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Contents Chapter 1 Introduction to Construction Industry Project Management, construction management and contract

Contents

Chapter 1 Introduction to Construction Industry Project Management, construction management and contract management

Chapter 1

Chapter 1 Introduction to Construction Industry Project Management, construction management and contract management

Introduction to Construction Industry

Project Management, construction management and contract management

Construction Industry and Contract Management

Construction Industry and Contract Management P r e p a r e d b y :
Construction Industry and Contract Management P r e p a r e d b y :

Prepared by:

Dr. Azeanita Suratkon

P r e p a r e d b y : Dr. Azeanita Suratkon

Parties involved in construction project and contract management

Stages and processes of construction project

Parties involved in construction project and contract management Stages and processes of construction project
 

Introduction to Construction Industry

 

Introduction to Construction Industry

Construction

Construction

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The Malaysian Industrial Classification (M.I.C) refers to construction as:

 

‘Construction’ refers to the processes of building physical structures and related activities.

The end products are site-specific and for each product the processes involve elaborate commissioning, design, management and assembly of resources – human, finance and materials – over a period of time.

“… new construction, alteration, repair and demolition. Installation of any machinery or equipment which is built-in at the time of the original construction is included, as well as installation of machinery or equipment after the original construction but which requires structural alteration in order to install.”

The M.I.C categorises construction works into 2 categories:

It encompasses all types of buildings, all civil engineering works and the repair and maintenance of existing structures.

 

General contracting – covering residential, non-residential, civil and engineering construction.

 

Special trade contracting - covering specialist works such as metal work, electrical, refrigeration and air-conditioning, carpentry, planting, etc.

Introduction to Construction Industry Introduction to Construction Industry Construction The Environment 5 6
Introduction to Construction Industry
Introduction to Construction Industry
Construction
The Environment
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Category of
 3D – Dirty, Dusty, Danger.
Construction
 Gathering of multi-sector industries.
CIVIL
BUILDING
ENGINEERING
CONSTRUCTION
CONSTRUCTION
 Installation process or combination/compilation
construction materials or building components.
 Industrial
Dam
 Agricultural
Port
 A manufacturing process?
 Community
Airport
 Residential
Highway
 Educational
Sub-marine pipeline
 Recreational
& medical social.
 

Introduction to Construction Industry

 

Introduction to Construction Industry

The Characteristics

The Characteristics

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The products are heterogeneous

 

The products are heterogeneous

The products are different in terms of design, size, location and in terms of end-use.

The final process is in-situ

The product is unique

 

The output consists of capital goods

 

The products differ widely in terms of the materials and techniques used in production.

Separation of design and construction responsibilities

 

The setting up of ad-hoc team

 

The final process is in-situ

Methods of price determination

The finished products are generally permanent in the particular location where the construction takes place. Consequently, the final process of construction must be in- situ, although some sections of the completed products may be produced elsewhere.

Risks

 
 

Introduction to Construction Industry

 

Introduction to Construction Industry

The Characteristics

The Characteristics

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The final process is in-situ (cont’d)

The output consists of capital goods

 

There is a limit on the potential for prefabrication. Prefabrication refers to using component parts or sections of a structure produced elsewhere, perhaps on the basis of economies of scale.

 

Capital or investment goods refer to products required for the production of other goods or services in an economy.

There must always be a balance between the savings that may be gained from prefabrication and the ensuing costs of transportation of components parts or sections of a structure to the construction site.

The products of construction including roads, railways, air and sea ports, telecommunication, electricity generation and transmission, water supply, buildings for factories, offices, hospitals, schools, houses, etc. are all regarded as capital or investment goods.

Since the products of construction are site-specific, generally they cannot be produced in advance of demand but rather have to be sold before they are produced. Construction therefore, follows a sequential process of planning, ordering and the final production on the particular location where they are required.

This makes the construction sector highly susceptible to variations in the level of activity in the economy.

 

Introduction to Construction Industry

 

Introduction to Construction Industry

The Characteristics

The Characteristics

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Separation of design and construction responsibilities

The setting up of ad-hoc team

 

The general trend in the construction sector is that the party that designs the project is normally different from the party that constructs the project.

