Lecture 1: Introduction To Construction Management (CEE 266) PDF

[email protected] Prof. Pervizpour x8-2137 Lecture 1. Introduction CONSTRUCTION MANAGEMENT CEE 266 Outline Introduction Clas...

[email protected] Prof. Pervizpour x8-2137 Lecture 1. Introduction CONSTRUCTION MANAGEMENT CEE 266 Outline Introduction Class Objectives Course Information Lecture Outlines Learning Objectives Evolution of Construction Management Types of Projects Construction Management and Manager Participant Roles and Motivations Project Process and Managing Phases Challenges of Construction Uncertainty leading to Risk Mesut Pervizpour, Contact Info Office Location: Fritz Lab. Room 401A Email: [email protected] Office Phone: x8-2137 Cell Phone: 484-431-0815 TA: Textbook Text: Construction Management Fundamentals, 2nd Ed. By K. Knutson, C.J. Schexnayder, C.M. Fiori, R.E. Mayom McGraw Hill, ISBN# 978-0-07- 340104-1 Online Reference Material: Project Management for Construction, † by Chris Hendrickson, 2nd Ed. Version 2.2 Summer, 2008. http://pmbook.ce.cmu.edu/03_The_Design_And_Con struction_Process.html Course related handouts and lecture notes.  Assignment # 0 (Course Site) www.lehigh.edu/~mepa Course Topics I. Introduction, History and evolution, Project Types, Construction Industry, Participants Construction Management Functions, delivery methods, types of contracts, awards & contracts Scheduling and Critical Path Method Scheduling and MS Project Introduction to Construction Cost Estimates, Intro. to RS Means Estimating Heavy/Civil Projects, Cranes and Loaders Building Materials, Construction Methods Other Course activities to be scheduled during semester: † Procurement, contract admin, bid types & Process † Guest Lectures † Field Trips † Project Presentations Course Learning Objectives Construction and CM Business Project Organization Contracts, Payments and Delivery Systems Preconstruction and Construction Phase Services Monitoring and Control Measures Economic Evaluation of Alternative Projects Homework, Quizzes, and Project Homework assignments due weekly at beginning of lecture. No Late Homework will be accepted Work with classmates, but submit your own work Project material will be posted, it will require group presentation and report Homework Assignments 20% Course Project 15% Exams - Policies Material covered up to exam date Closed book, closed notes If needed equation sheet will be provided Comprehensive final, heavier focus on 2nd half Mid-term Exams worth 30% Final Exam worth 30% Quiz Grades/Participation 5% Class attendance is Mandatory Participation is required Reference any source you use! CM profession mandates Communication! Lets get started SCOPE Quality Quality PM BUDGET SCHEDULE Quality Brief Evolution of CM Early Egyptians, Greeks and Romans-Kings and Slaves Master Builder – 1700’s to 1800’s General Contractor as Builder – 1900’s General Contractor as “broker” Specialization – 1980’s Construction Manager “at risk” – 1980’s Pure Construction Manager Project Scope Time / Schedule Cost / Budget Natural Environment Political / Social Environment Quality  Industry I Construction value > $850B (worldwide > $4 trillion) Roughly 8% of US GDP, employ 5% of the workers 700K construction firms † 90% < 10 employees † 215K GC/Building, 442K trade contractors Buildings are 70-80% of market Types of construction projects: † Public (30%) and Private (70%) Private Advantages Disadvantages Pick your partners/team Owner not knowledgeable Better contractors/or at least in Funding inadequate a better position Market shifts Less money left on the table Deconstruction of partnerships Owners are different less turnover less politically motivated able to make decisions timely single point of responsibility vs. Board May be knowledgeable about construction  Public By nature, far more complex process – Public Advertisement and Bidding Rules – Design-Bid-Build. – Prevailing Wages, US Steel, MWE, Affidavits, Criminal History Reports, Performance/Labor and Mat’l payment bonds – Schedule of extreme importance – May require a complicated prequalification process – Bidding Campaign usually necessary! – Bids complicated! – Tend to follow Contract provisions more carefully – Inherently, contractors looking for change, time and money – More prone to litigation Public Advantages Disadvantages Owners can be very knowledgeable Complexity of process – from (Counties, Cities, DOT, Airport preconst. to completion Authorities, Utility Authorities) Board decision, rather than Projects are well funded delegation to party that is Projects can be large, interesting and knowledgeable. complex CM has a tougher job and less Low bids, lots of bids control A “natural” for Agency CM to More overall project time, due to facilitate process the