Project Management - UTM

8/2/2019 Project Management - UTM

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Project Environment


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Asset & Facility Life Cycle

DESIGN &CONSTRUCTION

OPERATION &MAINTENANCE

ASSET Life Cycle

REFURBISHMENT ORREBUIDING

Project Management


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Parties Involved in Construction

Projects and the Environment

Conversion

ProcessInput Output

Suppliers Consultants Designers

Sub-Contractor Contractor Owner

TownPlanningAuthorities Regulatory Authorities Trade Unions

Professional organizationsConstruction Associations

StandardsOrganizations

Demand

Technology

Govt. Agencies

LawMakers

Economic Conditions

Public Social

InternalEnvir

onment

Operating Environment

General

Environment


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Types of projects

Residential: Single family houses, multi-unit town houses, high rise

apartments, condominiums

General Buildings: Retail stores, urban development, schools, hospitals,

churches

Heavy Engineering: Dams, tunnels, power, bridges

Industrial: Petrochemical plants, mills, plants

Asset & Facility Management


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Challenges Ahead - Projects

Increasing project size

Increasing technological complexities

Complex organizational relationships

Working together

Govt. regulations

Integration of design & construction

Shortages of skilled workforce Economic trends

Growing customer demands


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Challenges AheadAsset & Facility

Lack of standardised practice

Lack of contractual arrangements

Lack of defined tools and system


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3D Influence on construction

firms Stable Vs Dynamic

Simple Vs Complex

Friendly Vs Hostile


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How to respond the influences?

Construction Organizational System

Open/Organic Closed/Mechanistic

Responding to the environment

Free interaction with the environment

Decentralized hierarchy

Informal coordination/control

EmpowermentFlexibility

Operating in a specified way with a

given output from a specified input

Cannot be influenced by the changing

Environment

Well documented policiesCentralized/functional department

Authoritative

Procedures/bureaucracy


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Reasons why projects do not

satisfy performance requirements Failure to be organic/open

Inadequate articulation of requirements

Poor planning

Inadequate technical skills

Lack of teamwork

Poor communications and coordination Insufficient monitoring of progress

Inferior corporate support


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Reasons Why Assets & Facility

Management Projects do not satisfy

Requirements Increased response time leading to increased wastages,

scraps, and reworks;

Current IT and technological systems could only collect

data related to mechanical, civil and electrical utilities butcould not control them to efficiently serve the customer;

Both preventive and predictive systems are too poor toavoid damages and foresee problems before they occur;

Poor surveillance and inventory systems leading to ever

increased asset loss and duplication; Real time control and automation is a distant dream;

Lack of sustainable methods leading to increased energyconsumption and bills.


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Construction Vs manufacturing

labor intensive,

fragmented,

less precision

Automated

Assembly line

More precision

Craftwork paradigm Mass-production philosophy


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People management

Design/Construction integration

Quality & performance improvement

New management concepts

TQM

Reengineering

Supply chain logistics/JIT

Empowerment


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Project Life Cycle

Conceptual phase

Design phase

Tendering

Construction

Commissioning


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Conceptual phase tasks

Consents and permits

Project definition (feasibility

Financial strategy Project planning

Contract strategy

Project management organization

Construction philosophy

Procurement strategy

Design of temporary works

Design of permanent structures


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Feasibility

Alternate courses of action

Engineering evaluation

Economic evaluation

Social analysis

Political consideration


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Design

Schematic design: Basic scope Possible equipments

Site work

Basement & special foundations

Impact of master plan Preliminary design:

Study of plan elements to determine feasibility

Determine constructability & cost predictability

Architectural plan for accurate layout

Tentative scheme for mechanical and electrical system

Exterior design of the structure

Outline of materials & finishes


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Final design

Layouts of partition & interior fixtures

Engineering design & structural elements

Architectural design of construction details

Layout & design of mechanical systems

Location of fixtures & utility outlets

Materials & finishes

Specification of materials & equipment Layout & design of electrical system


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Tendering phase

Finalize preliminary contractor lists by contract package

Prequalify selected contractors

Issue final invited tender list Prepare bid packages

Review bid packages

Issue requests for quotation

Review & analyze bids Recommend contract awards

Issue notices to proceed with fieldwork


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Construction phase

Obtain funds

Continually review design

Organize project teams

Allocate tasks Produce and evaluate product

Reporting

Documentation

Work measurement & interim payments

Supply chain logistics Communication

Changes and reworks

Contract administration

Arbitration


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Commissioning phase

Review of products/services

Commission team

Team tour Project postmortem

Handover


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PROJECT DELIVERY SYSTEM


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Forms of Contract A contract is a written document describing the

legal rights and obligations of the parties to thecontract

Associations involved in developing standardforms of contract: The Associated General Contractors of America (AGC)

