Construction Project Management - Contracting

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Questions and Answers

Which project management knowledge area includes the processes of identifying and documenting project stakeholders?

  • Project Risk Management
  • Project Procurement Management
  • Project Stakeholder Management (correct)
  • Project Communications Management

Which project management process is responsible for creating a baseline for measuring project performance?

  • Control Costs
  • Determine Budget (correct)
  • Plan Cost Management
  • Estimate Costs

Which process is responsible for developing a plan to ensure that the quality of the project deliverables satisfies the requirements?

  • Manage Quality
  • Estimate Activity Resources
  • Control Quality
  • Plan Quality Management (correct)

Which knowledge area focuses on the processes required to plan, acquire, and manage resources for a project?

<p>Project Resource Management (A)</p> Signup and view all the answers

Which knowledge area is involved in identifying, analyzing, and responding to potential threats and opportunities in a project?

<p>Project Risk Management (B)</p> Signup and view all the answers

According to the slide "Course topic map (the PM BoK guide, 6th ed.)", which Knowledge Area is associated with "Develop Project Charter"?

<p>Project Integration Management (B)</p> Signup and view all the answers

Which of the following is NOT a Process Group listed in the "Course topic map (the PM BoK guide, 6th ed.)" slide?

<p>Managing (D)</p> Signup and view all the answers

Which Knowledge Area in the PMBOK® Guide is associated with the task "Direct and manage project work"?

<p>Project Integration Management (A)</p> Signup and view all the answers

What are the two main distinctions between a contract of sale and a tender contract?

<p>A contract of sale involves the transfer of an existing good, while a tender contract involves the creation of a new good or service. (B)</p> Signup and view all the answers

From the operational perspective, what are the four main components of a procurement contract?

<p>Project delivery method, payment scheme, award mechanism, and contractual obligations. (C)</p> Signup and view all the answers

Which of the following is NOT a project delivery system commonly used in project management?

<p>Agile (C)</p> Signup and view all the answers

What is the main purpose of the contract organization?

<p>To establish and define the legal and contractual relationship between the owner and the contractor. (A)</p> Signup and view all the answers

What is the role of the Owner's Project Manager (PM) in a contract organization?

<p>To represent the owner's interests and ensure the project meets their requirements. (C)</p> Signup and view all the answers

Which of these are payment schemes commonly used in project management?

<p>Time&amp;Material, Unit prices, Cost plus kinds, Guaranteed Maximum Price, Lump-sum. (B)</p> Signup and view all the answers

What are the primary obligations of the Contractor in a procurement contract?

<p>To provide the necessary resources, manage the construction activities, and deliver the project on time and within budget. (A)</p> Signup and view all the answers

What is the key difference between a traditional project delivery system and a Design/Build project delivery system?

<p>A traditional system involves separate design and construction phases, while Design/Build combines these two phases into one. (C)</p> Signup and view all the answers

What is the main difference between a 'Traditional' and an 'Integrated' delivery system?

<p>The 'Traditional' system relies on separate contracts for design and construction. (A), The 'Integrated' system involves the contractor taking responsibility for both design and construction. (D)</p> Signup and view all the answers

What is the defining characteristic of a 'Turn-Key' delivery system?

<p>The contractor is responsible for project financing, design, and construction. (C)</p> Signup and view all the answers

How does a 'BOT' delivery system differ from other delivery systems?

<p>The contractor is responsible for the long-term financing of the project. (C)</p> Signup and view all the answers

What is the main purpose of the 'Design' phase within a project's scope?

<p>Developing detailed specifications and drawings for the project. (B)</p> Signup and view all the answers

What is the purpose of the 'Build' phase within a project's scope?

<p>Carrying out the physical construction of the project. (A)</p> Signup and view all the answers

How does the 'Financing' phase contribute to the project's success?

<p>It ensures the project has adequate funds to cover the cost of design and construction. (D)</p> Signup and view all the answers

Why are delivery systems crucial in project management?

<p>They define how the project will be managed, executed, and delivered. (D)</p> Signup and view all the answers

Which delivery system is typically used when a project requires a specific type of expertise or specialized knowledge?

<p>Integrated (C)</p> Signup and view all the answers

In the context of delivery systems, what is the most significant factor that dictates risk allocation?

<p>The scope of work assigned to the Contractor (B)</p> Signup and view all the answers

Which delivery system offers the most flexibility for the Owner in terms of budget and project scope?

<p>Traditional (D)</p> Signup and view all the answers

Which delivery system is marked by a defined budget during the tender process?

<p>Traditional (C)</p> Signup and view all the answers

Among these delivery systems, which is best suited for projects with high complexity?

<p>Design/Build (B)</p> Signup and view all the answers

Identify the delivery system known for its potential to minimize design risk and facilitate early budget determination.

<p>Agency CM (D)</p> Signup and view all the answers

Which of the following delivery systems is associated with a high risk of redesign and rework due to fast-tracking?

