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Construction Fundamentals
Chapter 3 – Construction Management Functions <ul><li>Purpose of operating a business is to earn a profit! </li></ul>
Chapter 3 – Construction Management Functions <ul><li>To be successful a construction company must: </li></ul><ul><ul><li>...
Construction Management Functions <ul><li>Responsibility to construct the project: </li></ul><ul><ul><li>in accordance wit...
Owner Functions <ul><li>Defining the scope of the project </li></ul><ul><li>Planning the project  </li></ul><ul><li>Financ...
Construction Management Functions <ul><li>Company level </li></ul><ul><ul><li>Selecting the right jobs to  bid </li></ul><...
Construction Management Functions <ul><li>Construction site level </li></ul><ul><ul><li>Setting the standards for  quality...
Construction Management Functions <ul><li>Construction site level </li></ul><ul><ul><li>Communicating  effectively with ow...
Project Planning And Design <ul><li>Master planning </li></ul><ul><li>Scope definition </li></ul><ul><ul><li>Owner determi...
Influence on Construction Quality
Influence on Construction Project Cost
Impact of Time on the Cost of Project Changes
The Business of Construction Management
Planning Phase <ul><li>Select the  designer </li></ul><ul><li>Define the  project goals </li></ul><ul><li>Ensure the avail...
Design Phase <ul><li>Primary requirement for any facility is that it must be safe !! </li></ul><ul><ul><li>Building codes ...
Bid Phase <ul><li>First step is to decide whether or not to bid the job. Contractors are generally limited in their abilit...
Policies of Management <ul><li>Factors contractors consider in deciding whether or not to bid a particular project include...
Factors Contractors Consider <ul><ul><li>Identity of the  owner </li></ul></ul><ul><ul><li>Availability of  key company pe...
Factors Contractors Consider <ul><ul><li>Whether or not there is  financing  for the project </li></ul></ul><ul><ul><li>Si...
Bid Preparation   <ul><li>Bid preparation is expensive! </li></ul><ul><li>In preparing a bid, contractors must consider th...
Bid Preparation   <ul><li>Consider the costs of: </li></ul><ul><ul><li>Job and company  overhead ,  contingency , and  pro...
Award Phase <ul><li>Owner provides: </li></ul><ul><ul><li>Builder’s Risk insurance  </li></ul></ul><ul><li>Successful bidd...
Notice to Proceed <ul><li>Contractor  cannot begin the work until the  Notice to Proceed   is received  – so </li></ul><ul...
Pre-project planning <ul><li>Planning how the work will proceed and in what sequence </li></ul><ul><ul><li>Construction pr...
Pre-project planning <ul><li>Cash flow analysis  should be completed to determine if the company needs to borrow money   <...
Construction Phase <ul><li>Size of the contractor’s on-site project management organization is a function of the  size and...
Project Management Team
Construction Company Team Functions   <ul><li>Project managers (PM) </li></ul><ul><li>Superintendents </li></ul><ul><li>Sc...
Owner’s Project Team   <ul><li>Size of the owner’s project team will depend on the size and complexity of the project – sm...
Managing Critical Activities   <ul><li>Contracts are broken down into  activities for purposes of scheduling, estimating, ...
Critical Activities <ul><li>Critical activities are those that could impact the cost of the work by at least one half of o...
Pareto’s 80-20 rule <ul><li>20% of the activities are critical and  should be managed carefully </li></ul><ul><li>The othe...
Project Control <ul><li>Cost control </li></ul><ul><li>Cash Flow Analysis </li></ul><ul><li>Schedule Control </li></ul><ul...
Cost Control <ul><li>Possible corrective actions could include: </li></ul><ul><li>Adding  additional trade workers  or cre...
Cost Control <ul><li>Possible corrective actions could include: </li></ul><ul><li>Making the job more  efficient </li></ul...
Productivity <ul><li>Let R = Production rate </li></ul><ul><li>Where:  T is total time ,  Q is the total quantity  to be i...
