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3.Project Delivery Methods, Contract Terms, Project Documentations and Quality Assurance Systems

CONTRACT ENVIRONMENT

Construction is product oriented activity.

It has many dimensions.

One dimension is Business

Business world is structured by contractual relationships and busines aspects of construction require the establishment of legally binding relationships.

So, construction firms are referred as “contractors.”

A construction contract is a legally binding agreement between two parties on

the details and cost of a construction project. This type of contract covers very expensive, complex projects and simple renovations.

Construction contract includes three basic elements: project scope, schedule of work and payment details

Content of a construction Contract:

Identity of Parties Promises and responsibilities Scope of work Price and Payment terms Commercial terms and conditions Project execution plan

WHAT IS CONTRACT MANAGEMENT?  Contract Management could be defined as a multi-stage process that goes

WHAT IS CONTRACT MANAGEMENT?

Contract Management could be defined as a multi-stage process that goes on through the entire duration of the contract and ensures that the parties meet their contractual obligations in order to deliver the specific objectives provided in the contract.

The ultimate objectives of contract management are:

- Effectiveness (getting the job done)

i.e.: (i) Goods are delivered/installed; (ii) Services are performed; (iii)Civil works are completed

- Efficiency (in the best possible way) (i) Costs (budget); (ii) Time (duration); (iii)Quality.

MANAGEMENT OF CIVIL WORKS CONTRACTS

WHAT IS CONTRACT MANAGEMENT?  Contract Management could be defined as a multi-stage process that goes

Major Construction Contracts

Major Construction Contracts Competitive-Bid Contract  Award contract to the “lowest responsible bidder”  What is

Competitive-Bid Contract

  • Award contract to the “lowest responsible bidder”

  • What is meant by the term “lowest responsible bidder”?

“lowest responsible bidder”

  • Lowest bidder whose offer best responds in quality, fitness and capacity to fulfill the particular requirements of the proposed work and with the necessary qualifications to complete the job in accordance with the terms of the contract.

  • In open competitive bidding by public and private owners the bid will go to the lowest responsible bidder.

Factors affecting “Responsible”

  • 1 Technical competence and experience

  • 2 Current financial position

  • 3 Bonding capacity

  • 4 Current workload

  • 5 Past history of claims litigation

  • 6 Defaults on previous contracts, etc.

Competitively Bid Contracts Benefits:

  • 1) It yields a low and competitive price.

  • - This is only theoretically true, since change orders and modifications tend to increase the contract price

    • - Some contractors, upon finding a set of poorly defined plans and specifications will purposely bid low (i.e., zero or negative profit) knowing that many change orders will be necessary and will yield a handsome profit.

      • 2) All bidders equally treated

  • - This is important in the public sector where political influence and other pressures could bias the selection of the contractor

Drawbacks:

  • 1) Plans totaly completed

  • 2) Constrution not started

..

Longer time

STIPULATED-SUM (LUMP-SUM) CONTRACTS

Under a Lump Sum or Fixed Price Contract, the contractor agrees to perform the work specified and described in the contract for a fixed price. Lump-sum includes:

  • - Direct costs (ex. Labor, equipments, etc.)

  • - Indirect costs (ex. office supervision, secretarial support, equipment maintenance, etc.)

  • - Profit

The price of a fixed contract can only be changed upon the execution of a change order.

These types of contracts are appropriate when a clear scope and a defined schedule have been reviewed and agreed upon.

Progress payments based on percentage complete

Contractors receive monthly payments based on the percent of the total job competed

Advantages:

  • The owner’s construction costs are more predictable

  • The owner’s cost will be capped by the contract price, so long as no change orders are issued and no disputes arise on the project

  • No need for precise field measurements, since the total budget may not be exceeded decrease the number of field quantity estimators

Disadvantages

  • The requirement for the scope of work under the contract to be clearly defined

  • The requirement to have detailed plans and specifications complete before bidding and construction can begin

  • The difficulties involved in changing design or modifying the contract: The flexibility of this contract form is limited.

