Chapter 1: Understanding Owners and Projects PDF

## Understanding Owners and Projects - **Owner** is the responsible party for a construction project, whether a person, group, or company. They initiate the project and raise funding. - Public and private sector owners develop the same general kinds of projects, such as hospitals, housing, offices...

## Understanding Owners and Projects - **Owner** is the responsible party for a construction project, whether a person, group, or company. They initiate the project and raise funding. - Public and private sector owners develop the same general kinds of projects, such as hospitals, housing, offices, etc. - Public sector owners primarily develop projects that support public functions, such as highways, bridges, courthouses, and military facilities, though private sector involvement is increasing through Public-Private Partnerships (P3). - Private sector owners develop projects in the commercial arena, such as hospitality, entertainment, and gaming. ### Public Sector - Public sector owners develop facilities for federal, state, or municipal projects. - They are funded through taxes or other public revenue, including municipal bonds. - Public owners spend close to 80% of all funds on projects developed in the United States. - The scope and size of these projects are immense, from large infrastructure initiatives to small standalone facilities. - Federal Acquisition Regulations (FAR) are applicable to most executive agencies in the federal government. - They define and differentiate public and private-sector contracting. - There are three principle differentiators of public owners: - **Open procurement process** - Public sector owners procure consultant services through an open, competitive process. Projects are publicly advertised, proposals are evaluated against pre-established criteria, and selection is based on price or best value considerations. - **Contracting advantage** - Public projects have contracts advantageous to the public owner, including the ability to direct consultants beyond the original scope, auditing the service provider’s books at any time, and provisions that specify civil and criminal penalties for program fraud. - **Socio-economic objectives** - Public sector projects often include objectives designed to enhance the participation of small, economically or socially disadvantaged businesses. ### Private Sector - Private sector owners aren’t bound by public acquisition regulations and have more flexibility for procurement. - They are subject to federal, state, and local regulations but can leverage relationships established through prior experience or other motives when procuring project teams. - Contractual relationships that share project risks and rewards are easier to arrange. - Only applicable contract law and the parties’ willingness to participate limit these arrangements. ### Public-Private Partnership (P3) - P3 refers to a project funding and delivery method that emerged in response to federal, state, and municipal lack of funds to promote public projects. - Public sector entities seek a private sector partner to fund, develop, and operate an infrastructure or facility project. - Private sector partners provide design, build, and operational services and are compensated via tolls or fees collected from project users. - Public-private partnerships are highly customized and combine elements of both public and private sector procedures. - For a P3 project to be successful, the agreement must be beneficial to all parties. - Problems may occur if there's insufficient private competition due to a lack of qualified partners or if the public entity lacks the expertise to properly manage quality and costs. ## Project Delivery - **Project Delivery** refers to the process of planning, designing, building, and completing a construction project. - A **project delivery method** is a system designed to achieve the satisfactory completion of a construction project. - Project delivery methods address the organization of tasks and the roles and responsibilities of stakeholders. - There are numerous variations possible. ### Project Delivery Methods | Method | Description | |---|---| | Traditional Construction Manager Approach (Design-Bid-Build) | Project proceeds in a linear sequence: Pre-Design, Design, Procurement, Construction, and Post-Construction. The owner engages a consultant to prepare the design, which is then presented to potential general contracting firms. The lowest responsive and responsible bidder is awarded the construction contract. The designer usually provides limited oversight of the work and responds to questions about the design on behalf of the owner. | | Design-Build (CM at-Risk) | Combines design and construction into a single contract. The design-builder is responsible for both design and construction. The owner may have limited oversight of the design and responds to questions about the design on behalf of the owner. The designer in this method is part of the design-build team. | | Multiple-Prime Contracting | The owner holds separate contracts with a variety of different contractors. The owner manages the overall schedule and budget during the entire construction phase. There are two main types: Phased Construction and Trade Contracting (full Multiple Prime). <br >**Phased Construction** is used when work must start before plans are completed, and the project is bid in phases. <br >**Trade Contracting** is an approach whereby the owner has direct contracts with individual trade contractors for the construction of various aspects of the project. | | Other Concepts | Include: - **Construction Manager at-Risk (CMAR)** - CM initially becomes involved during pre-construction as a consultant