Cash Flow Analysis Time Cost
Front Loaded Cost Curve Time Cost
Cash Flow Schematic Diagram
Profit (loss) To  Date <ul><li>Project Manager must calculate  profit (loss) to date  on a regular, weekly basis </li></ul...
Schedule Control <ul><li>Chapter 4 </li></ul><ul><li>Critical path - By definition, activities on the critical path will d...
Materials Management   <ul><li>Ensure that materials are delivered in a timely manner to the site in the quantity and qual...
Materials Management <ul><li>Must determine the latest order date accounting for the: </li></ul><ul><ul><li>shop drawing  ...
Materials Management <ul><li>Too many materials stored on the site can lead to problem of: </li></ul><ul><ul><li>space all...
Construction Related Design <ul><li>Temporary structures such as: </li></ul><ul><ul><li>Scaffolding </li></ul></ul><ul><ul...
Risk Management <ul><li>Risks are inherent in construction </li></ul><ul><li>Industry is moving toward allocating risks to...
Risk Management <ul><li>Construction risks  - inability of a subcontractor to perform </li></ul><ul><li>Economic risks  - ...
Risk Management <ul><li>Contractual and legal risks -  risks assigned by contract over which the contractor has no control...
Risk Management <ul><li>Worker injured or killed </li></ul><ul><li>A job accident that injures the public </li></ul><ul><l...
Risk Management <ul><li>Risks are best assumed by the party with the ability to best control the risk </li></ul><ul><li>Th...
Risk Management <ul><li>Contractors manage risks by  purchasing insurance </li></ul><ul><li>Examining the contract languag...
Value Engineering (VE)   <ul><li>Function analysis or value analysis </li></ul><ul><li>Main objective to  reduce project c...
Assignment <ul><li>Due next class </li></ul><ul><li>Chapter 3 Review Questions </li></ul><ul><ul><li>3.5 </li></ul></ul><u...
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Lecture-5:

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Transcript of "Lecture-5:"

  1. 1. Construction Fundamentals
  2. 2. Chapter 3 – Construction Management Functions <ul><li>Purpose of operating a business is to earn a profit! </li></ul>
  3. 3. Chapter 3 – Construction Management Functions <ul><li>To be successful a construction company must: </li></ul><ul><ul><li>Estimate the cost of construction projects accurately </li></ul></ul><ul><ul><li>Predict the schedule of the work </li></ul></ul><ul><ul><li>Control the progress and expenditures during construction </li></ul></ul><ul><ul><li>Complete projects safely and on time </li></ul></ul>
  4. 4. Construction Management Functions <ul><li>Responsibility to construct the project: </li></ul><ul><ul><li>in accordance with the plans and specifications </li></ul></ul><ul><ul><li>to satisfy the customer’s cost, quality, and time expectations </li></ul></ul><ul><li>The project team is organized for the purpose of accomplishing those missions! </li></ul>
  5. 5. Owner Functions <ul><li>Defining the scope of the project </li></ul><ul><li>Planning the project </li></ul><ul><li>Financing the project </li></ul><ul><li>Ensuring the project team understands the project’s goa ls </li></ul>
  6. 6. Construction Management Functions <ul><li>Company level </li></ul><ul><ul><li>Selecting the right jobs to bid </li></ul></ul><ul><ul><li>Preparing the cost estimate </li></ul></ul><ul><ul><li>Submitting the bid </li></ul></ul><ul><ul><li>Procuring the payment and performance bonds </li></ul></ul><ul><ul><li>Scheduling the work </li></ul></ul><ul><ul><li>Securing project operating capital </li></ul></ul>
  7. 7. Construction Management Functions <ul><li>Construction site level </li></ul><ul><ul><li>Setting the standards for quality and safety </li></ul></ul><ul><ul><li>Planning the sequence of construction </li></ul></ul><ul><ul><li>Controlling progress and expenditures </li></ul></ul>
