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Construction Fundamentals

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Title: Construction Fundamentals


1
Construction Fundamentals
2
Chapter 3 Construction Management Functions
  • Purpose of operating a business is to earn a
    profit!

3
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

4
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!

5
Owner Functions
  • Defining the scope of the project
  • Planning the project
  • Financing the project
  • Ensuring the project team understands the
    projects goals

6
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

7
Construction Management Functions
  • Construction site level
  • Setting the standards for quality and safety
  • Planning the sequence of construction
  • Controlling progress and expenditures

8
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

9
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

10
Influence on Construction Quality
11
Influence on Construction Project Cost
12
Impact of Time on the Cost of Project Changes
13
The Business of Construction Management
14
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.

15
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

16
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

17
Policies of Management
  • Factors contractors consider in deciding whether
    or not to bid a particular project include
  • Location of the work

18
Factors Contractors Consider
  • Identity of the owner
  • Availability of key company personnel
  • Experience in the type of work solicited

19
Factors Contractors Consider
  • Whether or not there is financing for the project
  • Size of the project.

20
Bid Preparation
  • Bid preparation is expensive!
  • In preparing a bid, contractors must consider the
    costs of
  • Equipment
  • Labor
  • Materials
  • Subcontractors

21
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

22
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

23
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.

24
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

25
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

26
Construction Phase
  • Size of the contractors on-site project
    management organization is a function of the size
    and complexity of the project.

27
Project Management Team
28
Construction Company Team Functions
  • Project managers (PM)
  • Superintendents
  • Schedulers
  • Estimators
  • Material expediters

29
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

30
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

31
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.

32
Paretos 80-20 rule
  • 20 of the activities are critical and should be
    managed carefully
  • The other 80 will average out

33
Project Control
  • Cost control
  • Cash Flow Analysis
  • Schedule Control
  • Material Management

34
Cost Control
  • Possible corrective actions could include
  • Adding additional trade workers or crews
  • Adding or removing equipment
  • Working overtime
  • Bringing in additional subcontractors

35
Cost Control
  • Possible corrective actions could include
  • Making the job more efficient
  • Eliminating factors that cause subcontractors to
    interfere with each other

36
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)

37
Cash Flow Analysis
Cost
Time
38
Front Loaded Cost Curve
Cost
Time
39
Cash Flow Schematic Diagram
40
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

41
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

42
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

43
Materials Management
  • Must determine the latest order date accounting
    for the
  • shop drawing
  • Preparation
  • submission and
  • approval time
  • lead time required for fabrication
  • shipping

44
Materials Management
  • Too many materials stored on the site can lead to
    problem of
  • space allocation
  • weather damage
  • theft

45
Construction Related Design
  • Temporary structures such as
  • Scaffolding
  • Forms
  • Temporary bridges
  • Shoring
  • Cofferdams
  • Rigging
  • must be designed by the contractor

46
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

47
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

48
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

49
Risk Management
  • Worker injured or killed
  • A job accident that injures the public
  • A construction vehicle is involved in an accident
    off the project

50
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!

51
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

52
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!!

53
Assignment
  • Due next class
  • Chapter 3 Review Questions
  • 3.5
  • 3.10
  • 3.15
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