American Institute of Architects (AIA)

The Engineers Joint Contract Documents Committee(established by the National Society of Professional

Engineers (NSPE) The American Consulting Engineers Council (ACEC)

The American Society of Civil Engineers (ASCE)

Construction Specifications Institute (CSI)


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Non-standard forms of contracts

Used when:

Specialty nature of the project

Complexity of the project

Desire to allocate risks


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Contents of a contractual agreement Identification of the parties

Description of the project

Relationship of parties

Owners responsibilities

Owners rights

Contractors responsibilities

Administration of the contract

Subcontractors and assignment

Compensation and payments

Cost of the work

Changes in the work

Time and schedule

Payments and completion

Safety and security

Insurance and bonds

Correction of work

Tests and inspections

Statutory limitation period

Termination or suspension

Contract documents list


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Standard AGC documents

AGC 400Preliminary Design-Build agreement between owner and contractor

AGC 410Standard form of design-build agreement and general conditions between owner andcontractor (Cost plus fee, guaranteed maximum price option)

AGC 415Standard form of design-build agreement and general conditions between owner andcontractor (lump sum)

AGC 420Standard form of agreement between contractor and architect/engineer for design buildprojects

AGC 450Standard form of agreement between Design-build contractor and sub-contractor

AGC 460Standard form of agreement between design-build contractor and design-build sub-

contractor (Guaranteed maximum price) AGC 510Standard form of agreement between owner and construction manager (Constn

Managr is owners agent)

AGC 520Standard form of agreement between owner and trade contarctor (Constrn managr isowners agent)

AGC 525Change order/construction manager fee adjustment

AGC 565Standard form of agreement between owner and construction manager (constrnmanagre is constructor)

AGC 566 - Standard form of agreement between owner and construction manager (constrnmanagre is constructor, cost plus fee)

AGC 601subcontract for use on federal construction

AGC 800Standard form of Program management agreement and general conditions betweenowner and program manager


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Standard AIA Documents

AIA document A101Standard form of agreement between owner andcontractor

AIA document A107Abbreviated form of agreement between owner and

contractor for construction projects of limited scope

AIA document A111Standard form of agreement between owner and

contractor (cost plus fee)

AIA document A117Abbreviated form of agreement between owner and

contractor for construction projects of limited scope (cost plus fee)

AIA document A201General conditions of contract for construction

AIA document B141Standard form of agreement between owner and

architect

AIA document B151Abbreviated owner architect agreement form forconstruction projects of limited scope


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The Design-Bid-Build Approach (Lump Sum)

Owner determines the need

Owner enters into a contract with a designer (design outputs)

The bid documents are distributed to contractors

Bids are invited and lowest bid is selected Cost increase is amended through change orders

The contractor is responsible for delivering the project to the owner at an

agreed-upon price, regardless of the cost to the contractor

Lump sum

Refers primarily to the traditional system Some times used in the negotiated general contracts, design build

arrangement and construction management


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Design-bid-build process

Public Works:

Sealed bids are used

Opened in public

Entire process Is subject to scrutiny by bidders, citizens, and others

Conform to law and regulations

Prequalification of

Contractors (optional)

Final DecisionsBiddingContract

Documents

Execution

of workContract signed

Design Team

Owner

Legal Advertisement

(In public works)


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The contract document should contain:

Drawings (e.g. AIA format)

Specifications (e.g. CSI format)

Forms of agreement

General conditions

Special conditions (e.g. temp. utilities)

Other requirements (e.g. wage rates)

Additional contractual requirements(e.g. TQM, ISO)

Instruction to bidders

Addenda


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Revisions to contract documents

In the form of:

Addenda

Made during the bid for errors/ommissions

Change orders

Changes initiated by field orders from designers orcontractors upon discovery of changed or uncertain

conditions, signed both by the owner and the designer

Change directives

To resolve a potential disagreement and delay, the designer

issues a directive, and if work is clearly within the projectscope the contractor is obligated to perform it.