  8. 8. Construction Management Functions <ul><li>Construction site level </li></ul><ul><ul><li>Communicating effectively with owner and designer </li></ul></ul><ul><ul><li>Coordinating the work of the subcontractors </li></ul></ul><ul><ul><li>Managing submittals, change orders and periodic pay estimates </li></ul></ul><ul><ul><li>Closing out the project </li></ul></ul>
  9. 9. Project Planning And Design <ul><li>Master planning </li></ul><ul><li>Scope definition </li></ul><ul><ul><li>Owner determines exactly what kind of a facility will be built </li></ul></ul><ul><ul><li>Sets the design objectives for the Architect/Engineer </li></ul></ul><ul><li>Planning phase </li></ul>
  10. 10. Influence on Construction Quality
  11. 11. Influence on Construction Project Cost
  12. 12. Impact of Time on the Cost of Project Changes
  13. 13. The Business of Construction Management
  14. 14. Planning Phase <ul><li>Select the designer </li></ul><ul><li>Define the project goals </li></ul><ul><li>Ensure the availability of sufficient funds to complete the project </li></ul><ul><li>Select and purchase the project site, </li></ul><ul><li>Determine construction procurement system and the form of construction contract to be used. </li></ul>
  15. 15. Design Phase <ul><li>Primary requirement for any facility is that it must be safe !! </li></ul><ul><ul><li>Building codes </li></ul></ul><ul><li>Owner and A/E schedule design reviews </li></ul><ul><ul><li>schematic drawings </li></ul></ul><ul><ul><li>preliminary drawings </li></ul></ul><ul><ul><li>working drawings </li></ul></ul>
  16. 16. Bid Phase <ul><li>First step is to decide whether or not to bid the job. Contractors are generally limited in their ability to bid by two factors: </li></ul><ul><ul><li>their bonding capacity and </li></ul></ul><ul><ul><li>the policies of management </li></ul></ul>
  17. 17. Policies of Management <ul><li>Factors contractors consider in deciding whether or not to bid a particular project include: </li></ul><ul><ul><li>Location of the work </li></ul></ul>
  18. 18. Factors Contractors Consider <ul><ul><li>Identity of the owner </li></ul></ul><ul><ul><li>Availability of key company personnel </li></ul></ul><ul><ul><li>Experience in the type of work solicited </li></ul></ul>
  19. 19. Factors Contractors Consider <ul><ul><li>Whether or not there is financing for the project </li></ul></ul><ul><ul><li>Size of the project . </li></ul></ul>
  20. 20. Bid Preparation <ul><li>Bid preparation is expensive! </li></ul><ul><li>In preparing a bid, contractors must consider the costs of: </li></ul><ul><ul><li>Equipment </li></ul></ul><ul><ul><li>Labor </li></ul></ul><ul><ul><li>Materials </li></ul></ul><ul><ul><li>Subcontractors </li></ul></ul>
  21. 21. Bid Preparation <ul><li>Consider the costs of: </li></ul><ul><ul><li>Job and company overhead , contingency , and profit </li></ul></ul><ul><ul><li>Should also consider the number of competitor bidders and the bidding history of those competitors on similar projects </li></ul></ul>
  22. 22. Award Phase <ul><li>Owner provides: </li></ul><ul><ul><li>Builder’s Risk insurance </li></ul></ul><ul><li>Successful bidder must provide: </li></ul><ul><ul><li>Payment and performance bonds </li></ul></ul><ul><ul><li>Workers compensation insurance </li></ul></ul><ul><ul><li>Liability insurance </li></ul></ul><ul><ul><li>List of subcontractors </li></ul></ul><ul><ul><li>Detailed project schedule </li></ul></ul>
  23. 23. Notice to Proceed <ul><li>Contractor cannot begin the work until the Notice to Proceed is received – so </li></ul><ul><li>Use the time between bid opening and contract award for detailed pre-project planning. </li></ul>