This approach referred to as the traditional system of construction procurement follows a pattern of activities that is sequential in nature: a client engages a team of designers to produce design – tender documents are prepared and tenders are invited from contracting firms – award the project to successful contracting firm.

 

A construction project requires the setting up of an ad-hoc team consisting of persons and firms, each specialising in a particular area of expertise, to work together to complete the project.

Since a construction project is one of its kind it is unlikely for the same team to work together again and if they do so it would be for a different project and in a different location.

However, there are alternative approaches (such as design-build or turnkey system and management-oriented systems) were developed in response to problems that may arise from the separation of the responsibility for the design from the responsibility for construction.

 
 

Introduction to Construction Industry

 

Introduction to Construction Industry

The Characteristics

The Characteristics

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Methods of price determination

Risks

The common methods used for determining price: measurement- based method and cost reimbursement-based method.

Construction work involves risks, the level of risk is considered much higher than in other types of economic activities.

Measurement-based method – the contractor is paid for the work based upon the actual quantities of work that formed the finished project multiplied by the respective unit rates. The quantities of work is measured prior to commencement or alternatively after the work is completed. The contractor is also paid for costs of plant hire, temporary materials, contractor’s overheads and profits, etc.

A construction entrepreneur moves from one location to another, organise the logistics required to complete each project, and follows a bespoke design for each project.

Most contracts are awarded through some forms of competitive tenders – contractors have to estimate the cost based on assumptions about many factors including weather, site conditions, availability and productivity of labours, availability and timely supplies of materials and plant, time constraint, interest rates, political and social scenarios, etc.

Reimbursement of costs method – the contractor is paid for the actual costs of materials that have been used, the time spent on the project by the operatives and an agreed amount for the contractor’s profit and overheads.

 
Introduction to Construction Industry Project Mgmt, Construction Mgmt & Contract Mgmt The Characteristics Project
Introduction to Construction Industry
Project Mgmt, Construction Mgmt & Contract Mgmt
The Characteristics
Project Management
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UNIQUE
TIME CONSUMING
FRAGMENTED INDUSTRY
RELYING TO OTHER
INDUSTRIES
CHARACTERISTCS
JOB OPPORTUNITIES
OF
 Project: A temporary endeavour undertaken to create a
unique product through a set of inter-related tasks (Proj.
Mgmt. Inst.).
In engineering/construction industry, e.g. a building project
would constitute a temporary endeavour where a myriad of
skills and materials are brought together to create a unique
product (i.e., the building) through a set of inter-related tasks
(i.e. the relevant activities)
CONSTRUCTION
LACK OF
INDUSTRY
COORPERATION
RISKY INVESTMENT
SEPARATED PROCESSES
VAST WORK LOAD
COMPLEX
 Project Management: The planning, monitoring and control
of all aspects of a project (i.e. financial, technical,
administrative etc.) and the motivation of all those involved
in it from inception right up to eventual completion with the
ultimate objectives of delivering the end product within the
specified cost, time, quality and performance.
ORGANISATIONS
 

Project Mgmt, Construction Mgmt & Contract Mgmt

 

Project Mgmt, Construction Mgmt & Contract Mgmt

Construction Management

Contract Management

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A term used to describes:

 

the particular type of contract procurement method or the actual process of running of a construction project

 

Contract: A legally binding agreement between two or more persons which creates mutual rights and duties, enforceable at law, or a legal device for conducting exchanges between parties/ binding parties to future performance.

The planning, monitoring and control of all aspects of the construction process from pre-tender to the completion stage.

Entails the planning, monitoring and control of essentially the construction aspects of a project.

Contract Management: A term to describe the control and administration of the legally binding agreement between two or more parties from its inception up to its final discharge.

The scope of construction management includes not only the activities pertaining to the construction stage but also all the preliminary enabling matters at the pre-contract stage.

Construction management is weighted heavily to the construction process.