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Contractual relationships

OwnerArchitect

Subcontractor

General contractor

Funding source

Financial consultants

Planning consultants

Sub-subcontractor

Material suppliers

Tradespersons & labor

Engineers

Special consultants

Subcontractor Subcontractor Subcontractor

Sub-subcontractor

Administrative

Relationship


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Advantages

Well established procedures

Best understood by the industry

Legal and procedural guidelines

Final cost is known

Competitive bidding

Design completed before construction

Better control of document preparation Specifications prescribed

All parties will have a clear idea of the finished product


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Problems

Require more time

Does not work at complex situations

Adversarial relationships

Contract terms dictates

Teamwork/informal working discouraged

Communications becomes hard

Lack of process focus


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Design Build System

Variations

In-house design and Consultative design

Turnkey

Design-build-lease

Design-build-lease-to-own or build-own-transfer

(BOT


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In-house design-build

Owner

Subcontractor

Sub-subcontractor

Material suppliers



Sub-subcontractor

Design-Build Contractor

(In-house design)

Consultants:

Landscape

Interior

Consultants


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Consultancy design-build

Owner

Subcontractor

Sub-subcontractor

Material suppliers



Sub-subcontractor

Design-Build ContractorDesign Consultants

Consultants

Engineering

Architecture


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Design-build

Advantages

Design/construction integration

Saves time Single point responsibility

Project cost can be determined soon

Contract documents can be less detailed

Constructability review is enhanced

Suitable for complex projects

Project close out is smoother Contract amount can be arrived at many ways including, competitive lump sum,

negotiated cost-plus to guaranteed maximum price

Changes, disputes and claims are fewer

Design-build: problems

Owners requirement must be clear The traditional checks and balances between designers and constructors are lost

Competitive tendering leads to both time and cost advantages

Consultative design-build may create functional problems between designers andcontractors

Less detailed documents early in the process may create initial problems

In lump sum design-build, changes in design during construction are discouraged


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Owners responsibilities

Detailed statement of requirements

Project scope, proposed activities in the new building, space

needs, budget, aesthetic statement, expected construction

schedule, expected level of quality The design-build contractor selection process include:

Alliance between the owner and contractor

References from other owners

Experience of D/B entity on similar projects

Requests for proposals + interviews

A competition among D/B firms


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Contractors responsibilities

Building code adherence

Assuring design correctness and completeness

Comprehensive field operations

Safety

Quality of work

Meet the schedule

Cost control


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D/B in public sector

Bidding

Competitive Vs negotiated

Corruption


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Turnkey projects

The D/B contractor delivers the completed building to an owner

for a pre-arranged price.

Characteristics:

Project financing is owned by the contractor Money is paid only after the completion of the project

The owner is bound to buy the building when it is completed

The terms of agreement between parties must be specific (e.g.

schedule, finishing etc.)

Owner generated changes will alter price

Used for buildings of rather routine nature

Warehouses, franchise hotels and motels etc.

Small power plants


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Design-build-lease and design-build-lease-to-own

Involve financing and ownership of design-build projects (an

extensions of turnkey)

Lease-to-own is a tenant agreement for a period of time and then

transfer to the owner for a set price Infrastructure projects

Contractors responsible for:

Construction financing

Site acquisition

Long term financing

Utilities and maintenance

Casualty and liability insurance


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AGC contracts documents for D/B

AGC 400: Prel. Agreement between owner and contractr

AGC 410: Std form of agreement and gen. Conditions between

owner and contractor (Actual cost plus with a Guaranteed

maximum price option) AGC 415: Std form of agreement and gen. Conditions between

owner and contractor (Lump sum)

AGC 420: std form of agreement between contractor and

architect/engineer

AGC 450: Std form of agreement between contractor and sub-contractor

AGC 460: Std form of agreement between design-build contractor

and design-build sub-contractor (Guaranteed maximum price)