  • The schedule should clearly define the work and the deadlines that must be met

  • So, it would require additional time and money to clearly define the scope of work and create a detailed schedule

Summary: Lump sum contract

  • In a single fixed-price contract, also called a lump sum contract, the contractor agrees to provide a specified amount of work for a specific sum.

  • The advantage of this contracting method is that the owner knows before the work begins what the final cost of the project will be.

This negates the possibility of a fast-tracked project

Disadvantages  The requirement for the scope of work under the contract to be clearly defined

Contract Type: Lump Sum/ Fixed price Contract

Requirements:

Good Project Definition

Stable Project conditions

Effective competition essential when bidding

Much longer time to bid and award this type of project

Minimal scope changes

Advantages:

Low financial risk to owner

High financial risk to contractor

Cost known as outset

Minimum owner supervision -quality and schedule

Contractor will assign best personnel

Maximum financial motivation for contractor

Maximum incentive to achieve early completion and superior performance

Contractor selection process easy

Disadvantages:

Changes difficult and costly

Early project start is not possible because need complete design prior to bidding

Contractor free to choose lowest cost means, methods, materials

Hard to build relationships this is one-off job

Bidding expensive& lengthy

Contractor may include high contingency

Unit Price contract

  • Unit Price Contracts are based on anticipated quantities of items which are counted in the project in addition to their unit prices.

  • The final price of the project depends upon the quantities required to carry out the work.

  • These types of contracts are oftentimes used on excavation projects

  • The project is broken down into work items, characterized by units such as m2, m3, ml, pieces, etc.

  • The contractor quote a price that will be charged per unit for the major elements of the project.

  • The owner/designer will typically provide estimated quantities for the project, then ask contractors to "bid" the job by calculating unit prices for these items and calculating a final price.

  • Contractor overhead, profit, and other project expenses must be included within the unit prices that are provided.

  • The owner then compares the final prices and selects the low bidder The advantage of this type of contracting method is that in many projects (heavy engineering projects being a perfect example), it is difficult to quantify accurately the work necessary.

Example

See four items of unit price work below. A guide quantity is given for each work item. Based on this quantity of work, contractor quotes a unit price.

For example: estimated amount of rock excavation is 550 cu yd.

Contract Type: Unit Price Contract Requirements:  Adequate breakdown and definition of work units Advantages: 

Contract Type: Unit Price Contract Requirements:

Adequate breakdown and definition of work units

Advantages:

Good quantity surveying and reporting system

Adequate drawings

Experience in developing bills of quantities

Payment terms properly tied to measured work completion

Owner- furnished drawings and materials must arrive on time

Quantity sensitive analysis of unit prices to evaluate total bid price for potential

quantity variations

Complete design definition not required

‘’Typical’’ drawings can be used for bidding

Suitable for competitive bidding

Easy for contractor selection

Bidding easy and inexpensive

Early project start possible

Flexibility (Scope and quantities easily adjustable)

Disadvantages:

Final cost not known at outset (Bills of quantities at bid time only estimates)

Additional site staff needed to measure, control and report on units completed

Unit price contracts tend to draw unbalanced bidding

 Unit price quotations are based on the quantity specified  It includes the mobilization and
 Unit price quotations are based on the quantity specified  It includes the mobilization and
  • Unit price quotations are based on the quantity specified

  • It includes the mobilization and demobilization costs

  • Example:

If 100 m2 of masonry brick wall is to be installed, the cost per m2 would normally be higher than the cost for 5,000 m2.

Mobilization and demobilization costs are spread over only 100 units in the first case, whereas in the second case these costs are distributed over 5,000 units, reducing the individual unit cost.

UNBALANCED BID

  • What is an unbalanced bid?

  • Unit-price contracts can also be manipulated using the technique called unbalancing the bid.

