PROJECT DELIVERY METHODS

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PROJECT DELIVERY METHODS
ARE 413 CONSTRUCTION MANAGEMENT CHAPTER 3 By
MOHAMMED JALALUDDIN LECTURER CONSTRUCTION
ENGINEERING MANAGEMENT DEPT Handout 7
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Presentation Outline

• Project Delivery Methods
• Definition
• Types of Project Delivery Methods
• Traditional
• Design- Build
• Professional Construction Management (PCM)
• BOT ( Build Operate Transfer)
• Advantages Disadvantages of various PDM
• Summary

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Objectives of Class

• To introduce various types of project delivery
  methods.
• To distinguish between the common project
  delivery methods.
• To introduce different types of contract and to
  differentiate between the different contracting
  methods.

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Project Delivery Methods What is it ?

• The term delivery method means the approach
  used to organize the project team so as to manage
  the entire designing and building (design-build)
  process.
• The owner needs to decide which designers to
  hire, when to hire them, and under what type of
  contract ?
• The owner also needs to decide when to hire the
  construction professional and under what type of
  contract ?
• Which organization gets hired first? Do both
  organizations report to the owner, or does one
  report to the other?

• Project Delivery method is an organizational
  concept which assigns specific responsibilities
  and authorities to people and organizations and
  which defines relationship of the various
  elements in construction of a project.

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Definitions Project Delivery systems

• A project delivery system is the method by which
  a construction project is executed.
• It is the first allocation of base
  responsibilities between the owner, design
  professional and contractor. Thus, the project
  delivery system is the foundation on which all
  subsequent negotiations will be based.

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Types of PDM

• Types of Project Delivery Methods
• Traditional
• Design- Build (Turnkey)
• Professional Construction Management (PCM)
• BOT ( Build Operate Transfer)

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Traditional

• The owner hires a design professional who
  prepares a complete set of contract documents for
  the owner for a design fee.
• The owner either negotiates a price with a
  general contractor or bids out the work.
• The general contractor is totally responsible for
  delivering the completed project as spelled out
  in the contract documents.
• The general contractor may subcontract out parts
  of the project, with each subcontractor reporting
  directly to the general contractor.
• The designer may be involved in overseeing the
  construction work in the field.
• In this delivery method no direct, formal
  relationship exists between the designer and the
  builder. They communicate only through the owner

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Traditional
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Advantages- Traditional PDM

• Familiarity Most owners, designers, and builders
  have worked under this framework on many projects
  and therefore are familiar with the system.
• Overall Job coordination Their control systems,
  documentation, and organizations are all set up
  to manage this process. The workers,
  subcontractors, and vendors also understand the
  system, improving overall job coordination.
• Owner can get a firm fixed price for the project
  before any work begins. The owner knows before
  construction begins what the cost of the project
  will be.
• Opportunity to get good price competition from
  the open market.

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Pros and Cons of the Traditional Approach
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Design-Build

• In this approach, a single organization is
  responsible for performing both design and
  construction .
• Within the design-build organization, parts of
  the design may be subcontracted to specialist
  consultants.
• Being responsible for both design and
  construction, the design-build contractor carries
  most of the project risks, and this can mean
  additional cost to owner.
• The owner's role in this approach is minimal and
  is only to express his or her objectives and
  specifications precisely before detailed design
  is started.
• Historically, the design-build approach has been
  used on large, privately funded,
  industrial-sector projects. Recently, however,
  this approach has begun to be used on commercial
  building projects, some publicly funded.

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Design-Build
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Design-Build
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Design-Build Advantages

• Good communication occurs between the design team
  and the construction team. Allows for
  constructability analyses and value engineering.
• This collaboration allows the project to be
  easily fast-tracked, cutting down on the
  design-build time for the project.
• Good cost estimating and scheduling should occur
  throughout the entire project.
• Long-lead item identification and ordering should
  also be able to proceed smoothly.
• In general, this arrangement allows easier
  incorporation of changes due to changed scope or
  unforeseen conditions than in the other
  arrangements, since the coordination is to occur
  within the same company.