 
 

Project Mgmt, Construction Mgmt & Contract Mgmt

 

Project Mgmt, Construction Mgmt & Contract Mgmt

Scope of Contract Management

Purpose of Contract Management

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the planning for the legal framework or transaction that is to be entered into by the parties to a project;

The contract entered into by the parties is efficiently and fairly administered to ensure that:

The administration and enforcement of the provisions,

 

procedures and practices (as expressly or impliedly stipulated) in the contract

The management of the roles, responsibilities, powers, rights, duties and liabilities of the contracting parties

The implementation of relevant sanctions to induce performance or to compensate for the non-performance on part of the parties

 

the parties perform their respective obligations/duties under the contract fully;

each party to the contract receives the full benefit due under the contract;

the contract is completed within the time frame and cost agreed between the parties;

the quality of the finished product as agreed upon by the parties is not compromised in terms of material, workmanship and design (as applicable); and

First line resolution of disputes between the contracting parties

disputes and contentious issues are minimised or resolved completely without having to resort to litigation or arbitration.

Parties involved in construction project & contract mgmt Parties involved in construction project & contract
Parties involved in construction project & contract mgmt
Parties involved in construction project & contract mgmt
Construction Stakeholders
Employer
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 Also called the client/ purchaser/ authority
 Normally the person or party who wishes to have
development project constructed on a piece of land
 The employer is the most important party to a contract as
he is in reality the paymaster who initiates and ultimately
uses the tangible fruits of the contract.
 The employer may be a public entity (government bodies)
or private entity (developers/ owners/ investors).
 He will appoints consultants, employs contractors and supply
the necessary fund to implement the project
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Parties involved in construction project & contract mgmt

 

Parties involved in construction project & contract mgmt

Contractor

Contractor

   
 
   
 

The contractor is the person or legal entity (partnership or company) who under the contract is actually entrusted to carry out construction works.

Owing to the complexities of the nature of the contracts entered into between the employer and the contractor, the contractor may be further described as a:

He is variously labeled as the contractor, the builder, the installer, the erector, etc. depending on the nature of the contract involved.

main or general contractor; or

turnkey contractor; or

design and build/design and construct contractor; or

 

management contractor; or

 

Construction development can only remain at blue-print and drawing board stage without contractor and builders to actually translate the project into reality.

construction management contractor

Normally these contractors enter into a main contract with the owner for the execution and completion of a construction contract.

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Parties involved in construction project & contract mgmt

 

Parties involved in construction project & contract mgmt

Sub-Contractor

Sub-Contractor

   
 
   
 

A sub-contractor is a person or firm to whom part of the main contract works are sub-let.

Depending on the complexity of the works, the specialist skills required, the extent of detailing or design work involved, the method of contract procurement adopted, sub- contractors can be further classified as:

domestic sub-contractors; or

A sub-contract is a contract made between a main- contractor and another contractor (sub-contractor) for part of the work which the main contractor has already contracted to carry out as part of his contract with the employer.

 

nominated sub-contractors; or

designated (or named) sub-contractors; or

 

selected sub-contractors; or

specified or named sub-contractors.

 

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Parties involved in construction project & contract mgmt

 

Parties involved in construction project & contract mgmt

Sub-Contractor

Supplier

   
 
   
 

Nominated Sub-Contractor (NSC) Specialist contractor nominated by owner/architect/ engineer, who sign their respective sub-contract with the main contractor and perform their respective duties and responsibilities under sub-contracts.

A person or firm undertaking the supply of goods or materials to a contract. The supplier’s contract is with the main contractor

In essence, a supplier is a sub-contractor concerned solely with supplying goods or materials as compared to undertaking services or labour.

In Malaysia, there is a prevalent practice of sub-contractors further sub-letting portions of their work to an array of sub- sub-contractors, i.e. labour, material supply, fabrication, erection/installation, etc.

As for sub-contractors, a supplier may be a domestic/ nominated/ designated/ selected/ specified supplier.

In practice, the common types of suppliers encountered are of the domestic, nominated or designated types.

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Parties involved in construction project & contract mgmt

 

Parties involved in construction project & contract mgmt

Professionals

Professionals

   
 
   
 

The professionals are not parties to the various contracts employed between employer and main contractor, main contractor and subcontractor, and sub-contractor and his sub-contractors/suppliers.

The professionals may have his own services agreement whereby he may contract to undertake either all or some of the following work depending on his term of employment:

Owing to the peculiarities of Malaysian law, in most instances only the qualified person is entrusted with the design and supervision of the works undertaken.