  • The relationship between the contractor’s expenditures and income across the life of a typical project is shown schematically in Figure.

 The relationship between the contractor’s expenditures and income across the life of a typical project
 The relationship between the contractor’s expenditures and income across the life of a typical project

One way to achieve this is to unbalance the bid

Essentially, for those items that occur early in the construction, inflated unit prices are quoted.

Since these items are overpriced, to remain competitive, the contractor must reduce the quoted prices for latter,

For example:

  • - Hand excavation that in fact costs $50 per cubic yard will be quoted at $75 per cubic yard. Or Foundation piles that cost $40 per linear foot will be quoted at $60 per linear foot.

  • - ‘‘Close-out’’ items such as landscaping and paving will be quoted at lower-than cost prices.

    • Owners using the unit-price contract format are usually sensitive to this practice by bidders.

    • If the level of unbalancing the quotations for early project bid items versus later ones is too blatant, the owner may ask the contractor to justify his or her price or even reject the bid.

    • Some contracts obviate the need to unbalance the bid by allowing the contractor to quote a ‘‘mobilization’’ bid item

Figure 4.3 Income Profile with Mobilization Payments This essentially allows the bidder to request front money

Figure 4.3 Income Profile with Mobilization Payments

This essentially allows the bidder to request front money from the owner. The owner can borrow money with lower i % than the contractor.

Balanced Bid Versus Unbalanced Bid

  • For Unit-Price Contracts, a balanced bid is one in which each bid is priced to carry its share of the cost of the work and also its share of the contractor’s profit.

  • Contractors raise prices on certain items and make corresponding reductions of the prices on other items, without changing the total amount of the bid.

Figure 4.3 Income Profile with Mobilization Payments This essentially allows the bidder to request front money

NEGOTIATED CONTRACTS

  • The Cost-Plus Contract is a type of a construction contract under which the owner agrees to pay the complete cost of the materials and labor needed to needed to build the project along with a fee for the contractor’s overhead and profit.

  • This contract type is favored where the scope of work is highly uncertain or indeterminate and the type of labor, material, and equipment needed to build the project is also uncertain in nature

NEGOTIATED CONTRACTS- Awarding Criteria

  • In these types of contracts the selection criterion is not the low bid

  • The owner invites selected contractors to review the project documentation available at the time of negotiation.

  • This documentation may be total and complete design documentation or only concept-level documentation.

  • Based on the documentation provided, the contractor is invited to present his qualifications to perform the work and to indicate his projected costs and fee for completing the work.

  • The owner evaluates:

    • - the experience,

    • - reputation,

    • - facilities,

    • - staff available,

    • - charge rates, and

    • - fee structures…

…of the various bidders participating.

NEGOTIATED CONTRACTS

  • Most common forms of contract is cost plus fee

  • Cost = All direct cost for labor, equipment and materials + charges fee

  • Cost + Percentage Contract

  • Cost + Fixed Fee Contract

  • Cost + Fixed Fee with Arrangement for Sharing Any Cost Savings Contract

  • Cost + Fixed Fee with Guaranteed Maximum Price Contract

  • Cost plus Fixed Fee with Bonus Contract

  • Cost plus Fixed Fee with Guaranteed Maximum Price with Bonus Contract

  • Cost + % of CostCompensation is based on a percentage of the cost;

  • Cost + Fixed Fee Compensation is based on a fixed sum independent the final project cost. The owner agrees to reimburse the contractor’s actual costs, regardless of amount, and in addition pay a negotiated fee independent of the amount of the actual costs;

  • Cost + Fixed Fee with Profit Sharing Clause Compensation is based on a fixed sum of money. Any cost savings are shared with the buyer and the contractor

  • Cost + Fixed Fee with GMP Compensation is based on a fixed sum of money. The total project cost will not exceed an agreed upper limit ‘Target Value’;

  • Cost + Fixed Fee with Bonus Compensation is based on a fixed sum of money. A bonus is given if the project is finished below budget, ahead of schedule, etc.;

  • Cost + Fixed Fee with GMP with Bonus Compensation is based on a fixed sum of money. The total project cost will not exceed an agreed upper limit and a bonus is given if the project is finished below budget, ahead of schedule, etc.;

COST-PLUS-FEE CONTRACTS

  • Contract value is NOT guaranteed

  • When used?

