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  • 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 goa ls
  • 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 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 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:
    • C t = C h  T
    • Where C t = total cost and C h = cost per hour, or
    • C t = C h  (Q/R)
  • 37. Cash Flow Analysis Time Cost
  • 38. Front Loaded Cost Curve Time Cost
  • 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