Project Management Fundamentals

• A project combines activities from different specialized groups.
• Projects yield non-repetitive results with clear beginnings and ends.
• The Project Management Institute defines a project as a temporary endeavor to create a product, service, or result, with the major goal of satisfying a customer's needs.

Major Characteristics of a Project

• An established objective.
• A defined lifespan (beginning and end).
• Involvement of several departments and professionals.
• It's typically something that has never been done before.
• Specific time, cost, and performance requirements

Three Components of a Project

• Scope represents the work to be accomplished (quantity and quality).
• Budget refers to direct costs (materials and labor) and indirect expenses, which are measured in pesos and/or labor-hours of work.
• Schedule refers to the logical sequencing and timing of work performed.

Classifications of Projects

• Residential Building: structures built for housing people, supplies, or equipment (apartments, townhomes, condos, nursing homes, dormitories, garages).
• Institutional and Commercial Building: Includes schools, sports arenas, hospitals, shopping centers, stadiums, retail stores, and skyscrapers.
• Specialized Industrial Construction requires a high level of specialization and technical skills in planning, construction, and design, such as oil refineries, nuclear power plants, and hydroelectric power plants.
• Infrastructure and Heavy Construction entails building and upgrading highways, railways, communications, transit systems, roads, drainage systems, and pipelines, and are often executed by government agencies and large private corporations.

Project Life Cycle Stages

• Defining: project specifications are defined, objectives are established, teams are formed, and major responsibilities are assigned.
• Planning: effort increases, and plans are developed to determine project details, scheduling, benefits, quality levels, and the budget.
• Executing: the major portion of the project work takes place (both physical and mental) and the physical product is produced (bridge, report, software).
• Closing: involves:
  • Delivering the project product to the customer, including possible training and document transfer.
  • Redeploying project resources to other projects.
  • Conducting a post-project review to assess performance and capture lessons learned.

Project Management

• Concerned with the overall planning and coordination from inception to completion.
• Focused on meeting client requirements, ensuring on-time completion, and adhering to cost and quality standards.

Steps in Management of a Project

• Project Definition: defines intended use by the owner and conceptual configurations.
• Project Scope: defines work to be accomplished, quantity, quality, and required tasks.
• Project Budgeting defines the owner's permissible budget and determines direct/indirect costs and contingencies.
• Project Planning identifies the strategy to accomplish the work.
  • select/assign staff.
  • identify tasks
• Project Scheduling arranges and schedules activities in a logical sequence, linking costs and resources to scheduled activities.
• Project Tracking/Control: compares actual vs. planned work, time, and costs expended.
• Project Close Out ensures owner satisfaction by performing final testing and inspection, archiving documents, confirming payments, and turning the project over to the owner.

Role of the Project Manager

• To lead the project team and ensure quality within the project's time, budget and scope constraints.
• A PM must achieve desired outcomes, manage risks, and sequence tasks logically, using available resources effectively and perform five basic functions:
  • Planning
  • Organizing
  • Staffing
  • Directing
  • Controlling
• Effective project planning includes the development of organizational charts with clear communication channels and roles and responsibilities.
• Organized work leads to accomplishments and helps prevent rework.
• Project staffing is important because people make things happen.

Project Control

• A cooperative effort involving the entire project team.
• Control anticipates and reports deviations, addressing quality, work accomplished, budget, schedule, and scope changes.

Contractual Arrangements

• Project management requires teamwork among the project owner, designer, and contractor.
• Owners provide project needs, quality levels, budget, and schedule, along with overall direction.
• Designers develop contract documents meeting the owner's needs.
• Contractors efficiently manage the required physical work.

Construction Contract Agreement

• A written document between a property owner and a general contractor.
• Specifies construction, renovation, alteration, or other work on the property.
• It outlines parties involved, price, rights, construction start and end dates, work details, and responsibilities.

Construction Pricing and Contracting Approaches

• Separate pricing is imperative for each unique constructed facility.
• A construction contract price includes direct project costs, field supervision, plus the markup from the contractors for overhead/profit.
• Pricing factors depend facility type/location.

Competitive Bidding

• The bid process includes detailed plans and the specifications based on the owner's objectives and requirements, where qualified contractors bid for the project.
• A qualified contractor typically demonstrates previous experience/financial stability.
• Private sector owners have latitude in bidder selection; in the public sector, rules ensure an equal footing for qualified contractors.

Lump Sum Bid

• Represents the total contractor price to complete the project as per the detailed plans and specifications.

Unit Price Bidding

• Used when material quantities/labor for key tasks are uncertain.
• Contractors submit a list of unit prices, and the lowest bidder is determined from lump sum price calculated by multiplying quoted prices by owner-estimated quantities.
• The final payment is based on actual quantities multiplied by quoted unit prices.