    • If the owner needs to complete a project quickly or

    • When design and drawings are NOT complete.

    • Risk to owner: Cost can increase.

      • Owner pays “reimbursable costs” plus a “fee”

      • “Fee” is usually a percentage of total reimbursable cost (2% to 6%)

Cost + Percent of Cost

  • Fee = percentage of the total project cost

    • Ex: Typical Job

    • (Cost = $80 million, Fee = 2%)

    • If cost increases to $100 M, the fee increases by $ *****

 Cost + Fixed Fee with GMP – Compensation is based on a fixed sum of

Cost + Fixed Fee

  • Fee = percentage of the original estimated total figure

    • Utilized on large multi-year jobs

    • Ex: Nuclear Plant Facility (Cost = $500 million, Fee = 1%)

    • $500 Million 1% fee = $5 Million

 Most common form of negotiated contracts  • COST = expenses incurred by the contractor
  • Most common form of negotiated contracts

  • • COST = expenses incurred by the contractor for the construction of the facility

    • Includes: Labor, equipment, materials, and administrative costs

  • • FEE = compensation for expertise

    • Includes: profit

 Most common form of negotiated contracts  • COST = expenses incurred by the contractor

Cost Plus Fee Type Combinations

  • A variation of this type of contract is called a guaranteed maximum price (GMP).

  • In this type of contract the contractor is reimbursed at cost with an agreed-upon fee up to the GMP, which is essentially a cap; beyond this point the contractor is responsible for covering any additional costs within the original project scope

  • An incentive clause, which specifies that the contractor will receive additional profit for bringing the project in under the GMP.

Reimbursable Costs

  • Defined by very detailed contract language

  • Subcontract bidding and letting procedures

  • Definitions of what types of costs can be reimbursed

    • Payments to Subcontractor per subcontract

    • Contractor’s field labor, material and equipment costs

  • Definitions of what types of cost that will NOT be reimbursed

    • Contractor’s main office overhead and staff

    • Salaries of contractor’s officers

  • Contractor’s Fee in Cost-Plus Contract

    • Determined by taking into account:

      • Degree of risk

      • Nature and complexity

      • Geographical location

      • Equipment and manpower requirements

      • Estimated construction time

  • Final fee usually negotiated to be competitive (what will the market bear)

  • How select Contract Type?

    Factors:

    Conditions:

    Scope Definition

    Extensive

    Low

    Uniqueness of Work

    Routine

    Unusual

    Cost Importance

    High

    Low

    Market Conditions

    Buyers’

    Sellers’

    Economic Conditions

    Stable

    Unstable

    Project Duration

    Normal

    Long

    Schedule Importance

    High

    Low

    Buyer’s Resources

    High

    Low

    Price Style Indicated

    How Assess Contract Types?

    Considerations:

    Complexity, uniqueness of the project

    Owner’s ability to manage design and construction Owner’s tolerance for risk

    Owner’s tolerance for decreased project control

    Local marketplace factors

    Owner’s ability to select right contractor

    Likelihood of changes or delays on project

    Amount of time to complete project

    Owner’s financial condition

    CONSTRUCTION CONDITION OF CONTRACTS

    • The conditions of contract are the terms that collectively describe the rights and obligations of contracting parties (i.e. the employer and the contractor) and the agreed procedures for the administration of their contract.

    • Contract conditions determine the allocation of risk and consequently, price.

    • Typically these conditions address the following:

    • a) The parties’ main responsibilities e.g., the employer provides the site and the right of access thereto while the contractor provides the works in accordance with the requirements established in the contract.

