stage civil work tunnelling costs

 1 3925 6725 4894
 2 9420 16140 11745
 3 14915 25556 18596
 4 17270 29591 21532
 5 16485 28246 20553
 6 11775 20175 14681
 7 4710 8070 5872
Sum 78500 134503 97873
Total Costs 310876
Estimated Profit 12024

 Local firm A

 Pricing Costs for Costs for Indirect
 Stage civil work tunnelling costs

 1 3525 9018 3630
 2 8461 21642 8712
 3 13396 34267 13794
 4 15512 39678 15972
 5 14806 37874 15246
 6 10576 27053 10890
 7 4230 10821 4356
Sum 70507 180353 72598
Total Costs 323458
Estimated Profit -558

 Local firm B

 Pricing Costs for Costs for Indirect
 Stage civil work tunnelling costs

 1 2984 8713 3977
 2 7162 20910 9546
 3 11339 33108 15114
 4 13130 38335 17500
 5 12533 36593 16705
 6 8952 26138 11932
 7 3581 10455 4773
Sum 59680 174252 79546
Total Costs 313478
Estimated Profit 9422

Table 3. Estimated project costs after cooperation

Contract amount 322900 Unit: NT$10,000

 Foreign firm + Local firm A
 Pricing
 Stage Costs for Costs for Indirect
 civil work tunnelling costs

 1 3878 7398 3993
 2 9307 17754 9583
 3 14736 28111 15173
 4 17063 32550 17569
 5 16287 31070 16770
 6 11634 22193 11978
 7 4653 8877 4791
Sum 77558 147953 79858
Total Costs 305369
Estimated Profit 17531

 Foreign firm + Local firm B
 Pricing
 Stage Costs for Costs for Indirect
 civil work tunnelling costs

 1 3282 7398 4375
 2 7878 17754 10500
 3 12473 28111 16625
 4 14443 32550 19250
 5 13786 31070 18375
 6 9847 22193 13125
 7 3939 8877 5250
Sum 65648 147953 87501
Total Costs 301102
Estimated Profit 21798

Table 4. Comparison of different coalitions

Contractor Contract Total Estimated
 amount cost profit

Foreign firm 322900 310876 12024
Local firm A 322900 323458 -558
Local firm B 322900 313478 9422
Foreign + Local firm A 322900 305369 17531
Foreign + Local firm B 322900 301102 21798

Contractor Shared profit Shared profit
 by the foreign by the local
 firm (based on firm (based on
 contribution) contribution)

Foreign firm
Local firm A
Local firm B
Foreign + Local firm A 14777 2754
Foreign + Local firm B 12200 9598

Unit: NT$10,000

Table 5. Cost estimation for the JV team

Contract amount 322900 Unit: NT$10,000

 Foreign firm (60%) Local firm A (40%)
Stage
 Costs Accumulated Costs Accumulated
 costs costs

 1 9161 9161 6107 6108
 2 21987 31148 14658 20766
 3 34812 65960 23208 43974
 4 40309 106269 26872 70846
 5 38476 144745 25651 96497
 6 27483 172228 18322 114819
 7 10993 183221 7329 122148

 Foreign firm +
 Local firm A (100%)
Stage
 Costs Accumulated
 costs

 1 15269 15269
 2 36644 51913
 3 58020 109933
 4 67181 177114
 5 64127 241241
 6 45806 287047
 7 18322 305369

Table 6. Comparison of different profit-sharing

Differentiation Independent Profit distribution based
 contracting on ratio of investment

 Profit Ratio Profit Profit shared:
 shared compared with
 independent
 contracting

Foreign firm 12024 60% 10519 -1505
Local firm -558 40% 7012 +7570

Remarks The foreign firm got 12024 and local firm got
 -558 when each of them invested alone without
 cooperation.

 In cooperation, it is unfair to distribute the
 profit according to the proportion of investment
 and it is also not easy to reach agreement. If
 the profit is shared based on the proportion of
 investment, the foreign firm will have no
 incentive to cooperate with the local firm, while
 he got less profit than independent contracting.

 Based on the contribution-based profit
 distribution upon JV, both parties gained higher
 profit than individual sole investment and thus
 the JV can be more successful.

 Unit: NT$10,000

Differentiation Profit distribution based
 on profit contribution

 Profit Profit shared:
 shared compared with
 independent
 contracting

Foreign firm 14777 +2753
Local firm 2754 +3312

Remarks The foreign firm got 12024 and local firm got
 -558 when each of them invested alone without
 cooperation.

 In cooperation, it is unfair to distribute the
 profit according to the proportion of investment
 and it is also not easy to reach agreement. If
 the profit is shared based on the proportion of
 investment, the foreign firm will have no
 incentive to cooperate with the local firm, while
 he got less profit than independent contracting.

 Based on the contribution-based profit
 distribution upon JV, both parties gained higher
 profit than individual sole investment and thus
 the JV can be more successful.

 Unit: NT$10,000

Fig. 2. Comparison of construction firm's profit under
different situation

 Independent Based on Ratio Based on Shapley
 Operation of Investment Value

Foreign firm 12 024 10 519 14 777
Local firm -558 7012 2754

Note: Table made from bar graph.