design-bid-build requirement. In tough economy, more funding and jobs A bad GC or a bad prime, can “Hybrids” - Partially funded impose delays. Difficult to correct. Multi-prime method often called a Require elements of private/public CM breeding ground for claims Many PA RACP projects are under this category  Industry Sectors I Residential construction (35-40% & falling) † Single Family – Toll Brothers, K HOV, Centex, KB Homes … † Multi-family (high density) – Equity Residential Non-residential Building (30-40%) – General Builders/General Contractors (Turner, Lend Lease, Skanska) † Retail † Commercial † Institutional (colleges, schools, government, hospitals) † Warehouses and Distribution Centers Industry Sectors II Heavy construction (20% & Growing) – Civil & Heavy Construction Contractors – Kiewit, Flatiron… † Roads and Bridges - Tunnels † Pipelines - Drainage † Dams - Sewage treat. plants Industrial (5-10%) – Engineer/Builders – Fluor Corp, Bechtel, KBR … † Manufacturing † Refineries † Power Plants Affiliated institutions: Professional services, suppliers, financial services! Horizontal and Vertical Based on the direction of construction: Horizontal: Roads, Bridges, Dams † Engineer Leads Team, CM rarely used, although this is changing. Vertical: Buildings † Architect or CM Leads Team, CM often used. Participants Owner † Role: Commissions project, arranges financing † Common Motives: Good design, save $, finish quick Designer (Architects and Engineers) † Role: Designs facility (typically with owner) † Frequently oversees construction † Common motives: Recognition, continued business, happy client Contractors † Role: Builds facility (often with design assistance) † Common Motives: Make $, finish quickly, happy client Design/Construct Firms † Role: integrated D/C to avoid conflicts, scrutinize D for constructability, phased construction † Common motives: Good design and constructability, quick finish and save $, share benefits! Participants Other † Trades (Union and open shop) † Labor unions † Insurance companies † Banks † Suppliers † Permitting agencies & building authorities † Industry organizations „ ACI, AIC, AIA, AISC, ASCE, ABC, AGC, CII, NSPE, Functions of Project Team Owner/Developer Scope definition- What is needed or desired, what budget can be afforded? Select and manage design team Financing & payment – Usually a bank loan Preliminary approvals – Zoning & Planning Construction contract approach – Project delivery method Functions of Project Team Designer/Architect Establish Owner’s Program – Scope put on paper Assist with approvals Execute design – Following Codes † Conceptual – “Napkin Sketches” & program † Schematic – Layout with some detail † Design development – Detail development † Construction documents – Final coordination † Construction administration – RFI’s, Clarify Functions of Project Team Contractor – Traditional LS Identify bid opportunity or prequalify Bid Project Negotiate – if applicable If selected – Buy out subtrades & material Mobilize Build Project Close-out/Warranty Functions of Project Team CM (fast track) - Preconstruction Establish master schedule Establish construction budget Assist in managing design team to schedule and budget Value Engineering – reduce costs Constructability review Project planning – Logistics, rules, etc. Bid & award sub packages Functions of Project Team CM – Construction Phase Mobilize and set up site logistics Expedite critical materials and manpower Supervise & lead work on site Establish and monitor Safety Plan Establish and monitor Quality Plan Document & Information Management † RFI’s † Change to Design Documents † Budget and Schedule Reports Construction Management A professional management practice applied to a construction program from inception to completion for the purpose of controlling Time, Scope, Cost and Quality (CMAA Definition) Applies integrated systems and procedures to achieve Owner’s goals What is Construction Manager? Communication Facilitator Project Team Leader Project Team Coordinator Technical Interpreter Project “Broker” Project “Accountant” Project Risk Manager Construction Management Fees General Contractor † 7 to 10% of Construction Budget CM as Agent, managing single GC † 3 to 5% of Construction Budget † Add 7 to 10% for GC’s Costs CM as Agent, Management Multi Primes † 5 to 9% of Construction Budget CM at Risk - 7 to 10% of Construction Budget, including preconstruction budget. Construction Management Fees It depends on the services needed by Owner CM normally used to augment Owner’s capabilities Is the Owner knowledgeable – Varies Services vary – seldom are all services used on all project phases single project.  