  24. 24. Pre-project planning <ul><li>Planning how the work will proceed and in what sequence </li></ul><ul><ul><li>Construction procedures </li></ul></ul><ul><ul><li>Type of equipment to be used </li></ul></ul><ul><ul><li>Job access </li></ul></ul><ul><ul><li>Location of the field office and storage areas </li></ul></ul><ul><ul><li>Final selection of subcontractors and suppliers </li></ul></ul>
  25. 25. Pre-project planning <ul><li>Cash flow analysis should be completed to determine if the company needs to borrow money </li></ul><ul><li>Detailed project schedule is prepared </li></ul><ul><li>Work break down (WBS) and pay schedule are planned </li></ul>
  26. 26. Construction Phase <ul><li>Size of the contractor’s on-site project management organization is a function of the size and complexity of the project. </li></ul>
  27. 27. Project Management Team
  28. 28. Construction Company Team Functions <ul><li>Project managers (PM) </li></ul><ul><li>Superintendents </li></ul><ul><li>Schedulers </li></ul><ul><li>Estimators </li></ul><ul><li>Material expediters </li></ul>
  29. 29. Owner’s Project Team <ul><li>Size of the owner’s project team will depend on the size and complexity of the project – small project (A/E) </li></ul><ul><li>Large highway project </li></ul><ul><ul><li>Resident engineer </li></ul></ul><ul><ul><li>Inspectors </li></ul></ul><ul><ul><li>Surveyors </li></ul></ul><ul><ul><li>Quality assurance technicians </li></ul></ul>
  30. 30. Managing Critical Activities <ul><li>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 ! </li></ul><ul><li>Trick is to know which activities are critical </li></ul>
  31. 31. Critical Activities <ul><li>Critical activities are those that could impact the cost of the work by at least one half of one percent of the bid price : </li></ul><ul><ul><li>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. </li></ul></ul>
  32. 32. Pareto’s 80-20 rule <ul><li>20% of the activities are critical and should be managed carefully </li></ul><ul><li>The other 80% will average out … </li></ul>
  33. 33. Project Control <ul><li>Cost control </li></ul><ul><li>Cash Flow Analysis </li></ul><ul><li>Schedule Control </li></ul><ul><li>Material Management </li></ul>
  34. 34. Cost Control <ul><li>Possible corrective actions could include: </li></ul><ul><li>Adding additional trade workers or crews </li></ul><ul><li>Adding or removing equipment </li></ul><ul><li>Working overtime </li></ul><ul><li>Bringing in additional subcontractors </li></ul>
  35. 35. Cost Control <ul><li>Possible corrective actions could include: </li></ul><ul><li>Making the job more efficient </li></ul><ul><li>Eliminating factors that cause subcontractors to interfere with each other </li></ul>
  36. 36. Productivity <ul><li>Let R = Production rate </li></ul><ul><li>Where: T is total time , Q is the total quantity to be installed </li></ul><ul><li>The total cost is determined by the equation: </li></ul><ul><li>C t = C h  T </li></ul><ul><li>Where C t = total cost and C h = cost per hour, or </li></ul><ul><li>C t = C h  (Q/R) </li></ul>
  37. 37. Cash Flow Analysis Time Cost
  38. 38. Front Loaded Cost Curve Time Cost
  39. 39. Cash Flow Schematic Diagram
  40. 40. Profit (loss) To Date <ul><li>Project Manager must calculate profit (loss) to date on a regular, weekly basis </li></ul><ul><ul><li>Cost to date </li></ul></ul><ul><ul><li>Re-estimated cost to complete </li></ul></ul><ul><ul><li>Amount billed </li></ul></ul><ul><ul><li>Contract amount (including change orders) </li></ul></ul><ul><ul><li>Example 3.2 </li></ul></ul>