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Construction Management

Why Construction Management

Inflation of construction costs

Increased complexity

Lengthy schedules in complex projects

Difficulty in reducing the bidding time

Growing number of disputes

Decline in trust


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Types of Construction Management

Two types:

Agency construction management

CM Coordinates and monitors trade contractors

The owner holds the contract

CM recommends on phased construction, scheduling, procurement, division of worksinto trade contracts, monitors cost, time and quality, administers the project

An option preferred by the public sector

At-risk construction management

CM begins with an agency role for preconstruction services

Prior to construction the CM assumes the risk of delivering the project with a setprice.

Much of the actual work is performed by subcontractors

Variations in CM

Agency + CM providing preconstruction services + admin. Of trade contract held byowner

Agency + preconstruction services + admin of trade contracts as an agent of the owner CM at risk + preconstruction service + holding subcontracts + No GMP + Fixed

contract time is optional

CM at risk + preconstruction services + Subcontracts held by the owner but to the CM+ GMP + fixed contract time

CM at risk + preconstruction service + subcontracts + GMP + fixed contract time


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Compensations

Agency CM + fixed fee+reimbursement for preconstruction

and construction services

Agency CM+percentage fee+reimbursement for

preconstruction and construction

Agency CM+fee based on personnel

expenses+reimbursement for preconstruction and

construction

At risk CM+fixed fee+reimbursement for preconstruction

and construction

At risk CM+percentage fee+reimbursement for

preconstruction and construction At risk CM+a separate fee for preconstruction+fixed or

percentage fee for construction included in the GMP


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Agency Construction Management

Owner

Trade contractor

Sub-subcontractor

Material suppliers

Crafts & labor

Trade contractor Trade contractor Trade contractor

Sub-subcontractor

Construction ManagerArchitect

Consultants

Consultants

Engineers

Functional relationships


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At-risk Construction Management

Owner

Sub-contractor

Sub-subcontractor

Material suppliers

Crafts & labor

Sub-contractor Sub-contractor Sub-contractor

Sub-subcontractor

Construction ManagerArchitect

Consultants

Consultants

Engineers

Functional relationships

At-risk Constructor


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Advantages

Better service to the owner

Better coordination of projects

Time compression

Bidding and design/construction integration

Cost savings

Fewer disputes, claims and delays

Constructability during design stage

Bid packages well organized early

Relationship between parties improved


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Problems

No early guaranteed cost

Phased work

Control over subcontractors may be reduced

When CM works as an agent Loss of objectivity-as public owners select CMs on qualifications

rather than price

Some duplications may be perceived between designers and CM


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Requirements in public works

The CM is precluded from doing construction activity

All trade work is to be competitively bid

Bidding requires public advertisement

Regular reports must be submitted to public bodies on progress,expenses, safety and staffing

Record are subject to audit


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Selection of the Construction Manager

Private works

Straightforward, based on previous relationships, interview

process

Public works

Objectivity

Selection process

Requests for qualifications sent to potential firms

Requests for proposals sent to candidate firms

Shortlist the candidates for interviews

Firms marketing strategy

Capability, past perfoemance Experience

Current workload

Availability of experienced personnel

Experience in partnering

Ability to work with design teams


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Owners role

Select designers and construction managers

Assign owners personnel

Weigh recommendations from the CM and designer

Understand the design, cost, schedule, value

engineering

Promote coopoeration between parties including

designers and CM


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Phased construction (Fast track)

Bid packages

Size and complexity

Owner requirements

Government regulations

Design constraints availability of contractors


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Program Management

Also called Professional Project Management or Project Management

Owner

Construction Options:

DBB

CM

DB

Architect/

Engineer

Program

Manager


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When to use?