The definition of the qualified person encompasses mainly architects and engineers.

design work; supervision work; contract administration; auditing or independent checking of turnkey/design & build contractor’s work; project management; facilities management.

 

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Parties involved in construction project & contract mgmt

 

Parties involved in construction project & contract mgmt

Architect

Engineers

   
 
   
 
 

Person who practises the profession of either civil, structural,

 

In most building projects, i.e. of the traditional general contracting type, the professional team during the design and construction stage is normally led by the architect.

Person who practises the profession of architecture and usually submits the application on behalf of the owner to obtained development order and designs and submit building plans for approval.

Building By-Laws defines architect as “any person who is registered as an architect under any law relating to the registration of architects and who under that law is allowed to practice or carry on business as an architect”.

The Architects Act 1967 restricts the usage of the word to a person registered as such by the Board of Architects, Malaysia for the practice of architecture.

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mechanical or electrical engineering and usually designs and submits plans for approval by the approving authorities.

In projects, i.e. of essentially engineering or infrastructure origin, the engineers are expressly stipulated in the contract as the principal designers and contract administrators.

In this country, the law restricts the label engineer to “any person who is registered as a Professional Engineer under any law relating to the registration of engineers and who under the law is allowed to practice or carry on the business of a Professional Engineer.

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Parties involved in construction project & contract mgmt

 

Parties involved in construction project & contract mgmt

Quantity Surveyors (QS)

Other professionals

   
 
   
 

Person who practises the profession of quantity surveying and building economics and usually prepares bills of quantities, tender and contract processes, evaluates interim payment and final accounts of the project.

Land Surveyor – person who carries out boundary and contour surveys and other surveys on land, submits survey plans for amalgamation and sub-division of land, applies on behalf of owner for qualified titles and final titles from the land office.

QS maybe engaged by the architect or engineer or may be directly appointed by the employer to play a role during the pre-contract and post-contract award stages.

Town Planner - person who practises the profession of town and country planning covering land use, zoning, density, the type, mode and form of development, traffic pattern, infra- structural requirements, impact of development with other developments in the vicinity etc.

There is a necessity for the QS to be registered with the Board of Quantity Surveyors under the Quantity Surveyors Act 1997.

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Parties involved in construction project & contract mgmt

 

Parties involved in construction project & contract mgmt

Other professionals

Other specialists

   
 
   
 

Interior Designer - person who practises the profession of interior designing involving furnishing and finishing work usually for prestigious buildings

Project Management Consultant Person/group of persons practising the profession of project management function. The works involved ranges from feasibility report, financial projection, design of management system, evaluation designs prepared by consultants, co- ordinating work of consultants etc.

Landscape Architect - person who practises the profession of landscaping architecture involving beautification of the project internally and or externally by using plants of all kinds, rocks etc.

 

These include traffic consultants, acoustical engineers, information technology (IT) consultants and interior decoration (ID) consultants.

 

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Parties involved in construction project & contract mgmt

 

Parties involved in construction project & contract mgmt

Authorities/Regulators

 

Other stakeholders

   
 
   
 

Federal and State Authorities Usually interested in matters regarding land, town and country planning, drainage and irrigation, supply of public utilities, fire requirements etc.

Finance Invariably the owner requires to borrow funds from banks and other financial institutions to finance or provide adequate funding to their project

Local Authorities

   

Normally

the

building

authorities

and

is

therefore

entrusted with the power to approve layout plans,

building plans and services plans etc.

 
 

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Parties involved in construction project & contract mgmt

 

Parties involved in construction project & contract mgmt

Manpower

Manpower

   
 
   
 

Craftsmen

 
   

Technicians

 

Represent the skilled workers of the industry especially in new construction method it is necessary for them to appreciate not only the how but also the why the work they do.

 
   

Persons who qualified by specialised technical education and training to work under the general directions of technologists.

 

Semi-Skilled Worker

Technologists

 

Person who have a qualification and experience required for corporate membership of professional institutions.

 

Those who possess skill of one or more construction trades but have not attained the requisite level of skilfulness to be paid as skilled workers.

