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 customer’s 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 project’s 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: • Builder’s 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 Proceedis 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 contractor’s 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. Owner’s Project Team • Size of the owner’s 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. Pareto’s 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!