Projects are complex

Mega development for special events

Multi-site systems

Owner is nave


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Program Management Services

Pre-design

Feasibility studies, Financing, Programming, Master schedule,

Project budget, Site selection, consultant selection

Design Schematic design, design development, construction

documents, estimating, bidding process

Construction

Project control, cost reports, progress payments, change order

management, document control, coordination Post-construction

Commissioning, move-in, maintenance, training, facilities

management, claims management


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Advantages

The owner can avoid hiring additional staff to manage

construction

Realistic scheduling and cost advise

Advise the owner on the best use of available resources


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Problems

The program manager assumes no contractual

responsibility

The compatibility of the owner and the program

manager is crucial


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Partnering


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Constructability Roadmap (CII)

Commit to implementing constructability

Establish constructability program

Obtain constructability capabilities

Plan constructability implementation

Implement constructability

Update corporate program

Corporate Program

Project Program


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Commit to implementing constructability

Understand constructability objectives, methods, concepts, and

barriers

Perform self-assessment and identfiy barriers

Assess and recognize constructability benefits Develop implementation policy


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Establish constructability program

Identify constructability sponsor/champion

Establish functional support organization

Develop lessons-learned file


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Obtain constructability capabilities

Assemble key owner team members

Define constructability objectives and measures

Select project contracting strategy

Secure contractors, vendors, and consultants


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Plan constructability implementation

Develop constructability team

Identify and address project barriers

Consult applications matrix and lessons-learned file

Develop constructability procedures and

integrate into project activities


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Implement constructability

Apply constructability concepts and

procedures

Monitor and evaluate projecteffectiveness

Document lessons learned


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Update corporate program

Evaluate corporate program effectiveness

Modify organization and procedures; update lessons-learned

database


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Construction Insurance


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What is Insurance?

How Insurance Works?

Insurance in the Construction Industry. Various Insurance Bonds?

Insurance Statistics.

Risks and Insurance in the Construction Industry. Conclusion & Recommendations.


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We should all know, understand and

interest ourselves in the risks of our

business, for it is only the engineers who areable to identify the construction risks and

therefore provide information for a contract

which is based on principle of utmost good

faith. (New Civil Engineer, www.nceplus.co.uk)
http://www.nceplus.co.uk/http://www.nceplus.co.uk/


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U.S. consumers spent $323.4 billion on

homeowners, auto and business insurance in

2001 (latest data available from A.M. Best Co.)


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What is Insurance?

Insurance is something you buy hoping you never

have to use. You purchase it to protect yourself

from unexpected losses you cant affordthe

accident you hope you never get into, the fire you

pray never destroys your home, the hailstorm you

know sooner or later is bound to batter your roof,

the lawsuit that threatens to wipe out all yoursavings. (National Association of Insurance Commissioners, 1999)


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How insurance Works?

An insurance policy is a legal contract

between you and your insurance company.

Like all legal documents, it very clearlyspells out certain conditions that you both

agree to when you sign off on the paper

work. You agree to pay the premium and

your company agrees to cover you for

certain losses.


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Insurance in the Construction

Industry: Virtually all of the public construction and

the private construction work in America oras a matter of fact the whole world isaccomplished by private sector contractingfirms. This work generally is awarded to thelowest responsive bidder through the open

competitive sealed bid system. Surety bondsplay a critical role in making the systemwork.


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How can we guarantee the system to

work: Obviously through insurance bonds such

as:

1. The Bid Bond2. The Performance Bond

3. The Payment Bond


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The Bid Bond?

The Bid Bond is intended to keep playful orunserious bidders out of the bidding processby assuring that the successful bidder willenter into the contract and provide therequired performance and payment bonds.If the lowest bidder fails to honor these

commitments, the owner is protected, up tothe amount of the bid bond. (Surety InformationOffice, 2000)


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Figure -1-Bid Bond form


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The Performance Bond?

The Performance Bond secures the

contractor's promise to perform the contract

in accordance with its terms and conditions,at the agreed upon price, and within the

time allowed. (Surety Information Office, 2000)


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Figure -2-Performance Bond form


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The Payment Bond ?

The Payment Bond protects certainlaborers, material suppliers andsubcontractors against nonpayment. Sincemechanic's liens cannot be placed againstpublic property, the payment bond may bethe only protection these claimants have if

they are not paid for the goods and servicesthey provide to the project.(Surety Information Office,2000)


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The need for insurance in the

construction industry ? Slightly more than 100 years ago, the federal

government became alarmed about the high failurerate among the private firms it was using to

perform public construction projects. It discoveredthat the private contractor often was insolventwhen the job was awarded, or became insolventbefore the project was finished. Accordingly, the

government was frequently left with unfinishedprojects, and the taxpayers were forced to coverthe additional costs arising from the contractor'sdefault.