    • b) The timing of the works, e.g. start date, time for completion, period for defects liability, etc.

    • c) Testing and remedying of defects.

    • d) Payment, e.g. manner in which the works are to be assessed and certified, time for payment and interest on overdue amounts.

    • e) Variations and claims, e.g. the manner in which variations to the contract are to be evaluated and paid for and how the costs which result from employer liabilities are assessed and paid for.

    • f) Title (ownership) to objects, materials within the site, etc.

    • g) Risks and insurances, e.g. what are the employer’s and contractor’s risk and what insurances each party will take out.

    • h) Termination, e.g. the reasons for termination, the procedures for termination and the payment to be made upon termination.

    • i) The resolution of disputes, e.g. by adjudication, mediation, arbitration, litigation (court of law) or a combination thereof.

    Standard contracts

    • Conditions of contract can be standardized so that the same conditions of contract can be used on different projects, in which case they are referred to as standard forms of contract.

    • Standard contracts:

    • a) FIDIC (French initials for International Federation of Consulting Engineers) (1999) (Short contract and Red, Yellow and Silver Books).

    • b) General Conditions of Contract for Construction Works (GCC).

    • c) JBCC Series 2000 (Principal Building Agreement and Minor Works Agreement).

    • d) New Engineering Contract (NEC3) (Engineering and Construction Contract and Engineering and Construction Short Contract).

    Project Delivery Methods: What is it?

    The term delivery method means the approach used to organize the project team so as to manage the entire designing and building (design-build) process.

    • The owner needs to decide which designers to hire, when to hire them, and under what type of contract?

    • The owner also needs to decide when to hire the construction professional and under what type of contract?

    • Which organization gets hired first? Do both organizations report to the owner, or does one report to the other?

    • Project Delivery method is an organizational concept which assigns specific responsibilities and authorities to people and organizations and which defines relationship of the various elements in construction of a project.

    Types of PDM

    • Design-Bid-Build (DBB) (Traditional)

    • Design-Build (DB) (Turnkey)

    • Construction management (CM)

    Traditional (D/B/B)

    • The owner hires a design professional who prepares a complete set of contract documents for the owner for a design fee.

    • The owner either negotiates a price with a general contractor or bids out the work.

    • The general contractor is totally responsible for delivering the completed project as spelled out in the contract documents.

    • The general contractor may subcontract out parts of the project, with each subcontractor reporting directly to the general contractor.

    • The designer may be involved in overseeing the construction work in the field.

    • In this delivery method no direct, formal relationship exists between the designer and the builder. They communicate only through the owner

    • Typical Design-Bid-Build Process (The Four Phases)

     The general contractor may subcontract out parts of the project, with each subcontractor reporting directly

    Pros and Cons of the Traditional Approach

     The general contractor may subcontract out parts of the project, with each subcontractor reporting directly

    Design-Build

    • In this approach, a single organization is responsible for performing both design and construction.

    • Within the design-build organization, parts of the design may be subcontracted to specialist consultants.

    • Being responsible for both design and construction, the design-build contractor carries most of the project risks, and this mean additional cost to owner.

    • The owner's role in this approach is minimal and is only to express his or her objectives and specifications precisely before detailed design is started.

    • Historically, the design-build approach has been used on large, privately funded, industrial-sector projects. Recently, however, this approach has begun to be used on commercial building projects, some publicly funded.

    • Typical Design/Build Process (The Four Phases)

     The owner's role in this approach is minimal and is only to express his or

    Pros and Cons of the Design-Build Approach

     The owner's role in this approach is minimal and is only to express his or

    The Four Phases (every project goes through)

    Design/Build ( One Single Contract for Design & Construction) DESIGN-BUILD A CONSORTIUM FORMAT  Each member

    Design/Build (One Single Contract for Design & Construction)

    Design/Build ( One Single Contract for Design & Construction) DESIGN-BUILD A CONSORTIUM FORMAT  Each member

    DESIGN-BUILD A CONSORTIUM FORMAT

    • Each member of consortium is at risk

    • The members are motivated to avoid disputes

    Construction Management Method

    Owner appoints a CM organization to manage and coordinate the design and construction phases of a project using a teamwork approach.