Negotiated Contracts

• Used by private owners.
• Flexibility in pricing, especially for large, complex, or duplicate projects.
• Owners value expertise, integrity, or satisfactory past performance.
• These might be used when speed is essential.
• Require reimbursement of direct project costs plus the contractor’s fee.

Negotiated Contracts Fee Determination Methods

• Cost plus fixed percentage.
• Cost plus fixed fee.
• Cost plus variable fee.
• Target estimate.
• Guaranteed maximum price or cost.
• Fixed percentages/fees are set, and are used as an incentive to reduce costs.
• Guaranteed maximum cost arrangements penalize for overruns/failures.

Speculative Residential Construction

• This is often used for houses and condos.
• Developers build in anticipation of buyer demand in which the developer essentially sets the prices.

Force Account Construction

• Owners use in-house labor.
• The total force-account charges (including overhead) become the pricing arrangement.

Contract Provisions for Risk Allocation

• Provisions allocate risk.
• The following can assign responsibilities and risks:
  • Force Majeure
    • absolves payment for costs due to "Acts of God" and external events
  • Indemnification
    • protects from losses/damages incurred by a third party
  • Liens
    • assure third-party claims settlement
  • Labor Laws
    • cover payments for labor law violations
  • Differing Site Conditions
    • addresses responsibility for extra costs from unexpected conditions
  • Delays/Extenstions of Time
  • Liquidated Damages
    • payments for facility defects with advanced agreed amounts
  • Consequential Damages
    • payments for facility defects’ actual damage costs
  • Occupational Safety/Health of Workers
  • Permits, Licenses, Laws, Regulations
  • Equal Employment Opportunity Regulations
  • Termination (Contractor Default)
  • Suspension of Work
  • Warranties/Guarantees

Design/Bid/Build Contract

• Suited for projects with well-defined scopes.
• Three-party agreement is owner, designer, and contractor.
• Complete design, is followed by competitive bids, and then a construction contract award.
• Separate contracts awarded to designer and contractor.

Design/Build Contract

• Shortens project time and offers flexibility for changes.
• This is a two-party agreement between the owner and design/build firm.
• A cost-reimbursable arrangement gets used, requiring involvement of owner in decision-making.

Construction Management Contract

• A construction management (CM) contract can be assigned to a CM firm to coordinate the project for the owner.
• Four-party arrangement: owner, designer, CM firm, and contractor.
• The owner assigns a contract to a capable firm for coordinating all aspects.

Owner/Agent Arrangement

• An owner-agent arrangement manages projects.
• Owners conduct their own partial designs and have the balance from outside design consultants, with construction contracts assigned to either one or multiple contractors/designers.
• An owner selects project handling based on resources, control, involvement, risk sharing, cost, and schedule.

Public-Private Partnerships

• Public-private partnerships are government mechanisms.
• PPPs procure/implement public infrastructure/services using private sector resources.
• PPP's combine skills/resources, sharing risks, and enabling governments to focus on policy.

Build-Operate-Transfer Contract

• A build-operate-transfer contract is an agreement between a private company and a governmental body.
• These contracts commit the company to building/operating facilities then transferring ownership.

Turnkey Contract

• The contractor is responsible for both the design and the construction of a facility, providing works ready for use at an agreed price and fixed date.

Fast-Track Contract

• Fast-track building construction is industry for starting construction before design completion to shorten project time.

Types of Construction Contracts

• Contracts serve as pricing and risk allocation means.

Types of Contracts by Risk

• Lump Sum
  • Contractor has the risk.
  • Higher markup.
• Unit Price
  • Some risk removed from contractor. -May be unbalanced.
• Cost Plus Fixed Percentage
  • Owner has the risk.
  • Little incentive to reduce cost.
• Cost Plus Fixed Fee
  • Owner & contractor share risk.
  • Incentive completion, fixed fee.
• Cost Plus Variable Percentage
  • Owner & contractor share risk.
  • Penalty if greater cost, reward if less.
• Target Estimate
  • Owner & contractor share risk.
  • Specifies a penalty/reward, pre-established portions.
• Guaranteed Maximum Cost
  • Contractor takes the risk.
  • Few or no change orders, performance specifications for owner.

Construction Specifications

• Written document with details on:
  • Scope of work
  • Materials
  • Installation methods
  • Workmanship quality.

Main Types of Specification

• Details the types of materials installed
• Explains how to measure installations
• Consists of categories:
  • General Provisions
    • reference to national/state building codes
  • Required Products
    • Lists the products/materials
  • Execution Procedures
    • details on the methods of installation and the required quality
• Describes needed operations.
• Proprietary - Specs used if only one can be used for install.