Construction Fundamentals

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Construction Fundamentals
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Chapter 3 Construction Management Functions

• Purpose of operating a business is to earn a
  profit!

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Chapter 3 Construction Management Functions

• To be successful a construction company must
• Estimate the cost of construction projects
  accurately
• Predict the schedule of the work
• Control the progress and expenditures during
  construction
• Complete projects safely and on time

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Construction Management Functions

• Responsibility to construct the project
• in accordance with the plans and specifications
• to satisfy the customers cost, quality, and time
  expectations
• The project team is organized for the purpose of
  accomplishing those missions!

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Owner Functions

• Defining the scope of the project
• Planning the project
• Financing the project
• Ensuring the project team understands the
  projects goals

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Construction Management Functions

• Company level
• Selecting the right jobs to bid
• Preparing the cost estimate
• Submitting the bid
• Procuring the payment and performance bonds
• Scheduling the work
• Securing project operating capital

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Construction Management Functions

• Construction site level
• Setting the standards for quality and safety
• Planning the sequence of construction
• Controlling progress and expenditures

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Construction Management Functions

• Construction site level
• Communicating effectively with owner and designer
• Coordinating the work of the subcontractors
• Managing submittals, change orders and periodic
  pay estimates
• Closing out the project

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Project Planning And Design

• Master planning
• Scope definition
• Owner determines exactly what kind of a facility
  will be built
• Sets the design objectives for the
  Architect/Engineer
• Planning phase

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Influence on Construction Quality
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Influence on Construction Project Cost
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Impact of Time on the Cost of Project Changes
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The Business of Construction Management
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Planning Phase

• Select the designer
• Define the project goals
• Ensure the availability of sufficient funds to
  complete the project
• Select and purchase the project site,
• Determine construction procurement system and the
  form of construction contract to be used.

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Design Phase

• Primary requirement for any facility is that it
  must be safe!!
• Building codes
• Owner and A/E schedule design reviews
• schematic drawings
• preliminary drawings
• working drawings

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Bid Phase

• First step is to decide whether or not to bid the
  job. Contractors are generally limited in their
  ability to bid by two factors
• their bonding capacity and
• the policies of management

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Policies of Management

• Factors contractors consider in deciding whether
  or not to bid a particular project include
• Location of the work

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Factors Contractors Consider

• Identity of the owner
• Availability of key company personnel
• Experience in the type of work solicited

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Factors Contractors Consider

• Whether or not there is financing for the project
• Size of the project.

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Bid Preparation

• Bid preparation is expensive!
• In preparing a bid, contractors must consider the
  costs of
• Equipment
• Labor
• Materials
• Subcontractors

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Bid Preparation

• Consider the costs of
• Job and company overhead, contingency, and profit
• Should also consider the number of competitor
  bidders and the bidding history of those
  competitors on similar projects

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Award Phase

• Owner provides
• Builders Risk insurance
• Successful bidder must provide
• Payment and performance bonds
• Workers compensation insurance
• Liability insurance
• List of subcontractors
• Detailed project schedule

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Notice to Proceed

• Contractor cannot begin the work until the
  Notice to Proceed is received so
• Use the time between bid opening and contract
  award for detailed pre-project planning.

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Pre-project planning

• Planning how the work will proceed and in what
  sequence
• Construction procedures
• Type of equipment to be used
• Job access
• Location of the field office and storage areas
• Final selection of subcontractors and suppliers

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Pre-project planning

• Cash flow analysis should be completed to
  determine if the company needs to borrow money
• Detailed project schedule is prepared
• Work break down (WBS) and pay schedule are
  planned

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Construction Phase

• Size of the contractors on-site project
  management organization is a function of the size
  and complexity of the project.