Unskilled Worker

 

Those who do not possess skill in any building trades but are working on construction sites performing such basic functions as carrying materials etc.

 
 

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Parties involved in construction project & contract mgmt

 

Parties involved in construction project & contract mgmt

 

Different Perspectives

 

Different Perspectives

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project & contract mgmt   Different Perspectives   Different Perspectives 41   42  
project & contract mgmt   Different Perspectives   Different Perspectives 41   42  
project & contract mgmt   Different Perspectives   Different Perspectives 41   42  
project & contract mgmt   Different Perspectives   Different Perspectives 41   42  
Parties involved in construction project & contract mgmt Parties involved in construction project & contract
Parties involved in construction project & contract mgmt
Parties involved in construction project & contract mgmt
Different Perspectives
Different Perspectives
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Stages and processes of construction project Stages and processes of construction project Stages of a
Stages and processes of construction project
Stages and processes of construction project
Stages of a project
Stages of a project (Traditional)
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Undertake all testing, Commissioning
 The principal phases of a typical engineering and construction
contract:
and training
Obtain CCC or CF (all authority
approvals)
• Identify project objectives
• Issue tender documents
• Handover of project to employer/user
 Pre-contract award phase: involves all activities or processes involved
from the inception of the project up to the award and/or signing the
engineering and construction contract pertaining to the project.
• Resolve all land issues
• Prepare and submit tenders, i.e.
• Carry out necessary maintenance and
• Contractor’s Proposals, etc.
Set up user’s requirements
defect rectification during defect
• Conduct feasibility studies
• Evaluate tender submissions
liability period
 Post-contract award phase: involves the activities or processes arising
after the award and/or signing of the contract up to the issue of the
final certificate.
• Set up project organisation
and management structure
• Undertake migration
Award tenders
• Carry out facilities management
Prepare contract documents
Inception &
Handover &
Design
Tendering
Construction
Feasibility
Maintenance
• Develop project brief further
Site possession and mobilisation of
Pre-contract award phase
Post-contract award phase
• Develop concept and schematic design
resources
• Obtain planning approvals
• Obtain necessary permits and approvals
Inception &
Handover &
• Undertake detailed design and detailing
• Undertake procurement, fabrication,
Design
Tendering
Construction
• Prepare cost plan/budget
installation, construction, etc.
Feasibility
Maintenance
• Undertake value engineering
• Carry out contract administration
• Undertake project financing
Stages and processes of construction project Stages and processes of construction project Parties involved in
Stages and processes of construction project
Stages and processes of construction project
Parties involved in project stages
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• Developer/Owner
• Developer/Owner
• Nominated / Domestic
• Developer/Owner
• Project Manager
• Users/Consumers
Sub-Contractors
• Valuer
• Architect
• Project Manager
• Regulatory bodies/
• Research firm
• Engineers
• Architect
authorities
• Real estate agents
• Quantity Surveyor
• Engineers
• Facilities Manager
• Financial advisors
• Other specialists
• Quantity Surveyor
• Architect
• Main Contractor
• Other specialists
• Engineers
• Nominated Sub-Contractors/
• Main Contractor/ Turnkey
• Suppliers
Quantity Surveyor
Contractor/ Management
• Town Planner
Domestic Sub-Contractors/
Contractor/ Construction
• Suppliers
Other specialists
Manager
Inception &
Handover &
Design
Tendering
Construction
Feasibility
Maintenance
• • Contractor for:
Developer/Owner
• Project Manager
• Suppliers
• Project Manager
• Turnkey Contracts
• Architect
• Construction Site Staff &
• Architect
• Management Contracts
• Workers
Engineers
• Engineers
• Construction Management
• Quantity Surveyor
• Regulatory bodies/
• (if applicable )
Quantity Surveyor
• authorities
Other specialists
• Town Planner
• Main Contractor/
• Financers
• Other specialists
Turnkey Contractor
• Regulatory bodies/
• Nominated/Domestic
authorities
Sub-Contractors
Stages and processes of construction project Stages and processes of construction project RIBA Work Stages
Stages and processes of construction project
Stages and processes of construction project
RIBA Work Stages 2007
RIBA Work Stages 2007
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