providing advice, offering schedule, budget, and constructibility advice during pre-construction. Once a “Guaranteed Maximum Price (GMP)” contract is established, the CM acts as the contractor, assuming risk for subletting the construction work to trade subcontractors and guaranteeing completion of the project for the negotiated fixed price. - **Public-Private Partnership (P3)** - **Engineering-Procurement-Construction (EPC/EPCM)** - **Integrated Project Delivery (IPD)**- A minimum of the owner, designer, and builder are part of the contract and share risk and reward. - **Lean Construction** - Maximizes value and minimizes waste. | ## Factors That Influence Project Delivery - **Budget:** The owner must determine a realistic budget and secure financing prior to design to determine project feasibility. Completing on or near the established budget is critical, as are cost overruns. - **Design:** The owner needs a qualified design team that meets the owner's and users' needs. Constructible, complete, and coordinated design documentation is essential. - **Schedule:** A realistic assessment of the project duration and sequencing needs to be performed early on and then monitored throughout design and construction. - **Owner's Level of Expertise:** The owner’s familiarity with the construction process and level of in-house management capability will influence the amount of outside assistance required, and guide the owner in determining the appropriate project delivery method. - **Risk Assessment:** Owners must understand the risks involved in construction, including impacts on budget and schedule, and make informed decisions about risk allocation. ## Construction Management - **Construction Management** is a discipline tailored to the planning, design, and construction process of capital projects. - The CM works directly for the owner, either through an in-house resource or from a third-party firm. - The CM can be effective regardless of the chosen form of contract or project delivery method. - **Construction management services** are offered to provide management techniques and expertise tailored to the owner’s needs. The CM typically works in an agency capacity by applying and integrating comprehensive project controls. ## Advantages, Disadvantages, and Main Characteristics of the Different Delivery Methods **Design-Bid-Build (D-B-B)** **Advantages:** - Easy to understand and widely accepted in the industry - Clearly defined roles and responsibilities for the project participants. - Owner retains control over the design process - Limited involvement required from the owner during the construction stage. **Disadvantages:** - Time-consuming process due to the sequential nature of the method. - Designer may have limited ability to assess scheduling and cost ramifications as the design is developed. - The contractor's input is not incorporated into the design phase, which can limit design effectiveness and constructibility. **Main Characteristics:** - Construction documents are complete before bids are received, offering greater predictability for bidding. - Phases proceed in a linear fashion. - Contracts may be negotiated or competitively bid. - Unlimited number of subcontractors. **Multiple Prime Contracting** **Advantages:** - Provides greater flexibility to the owner, allowing for tailored procurement and management. - Allows for phased or fast-tracked construction. - Contractors are involved early in the process. **Disadvantages:** - Owner is responsible for coordinating multiple contractors, which can increase the complexity and risk. - Owner must have comprehensive oversight to ensure proper schedule and budget management. - Multiple contracts can lead to fragmented project management. - Increased potential for disputes between contractors due to the lack of a single point of responsibility. **Construction Manager at-Risk (CMAR)** **Advantages:** - Early input & participation from the contractor. - Cost security for the owner. - More transparency in the subcontracting process. - Reduced potential for change orders. - More control over design and construction compared to other methods, making construction more predictable. **Disadvantages:** - The CM's dual role can lead to conflicts of interest as they shift from a consultant to the contractor. - The owner may have less control over contingencies if the contractor assumes more risk. - May require a higher level of sophistication and experience from the owner. - Increased potential for adversarial relationships between the CM and the owner. **Design-Build (D-B)** **Advantages:** - Simplicity and one point of responsibility for the owner. - Fast-track construction options. - Design expertise is involved in construction. **Disadvantages:** - The owner relinquishes significant control over the design and construction process, potentially limiting involvement and oversight. - Increased risk for the owner due to fewer checks and balances over the project. - May require a higher level of sophistication and experience from the owner. - Difficult to identify and select a competent and experienced D-B team. ## Chapter Takeaways - Understanding the different types of owners is essential when selecting a project delivery method. - Project delivery methods should be chosen based on the specific needs of the project, including size, complexity, budget, and timelines. - Construction management services provide valuable benefits for owners, regardless of the chosen delivery method. - The owner can tailor construction management services based on their specific needs and resources. - The CM can act as a valuable resource throughout all phases of the project, helping to ensure the success of the project, on time and within budget.