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The Beginning of Construction

Insurance in the USA: 1894, Congress passed the Heard Act to

authorize the use of corporate surety bonds

to secure privately performed federalconstruction contracts. (Surety Information Office, 2000)


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Correcting a wrong misconception:

It is important to note that bid, performance,

and payment bonds are not intended to

protect the contractors that have to postthem. Instead, these bonds are intended to

protect the owner of the construction project

against contractor failure and to protect

certain laborers, material suppliers, and

subcontractors against nonpayment.


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Cost of Insurance Bonds:

Insurance companies are like other businesses, inthat, the price charged for the product is directlyrelated to the cost of "raw materials" used in the

product. If the price of beef or bread goes up, then the price

of hamburgers must also rise. Similarly, if theprice of car repairs, home construction or settling

lawsuits rises, the cost of auto, homeowners orliability insurance must also rise. (Financial-jobs. com,2004)


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Insurance Industry Statistics:

2.4 million people in the U.S. are employed by the

insurance industry. (Financial-jobs. com, 2004)

Careers available through the insurance industry: Actuary.

Underwriter.

Agent and Broker.

Field Representative. Claims Adjuster.

Risk Manager.

E h i h d f


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Emphasis on the need for

Insurance: The construction project owner would be foolish

to hire any contractor that happens to walk in the

door. Some prequalification screening of

contractors obviously is necessary. The US

government and most private construction owners

elected to use the surety mechanism, so the surety

assumes the prequalification responsibility andprotects the owner against loss when a bonded

contractor defaults. (Prahl, 1999)


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Obtaining a Surety Bond:

An underwriter of an insurance firm would expect the following from acontractor in order to process and issue his bonds: (Prahl, 1999) Financial statements reported on by a CPA firm.

Schedules of contracts in progress.

Completed contracts and a reconciliation of the income and the costs of these

contracts to the current year's income statement. These schedules should be in a format that follows the industry norm and conformsto the AICPA Industry Audit Guide for Construction Contractors.

A controlled job cost system, often viewed as an accounting luxury in the past, hasbecome a necessity for proper financial statement presentation and control of costs.Without controlled job cost information, accurate reporting on a basis acceptable toa bonding company becomes a burdensome chore.

Other information generally required by the surety includes personal financial

statements for all principals--a compilation is usually sufficient--and documentsdescribing banking relationships and details of agreements related to businesssuccession and estate planning.


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Contd.:

In order for the underwriter to process the contractors papers he will belooking for the following: (Prahl, 1999)

Does the contractor have any other liabilities or commitments?

Are personal guarantees provided to banks?

Are various key ratios reflected in the contractors' financial statementsin compliance with agreements with banks or other creditors?

Also of concern to the underwriter is the contractor's ability tocontinue performance in the event of retirement, disability, or death ofa principal or key employee.

And upon all of that he will make a decision whether to grant the bondor deny it.

C i I d l d


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Construction Insurance and related

Risks: There are many risks inherent in a construction

project, whether a large or moderate undertaking,require that insurance coverage be selected with

the utmost care. Generally the insurance policy must provide:

all-risk or comparable coverage.

Coverage for material stored off site and in transit.

Coverage for all parties to the contract: owner,contractors, subcontractors.

Permission for waivers of subrogation among theparties.

Coverage for the duration of the project.

E l f C i Ri k


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Example of Construction Risks:

Tables 1 to 3

C l i d


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Conclusion and

Recommendation: Obtaining sufficient builders risk insurance is nosimple matter.

Insurance consultants must be familiar with the

construction contract, particularly theresponsibility for procuring required insurance.

It is a duty on engineers to know not only whatcoverage is required by the construction contract,

but also what coverage is available in themarketplace, so that their insured have thenecessary protection to meet the many exposuresthey will face.


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Question? (Due next week):

Based on what you heard in this

Presentation write down in not more than

ten sentences how you feel that theinsurance industry changed the construction

industry (from engineers point of view)?