  41. 41. Schedule Control <ul><li>Chapter 4 </li></ul><ul><li>Critical path - By definition, activities on the critical path will delay the entire project if they are delayed </li></ul><ul><li>Physical progress can be compared with the financial progress to determine if the project is: </li></ul><ul><ul><li>on schedule or late </li></ul></ul><ul><ul><li>over budget or under budget </li></ul></ul>
  42. 42. Materials Management <ul><li>Ensure that materials are delivered in a timely manner to the site in the quantity and quality required . When materials arrive they are: </li></ul><ul><ul><li>Counted </li></ul></ul><ul><ul><li>Inspected </li></ul></ul><ul><ul><li>if necessary, Tested </li></ul></ul>
  43. 43. Materials Management <ul><li>Must determine the latest order date accounting for the: </li></ul><ul><ul><li>shop drawing </li></ul></ul><ul><ul><ul><li>Preparation </li></ul></ul></ul><ul><ul><ul><li>submission and </li></ul></ul></ul><ul><ul><ul><li>approval time </li></ul></ul></ul><ul><ul><li>lead time required for fabrication </li></ul></ul><ul><ul><li>shipping </li></ul></ul>
  44. 44. Materials Management <ul><li>Too many materials stored on the site can lead to problem of: </li></ul><ul><ul><li>space allocation </li></ul></ul><ul><ul><li>weather damage </li></ul></ul><ul><ul><li>theft </li></ul></ul>
  45. 45. Construction Related Design <ul><li>Temporary structures such as: </li></ul><ul><ul><li>Scaffolding </li></ul></ul><ul><ul><li>Forms </li></ul></ul><ul><ul><li>Temporary bridges </li></ul></ul><ul><ul><li>Shoring </li></ul></ul><ul><ul><li>Cofferdams </li></ul></ul><ul><ul><li>Rigging </li></ul></ul><ul><ul><li>must be designed by the contractor </li></ul></ul>
  46. 46. Risk Management <ul><li>Risks are inherent in construction </li></ul><ul><li>Industry is moving toward allocating risks to the party most able to control the specific risk </li></ul><ul><li>Managing risks means: </li></ul><ul><ul><li>minimizing risks </li></ul></ul><ul><ul><li>insuring against risks </li></ul></ul><ul><ul><li>and sharing risks </li></ul></ul>
  47. 47. Risk Management <ul><li>Construction risks - inability of a subcontractor to perform </li></ul><ul><li>Economic risks - cost escalation </li></ul><ul><li>Political/public risks - disapproval of the required project permits </li></ul><ul><li>Physical risks - subsurface conditions </li></ul>
  48. 48. Risk Management <ul><li>Contractual and legal risks - risks assigned by contract over which the contractor has no control </li></ul><ul><li>Design risks - a project design that is not constructible </li></ul>
  49. 49. Risk Management <ul><li>Worker injured or killed </li></ul><ul><li>A job accident that injures the public </li></ul><ul><li>A construction vehicle is involved in an accident off the project </li></ul>
  50. 50. Risk Management <ul><li>Risks are best assumed by the party with the ability to best control the risk </li></ul><ul><li>The best way to manage risks is to avoid them, but the construction industry is characterized by risks ! </li></ul>
  51. 51. Risk Management <ul><li>Contractors manage risks by purchasing insurance </li></ul><ul><li>Examining the contract language addressing changed conditions… </li></ul><ul><li>Contractor safety programs </li></ul><ul><li>Subcontracting is also a form of risk management –require performance and payment bonds </li></ul>
  52. 52. Value Engineering (VE) <ul><li>Function analysis or value analysis </li></ul><ul><li>Main objective to reduce project cost, without reducing the quality of the structure </li></ul><ul><li>VE exists because contractors know better ways to build projects, and owners are willing to pay for that knowledge !! </li></ul>
  53. 53. Assignment <ul><li>Due next class </li></ul><ul><li>Chapter 3 Review Questions </li></ul><ul><ul><li>3.5 </li></ul></ul><ul><ul><li>3.10 </li></ul></ul><ul><ul><li>3.15 </li></ul></ul>
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