Phases Outcomes Project Process Chronology 1. Pre-Construction Phase a. Conceptual b. Schematic c. Design development d. Contract Documents 2. Procurement Phase 3. Construction Phase 4. Close Out 5. Claims Managing Phases Conceptual Planning Pre-Construction Phase Most Critical Preliminary understanding Public, private, hybrid funding of project finance Time value of money, Evaluation Understand to manage risk NPV, IRR,&B/C, MARR … Identify classify to mitigate Decision analysis and trees Decide on fundamental Sources: Changes & Claims concepts of Delivery type (organizational method), Design-bid-build, Design-build, Turnkey, CM at risk, Fast- Award method (hiring), track... Lowest cost, Negotiated … Contract type (payment), Lump sum, cost plus %, GMP … Hendrickson, Figure 1.1  Managing Phases Design and Engineering A/E & Owner Define: Project budgeting & life-cycle Scope, budget, time costing Successive Estimations Preliminary (financing model) Initial planning: Schematic, development, contract Time Activities and durations, schedule and resources Budget mgmt, People / Possible roles for contractor: Equipment / Space / Material Value engineering scheduling, Resource-Cost Constructability analysis Tradeoffs Hendrickson, Figure 1.1 Managing Phases Construction Project Monitoring Performance categories, Earned value, Progress reporting, and Cost/Schedule Monitoring, Audits Project Control Cost/time tradeoffs, Acceleration (Resource shifting and project crashing), managing changes Hendrickson, Figure 1.1 Phase Outcomes Conceptual & Schematic Project Team Owner role (hands on or not) Project Budget Schedule, Permitting Project Planning requirements, Architect/CM Project Concept (Schematic Design) hired, Delivery system Master time-line established Go/No Go Documents begin, budget becomes fixed, Estimate Critical, Design ~30% complete Drawings/Outline Specifications, With Outline Specs Value Engineering Contribution, Schematic Estimate Work Packaging, Preliminary Schedule Conceptual Phase: Allentown School District, 612 West Hamilton St. College Academy Six stories with full basement & partial Establish a team – Architect/MEP/site sub-basement, (1915) 245 x 30 feet, clear span, concrete Condition Assessment – several hour frame walk through Built as warehouse, wood floors, 2 Develop notes elevators Convert to College Academy Begin budget immediately, based on Comprehensive condition assessment experience, no time to wait for and complete budget, within 3 days to condition report, and sketches meet RACP grant deadline Complete budget, and share with team Adjust budget, based on team review, as condition report comes out simultaneously. (Review Handout) End result – Go/No go for project/acquisition of property  Project: DeSales Salesian Center Budget Estimate Date: Aug 4, 2005 COST CODE WORK DESCRIPTION TOTAL Schematic Design 01000 01400 GENERAL EXPENSE QUALITY CONTROL / TESTING $ $ 333,342.50 20,000.00 01500 TEMPOARY FACILITIES $ 55,850.00 01730 INSURANCE & TAXES $ 36,910.81 Consider “Value Engineering” 01735 TELECOMMUNICATIONS $ - 02050 DEMOLITION SITE $ 22,807.50 An organized effort directed at analyzing the functions of systems, equipment, facilities, services and supplies for the DEMOLITION BUILDINGS $ 25,401.00 purpose of achieving the essential functions at the longest 02200 SITE IMPROVEMENTS $ 190,069.50 life cycle cost consistent with required performance, 02950 BUILDING EXCAVATION & BACKFILL $ 18,345.00 reliability, quality and safety. 03000 CONCRETE WORK $ 170,467.50 “Value Engineering is a creative, organized 03400 PRECAST CONCRETE $ 52,588.00 approach, the objective of which is to optimize the 03500 INSULATING CELLULAR CONC. DECKS $ - cost of performance of a project.” 04000 MASONRY WORK $ 575,411.50 Follow Pareto’s Law (80/20 rule) 05100 STRUCTURAL STEEL $ 56,000.00 To reduce construction cost 05200 STEEL JOISTS Not Required 05300 STEEL DECK Not Required Soliciting another deign (or process) with less cost 05500 METAL FABRICATION.-FURNISH & ERECT $ 33,950.00 May be by contractor (after receiving the contract) 05600 METAL FABRICATION-FURNISH ONLY $ 9,390.00 Cost savings shared by owner and contractor 06100 ROUGH CARPENTRY $ 202,958.75 06200 FINISH CARPENTRY $ 185,554.06 Undermines role of A/E as prime professional on 07100 WATERPROOFING & DAMP PROOFING Not Required behalf of the owner 07215 BLOWN-IN INSULATION $ - Value Engineering 07240 EXTERIOR INSULATION FINISH SYSTEMS (EIFS) $ 3,270.00 † Apply early 07400 METAL PANELS $ - † Done in “list” form 07500 MEMBRANE ROOFING & SHEET METAL $ 204,800.25 † Study and price 07710 ROOF SPECIALTIES $ 1,500.00 † 07800 SPRAYED-ON FIREPROOFING $ 5,000.00 Review and analyze 07920 JOINT SEALERS $ 7,500.00 † Accept/reject Phase Outcomes Design and Contract Documents Working Drawings, Major system selections, Adjust budget & schedule, work on VE items, Develop