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Project Management Team
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Construction Company Team Functions

• Project managers (PM)
• Superintendents
• Schedulers
• Estimators
• Material expediters

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Owners Project Team

• Size of the owners project team will depend on
  the size and complexity of the project small
  project (A/E)
• Large highway project
• Resident engineer
• Inspectors
• Surveyors
• Quality assurance technicians

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Managing Critical Activities

• Contracts are broken down into activities for
  purposes of scheduling, estimating, progress
  control, and cost control. Large projects can
  have several hundred activities, or more!
• Trick is to know which activities are critical

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Critical Activities

• Critical activities are those that could impact
  the cost of the work by at least one half of one
  percent of the bid price
• For example, on a 1,000,000 project, any
  activity with a potential for cost over-run or
  under-run of 5,000 or more is by definition a
  critical activity.

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Paretos 80-20 rule

• 20 of the activities are critical and should be
  managed carefully
• The other 80 will average out

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Project Control

• Cost control
• Cash Flow Analysis
• Schedule Control
• Material Management

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Cost Control

• Possible corrective actions could include
• Adding additional trade workers or crews
• Adding or removing equipment
• Working overtime
• Bringing in additional subcontractors

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Cost Control

• Possible corrective actions could include
• Making the job more efficient
• Eliminating factors that cause subcontractors to
  interfere with each other

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Productivity

• Let R Production rate
• Where T is total time, Q is the total quantity
  to be installed
• The total cost is determined by the equation
• Ct Ch ? T
• Where Ct total cost and Ch cost per hour, or
• Ct Ch ? (Q/R)

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Cash Flow Analysis
Cost
Time
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Front Loaded Cost Curve
Cost
Time
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Cash Flow Schematic Diagram
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Profit (loss) To Date

• Project Manager must calculate profit (loss) to
  date on a regular, weekly basis
• Cost to date
• Re-estimated cost to complete
• Amount billed
• Contract amount (including change orders)
• Example 3.2

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Schedule Control

• Chapter 4
• Critical path - By definition, activities on the
  critical path will delay the entire project if
  they are delayed
• Physical progress can be compared with the
  financial progress to determine if the project
  is
• on schedule or late
• over budget or under budget

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Materials Management

• Ensure that materials are delivered in a timely
  manner to the site in the quantity and quality
  required. When materials arrive they are
• Counted
• Inspected
• if necessary, Tested

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Materials Management

• Must determine the latest order date accounting
  for the
• shop drawing
• Preparation
• submission and
• approval time
• lead time required for fabrication
• shipping

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Materials Management

• Too many materials stored on the site can lead to
  problem of
• space allocation
• weather damage
• theft

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Construction Related Design

• Temporary structures such as
• Scaffolding
• Forms
• Temporary bridges
• Shoring
• Cofferdams
• Rigging
• must be designed by the contractor

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Risk Management

• Risks are inherent in construction
• Industry is moving toward allocating risks to the
  party most able to control the specific risk
• Managing risks means
• minimizing risks
• insuring against risks
• and sharing risks

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Risk Management

• Construction risks - inability of a subcontractor
  to perform
• Economic risks - cost escalation
• Political/public risks - disapproval of the
  required project permits
• Physical risks - subsurface conditions

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Risk Management

• Contractual and legal risks - risks assigned by
  contract over which the contractor has no control
• Design risks - a project design that is not
  constructible

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Risk Management

• Worker injured or killed
• A job accident that injures the public
• A construction vehicle is involved in an accident
  off the project

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Risk Management

• Risks are best assumed by the party with the
  ability to best control the risk
• The best way to manage risks is to avoid them,
  but the construction industry is characterized by
  risks!

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Risk Management

• Contractors manage risks by purchasing insurance
• Examining the contract language addressing
  changed conditions
• Contractor safety programs
• Subcontracting is also a form of risk management
  require performance and payment bonds

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Value Engineering (VE)

• Function analysis or value analysis
• Main objective to reduce project cost, without
  reducing the quality of the structure
• VE exists because contractors know better ways to
  build projects, and owners are willing to pay for
  that knowledge!!

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Assignment

• Due next class
• Chapter 3 Review Questions
• 3.5
• 3.10
• 3.15