<p>Agency CM (B)</p> Signup and view all the answers

What are the primary advantages of a Traditional delivery system?

<p>Strong Owner contractual protection &amp; well-defined budget (C)</p> Signup and view all the answers

Identify the delivery system that often suffers from a lack of collaboration and communication among different project stakeholders.

<p>Traditional (A)</p> Signup and view all the answers

Which delivery system is most vulnerable to aggressive bids in the market, where contractors focus on offering the lowest price regardless of other factors?

<p>Traditional (B)</p> Signup and view all the answers

Which delivery system is associated with the selection of a Construction Manager based on their reputation and quality?

<p>Agency CM (B)</p> Signup and view all the answers

What is the primary role of a Construction Manager (CM) in an "Agency CM" delivery system?

<p>To oversee the project on behalf of the client, providing coordination and guidance. (D)</p> Signup and view all the answers

Which delivery system typically offers a guaranteed maximum price (GMP) to the client?

<p>CM at Risk (B)</p> Signup and view all the answers

Which of the following is NOT a benefit of a "Design/Build" delivery system?

<p>Clear separation of design and construction responsibilities, leading to reduced conflict. (C)</p> Signup and view all the answers

Which delivery system involves the contractor financing the project and being paid at the end?

<p>Turn Key (D)</p> Signup and view all the answers

In which delivery system does the customer retain ownership of the project while giving up management rights for a specified period?

<p>BOT (D)</p> Signup and view all the answers

What is a potential disadvantage of a "Pure CM" delivery system?

<p>High risk of reputational loss for the CM. (A)</p> Signup and view all the answers

What is a potential benefit of using a "CM at Risk" delivery system?

<p>Reduced financial risk for the client. (A)</p> Signup and view all the answers

What is a potential disadvantage of using a "Design/Build" delivery system?

<p>Potential for lower quality due to the contractor's focus on profit maximization. (A)</p> Signup and view all the answers

Which of the following best describes the "Turn Key" delivery system?

<p>The contractor finances the project and provides a completed project ready for use. (B)</p> Signup and view all the answers

Which of the following is NOT a characteristic of a "BOT" delivery system?

<p>The contractor assumes all financial risk for the project. (A)</p> Signup and view all the answers

Flashcards

Politecnico di Torino

An Italian university known for engineering and technology.

Construction Project Management

The process of planning, executing, and closing construction projects.

Project Contracting

The process of formalizing agreements between parties for project execution.

PMBOK® Guide

A standard that outlines project management processes and knowledge areas.

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Project Management Process Groups

Five phases: Initiating, Planning, Executing, Monitoring, Closing.

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Project Integration Management

Process of unifying and coordinating various project elements.

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Collect Requirements

The process of gathering the needs and expectations of stakeholders.

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Work Breakdown Structure (WBS)

A hierarchical decomposition of the total scope of work in a project.

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Plan cost management

The process of defining how project costs will be estimated, managed, and controlled.

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Estimate costs

The process of developing an approximation of the monetary resources needed to complete project activities.

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Determine budget

The process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline.

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Identify risks

The process of determining which risks may affect the project and documenting their characteristics.

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Plan stakeholder engagement

The process of developing approaches to involve stakeholders based on their needs, expectations, interests, and potential impact.

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Contractual Relationship

An agreement between parties detailing obligations and terms for a project.

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Project Delivery Systems

Methods used to organize and execute project delivery.

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Payment Schemes

Methods of financing a project payment, each with different structures.

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Award Mechanism

Processes to formally contract a project, such as bidding or negotiation.

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Contract of Sale

A contract for transferring ownership of existing goods or services.

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Tender Contract

A contract for creating a service or product that does not yet exist.

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Obligations in Contracting

Actions and commitments both parties must uphold in a contract.

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Procurement Contract Components

Four main elements drive the creation of a procurement contract.

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Contract Components

The five essential elements: scope, organization, type, award, payment.

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Scope of Contract

Includes financing, design, and build aspects of a project.

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Financing

Securing funds for project development and reimbursement from profits.

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Design

The process of detailing the project scope into specifications and drawings.

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Build Phase

Performing construction activities including site preparation and implementation.

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Traditional Delivery System

Contractor is responsible solely for the physical construction of the project.

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Integrated Delivery System

Contractor manages both design and construction of the project.

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Turn-Key Contract

Contractor provides design, construction, and may offer short-term funding.

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Field Supervision

Oversight of project activities including QA, cash flow, and coordination.

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Agency CM

Construction Management that operates as an agent for the client, earning a fixed fee on costs.

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Delivery System: CM at Risk

CM provides a guaranteed maximum price (GMP), assuming some financial risk.

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Design/Build System

A project delivery method integrating design and construction services.

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Turnkey Project

A project where the contractor completes everything, ready for use at delivery.

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BOT System

Build-Operate-Transfer; the contractor builds and operates the project for a time before transferring it.