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Pros and Cons of the Design-Build Approach
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BOT (Build Operate Transfer)

• The term Build-Operate-Transfer (BOT) was first
  coined by Ex-Prime Minister of Turkey, Turgut
  Ozal in 1984
• Essentially in a BOT project delivery method, a
  private entity, usually a consortium is
  responsible for financing, construction,
  operation and maintenance of the facility for
  agreed duration known as Concession period and at
  the end of the period, transfers the ownership of
  the facility to the government.
• A BOT mechanism is a complex structure comprising
  multiple, inter-dependent agreements among
  various participants.
• The concession agreement is between the
  government and the concessionaire. The concession
  agreement is regarded as the heart of a BOT
  project

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BOT (Build Operate Transfer)
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BOT Advantages

• The private firms are more efficient, hence
  project or service can be delivered at lower cost
• The private sector invests directly in the
  development of infrastructure, thereby reducing
  public debt, balancing the budget deficit, and
  reduced role of public sector
• BOT projects create business opportunities for
  the local private sector, create employment
  avenues as well as attract substantial foreign
  direct investment
• BOT projects help in facilitating transfer of
  technology by introducing international
  contractors in the host countries

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BOT Disadvantages

• Transaction costs are high, they amount to 5-10
  of total project cost
• Not suitable for smaller projects. Victorian
  Government of Australia has suggested that
  projects with a value of less than Australian
  dollar 15m are unlikely to gain benefits from
  BOT delivery method.
• The success of BOT project depends upon
  successful raising of necessary finance.
• BOT projects are successful only when substantial
  revenues are generated during the operation
  phase.

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Professional Construction Management

• In this approach, the owner appoints a PCM
  organization (also known as construction
  management organization) to manage and coordinate
  the design and construction phases of a project
  using a teamwork approach.
• The design may be provided by specialist design
  firms and in some cases by the PCM organization.
• With a high level of coordination between the
  participants, innovative approaches of
  overlapping design and construction (i.e., fast-
  tracking) can be adopted.
• The PCM organization aims at holding a friendly
  position similar to that of the consultants in
  the traditional approach.
• The services offered by the PCM organization
  overlap those traditionally performed by the
  architect, the engineer, and the contractor.

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Professional Construction Management

• This may include
• management and programming of design
• cost forecasting and financial arrangements
• preparation of tender documents tender analysis
• and selection of contractors
• selection of methods of construction
• planning and scheduling construction works
• materials procurement and delivery expeition
• Although this approach is likely to prove
  marginally more expensive than the traditional
  approach, it offers greater guarantee of
  performance and the potential to avoid time
  overruns and to reduce the cost of claims.
• The payment to the PCM organization is usually a
  fixed fee or a percentage of the total project
  cost.
• Use of PCM approach, should be considered when
  there is a need for time saving and flexibility
  for design changes, and the owner has
  insufficient management resources

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Professional Construction Management PCM Agency
with GC
Owner
Agency CM
A/E
GC
Designers and Consultants
Subcontractors and Suppliers
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• Source Modified AL( 1998)

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PCM Advantages Disadvantages
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• Advantages over traditional A/E construction
  administration
• CM with a construction background may be BETTER
  QUALIFIED
• CM provides greater QUANTITY of construction
  phase services
• CM often assumes greater DEGREE of control over
  contractors
• limitations the professional or agent CM
• DOES NOT guarantee construction cost or time
• DOES NOT perform any work or contract with the
  trade contractors
• IS NOT RESPONSIBLE for their performance
• usually DOES NOT assume responsibility for safety

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Pros and Cons of the PCM Approach
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CONCLUSION

• Types of Project Delivery Methods
• Traditional
• Design- Build
• Professional Construction Management (PCM)
• BOT ( Build Operate Transfer)
• Advantages Disadvantages of various PDM