bid packaging & documents, Detailed network schedule End of preconstruction, final prep of working drawings, sufficient detail for finer points of bid packages, Completed Technical Specifications, General and supplemental conditions edited, Complicated process for Fast-Tracked CM/Owner review final documents Final estimate or GMP estimate Preliminary Critical Path Schedule Phase Outcomes Procurement & Construction Public vs. Private, Wages, Bond requirements, Bid process (advertise, assemble & print), Bid period and opening, Review & Award (Procurement) Issue contacts, Familiarization with details, Monitoring & control, Shop drawings (review & tracking), Implement MIS, Generate progress payments, Develop & maintain CPM, Enforce contract provisions, Implement and manage: Quality/Cost, Safety, Meetings, Schedule Phase Outcomes Project Closeout and Commissioning † Punch list † Substantial Completion † Final Completion † As-Built Drawings † Commissioning † Final Accounting/Release of Retainage Claims † Avoidance best † Process often managed by those that know the least about construction † Incentive is to elongate, not resolve Project Phase and Cost Influence Level of influence of project costs. “Designing to Reduce Construction Costs”, B. C., Paulson, Jr., Journal of the Construction Division, ASCE, V. 102, No. 4, December 1976, pp 587-592 Challenges of Construction Cost – Time – Quality Tradeoffs Coordination and Control – Fragmentation † Turner, largest builder has < 5% share † Mostly small business † High turnover † Totally $ incentivized business † Very little innovation, R&D < 1% of $ volume † Mixed loyalty due to $, unions and job shoppers † Deteriorating design practices † Ethics!  Legal and Regulatory Legal responsibilities † Owner often seeks to shift risk to other parties † Shift of risk will reflect in price † Should allocate risk reasonable and spell out the terms clearly Government Regulation † Protects public safety and welfare † Building codes by local authorities as guidelines (D/C) † Safety Standards for workers (OSHA) † Environmental standards on pollutants and toxic wastes (by EPA) † Design and operation procedure of nuclear power plants Uncertainties Project cost overruns Project Cost Overrun (%) Suez Canal 1,900 Sydney Opera House 1,400 Concorde Supersonic Aeroplane 1,100 Panama Canal 200 Brooklyn Bridge 100 Sources: Peter Hall, ‘Great Planning Disasters Revisited’, p.3; Robert Summers, ‘Cost Estimate as Predictors of Actual Costs: A Statistical Study of Military Developments’, in Thomas Marschak et al. eds., Strategy for R&D Studies in the Microeconomis of Development (Berlin; Springer-Verlag, 1967), p.148 and Mette K. Skamris, ‘Economic Appraisal of Large-Scale Transport Infrastructure Investments’, Ph.D dissertation (Aalborg, Aalborg Univ. , 2000) Good Risk Management Uncertainties are the source of risk for all participants. Successful Project Management is all about managing risks, in any delivery method. Conflicts arise from each group attempting to minimize their own risk. Owner has the power to moderate and assign it to appropriate party through proper contractual agreement. Assign the risk to the party that can handle it best. If not, the end result is either excess cost and resultant losses or windfall gains, by someone. Allocating Risk Owners unfamiliar with construction projects, often try and allocate all the risk to the other parties in the process. Example: Owner might clearly know and define what is desired on new facility by clear project specifications and documents, but a complex renovation or project with many unknown site conditions is an entirely different matter. Poor Risk Allocation Public Schools and “No Change Orders” Temporary Heat assigned as “unclassified” (HVAC responsible for everything, including fuel costs) Results: † Poor Bidding „ CM’s or GC’s will only bid if they are not busy „ Bid results poor (Wide distribution) „ Fear or naivety will prevail † Potential for windfall loss or profit † Adversarial Relationship † Fight over “unknowns” Ignoring Fact that “Change” is a part of Construction. (It just needs to be managed properly) Assignment 1 Web research on the following national firms: † Kiewit Corp. † Granit Construction Inc. † Hoffman Construction Co. † WSP USA (Williams Sale Partnership) † Kinsley Construction Inc. † A Heavy Construction Contractor “local” to you home. † A General Contractor “local” † A Construction Manager “local” Research and Document Geographical Coverage Primary Type of Projects Public/Private and Sectors Serviced (Heavy Highway, General Building, Developer Builder, etc.) Primary Type of Service, GC, CM, Consultant, Program Manager, etc. $ Volume of annual work completed Primary “value proposition” offered to clients