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Build Operate Transfer (BOT)

A project delivery method where a contractor builds a facility, operates it for a time, and then transfers ownership to the client.

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Risk Allocation

The process of distributing risks among project stakeholders based on ability to manage them.

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Guaranteed Maximum Price (GMP)

A cap on costs for construction projects, offered by CM to reduce client risk.

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Change Orders

Requests to alter the original contract terms which can affect project time and cost.

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Contractor's Role

The contractor assumes risk based on their skills in managing project uncertainties and execution requirements.

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Owner's Role

The owner delegates certain project risks to the contractor due to their expertise in specific tasks.

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Design Quality Risks

The possibility of low quality in design-build contracts, needing client oversight.

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Subcontracting Costs

Expenses associated with hiring third-party contractors, often reduced in agency CM.

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Pros of Agency CM

Involvement from planning stages helps with budget determination and reduces design risk.

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Cons of Fast-Track Projects

Fast-tracking can lead to redesign, extra costs, and potential conflicts among parties involved.

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Value Engineering

A method to improve the value of a project by examining functions and reducing costs without affecting quality.

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Design Risks

Potential problems or uncertainties that may arise during the design phase of a project.

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Construction Management (CM)

A professional service that applies project management techniques to oversee the planning, design, and construction phases.

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Study Notes

Construction Project Management - Project Contractin

Main Learning Outcomes

  • Understanding contractual relationships
  • Project financing methods
  • Contract awarding procedures

Project Contracting Content

  • Project Management Organization:
    • Internal PM organizations (part of organizational structure)
    • External contract organizations (topic of this lecture)
  • Contract Organization:
    • Owner's organization (OWNER)
    • Contractor's organization (CONTRACTOR)
    • Owner PM
    • Contractor PM
    • Consultant (3rd party PM)
    • CM organization (linking owner and contractor)
  • Project Delivery Methods:
    • Traditional (Contractor only responsible for physical construction)
    • Integrated (Contractor responsible for design and construction)
    • Turn-key (Contractor contributes to short term funding)
    • BOT (Build-Operate-Transfer, contractor provides scope including lifecycle financing)

Contract Organization - Scope

  • Financing: Securing short-term and long-term funding for project development
  • Design: Detailed project scope, from concept to technical specifications and construction drawings
  • Build: Performance of construction works, including preliminary activities (like site prep) and actual implementation

Delivery Systems

  • Traditional: Well-known method, good for simple projects, low constructability, high risk of conservative design strategies.
  • Integrated Design-Build: Uses contractor's design skill, single point of control, good for complex projects.
  • Pure/Agency CM: Involves CM from planning stages, allows for budget determination early. Can lead to rework and extra costs.
  • CM at risk: Contractor offers guaranteed maximum price (GMP) to the customer. Less flexibility and can result in limited risk for the customer but higher risk for the Contractor.
  • Design/Build: Exploits contractor's design skills. Has lack of mediator problem and can result in problems during final testing and disputes (reworks and quality issues).
  • Turn-key: Like DB but funded at project end. Used for power and oil plants. Allows postponing investment.
  • BOT: Contractor funds the investment and gets long-term management rights. Suitable for P³ (public-private-partnerships).

Payment Schemes

  • Time & Material: Client pays agreed price for labor and materials, risk of higher costs to client.
  • Unit Pricing: Agreed unit prices for project categories; price can be fixed or adjusted based on parameters like inflation.
  • Cost Plus Fixed Fee: Client pays contractor's costs plus a fixed fee.
  • Cost Plus Fixed Percentage: Client pays costs plus percentage of costs as fee.
  • Target Cost Plus Incentive Fee: Contractor aims to achieve target cost, with incentives for managing at or under cost.
  • Guaranteed Maximum Price (GMP): Contractor guarantees maximum price (and cost control) for the project.
  • Fixed Price: Suitable for well-defined or predictable projects, often used for partial or lump sum payments.

Award Mechanisms

  • Bidding: Contractor selection based on lowest price.
  • CAP: Owner sets fixed price, contractor offers project quality and options.
  • Negotiation: Contractor selection based on reputation and qualifications; good for complex projects, also used for post-bid changes.

Bidding Considerations

  • Time: Bidding timeframes too short can lead to low quality bids; too long can delay the construction process.
  • Bid Count: Fewer or too many bidders can affect competitiveness.
  • Process: Requires A/E oversight, publicity, and pre-bid conferences to ensure transparency and clarity. Qualifications check is usually done before bid.

Public vs. Private Bidding

  • Public Bidding: Advertised, often following specific regulations and timelines for qualification processes.
  • Private Bidding: Typically by invitation only.

Bidding Qualifications

  • Bonds/Insurance: For safety and financial security during contract execution.
  • Safety Record & Reputation: Evaluation of contractor's past performance.
  • Financial Strength & Capacity: Demonstrating ability to handle contract obligations.
  • Experience & Licensing: Related to the type of work.

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Project Contracting - Politecnico di Torino PDF

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