    The design may be provided by specialist design firms and in some cases by the CM organization.

    innovative approaches of overlapping design and construction (i.e., fast- tracking) can be adopted.

    CM organization aims at holding a friendly position.

    Services offered by CM organization overlap those traditionally performed by the architect, the engineer, and the contractor.

    This may include:

    management and programming of design;

    cost forecasting and financial arrangements;

    preparation of tender documents; tender analysis

    and selection of contractors;

    selection of methods of construction;

    planning and scheduling construction works;

    materials procurement and delivery expedition

    Two types:

    Acency CM (CMa)

    CM at risk

    Construction Management at-Risk

    (Two Separate Contracts for Design & Construction)

     preparation of tender documents; tender analysis  and selection of contractors;  selection of methods

    Comparing Project Delivery Methods

     preparation of tender documents; tender analysis  and selection of contractors;  selection of methods

    4.Project Delivery Methods, Contract Terms, Project Documentations and Quality Assurance Systems

    Communications

    The construction sector has a wide range of standard forms of contracts aiming to:

    • balance the risk of the parties

    • ensure effective communications with the employer and his representatives

    • Each form of contract stipulates requirements for communications between the parties of the contract, in a form which can be read, copied and recorded

    The various contracts require:

    • a) The contractor to provide a programme/plan within a specified time period.

    • b) The employer to pay the contractor within a specified time period.

    • c) The employer’s representative to provide a decision within a specified period.

    • d) The contractor to give notice of his intention to declare a matter as being a dispute within

    a specified time period.

    • e) The contractor to submit timely request for inspections. etc.

      • Each of these events requires different types of communications between the parties

    MANAGING TIME Project Schedule

    At the start of each contract, the contractor is required to prepare a programme and have it agreed to by the employer or his representative.

    This programme indicates the duration and logic of the sequencing of activities for the project.

    The employer or his representative will evaluate whether the logic is sound and whether the estimated time frames for completion of the works are reasonable.

    Extensions of time

    Once the formal contract has been signed, certain aspects of contractor’s activity

    during construction must be considered. Circumstances beyond the constrictor's control and prediction, lead to delays

    These delays make it difficult to complete the project on time, so TIME EXTENSIONS are claimed.

    Claims for extention of time must be based on

    Delays caused by owner or owner’s agent or

    Delays due to Act of God.

    Weather Typical delay due to Act of God

    Not always a justification for granting time extensions.

    Example:

    A contractor working in North Areas in January who requests a 15-day time extension due to frozen ground that could not be

    excavated - will probably not be granted a time extension (‘‘reasonably anticipated’’ condition)

    Only ‘‘adverse weather conditions not reasonably anticipatable’’ qualify as a basis for

    time extensions Time extensions are added to the original duration

    Example: If 62 days of time extension are granted to an original duration of 1,050 days, the project must be completed* by 1,112 calendar days after notice to proceed.

    Completed*- is often referred to as the beneficial occupancy date, or BOD

    Usually, a mutually acceptable date is established when an inspection of the facility is

    conducted by the owner’s representative and the contractor

    If the owner is satisfied, FINISH

    If there are deficiencies (punch list), Correct,

    FINISH

    Changes to the prices for the works

    Instructions given by the owner that change the scope of the work or the timing of the works, can impact on the cost of the works.

    Changes in the scope of work most often arise through:

    -

    changes in the details on the construction drawings or specifications,

    -

    the employer increasing or decreasing the size of the work, and

    -

    new information regarding the site becoming available which necessitates that the design be amended.

    The contractor should always check the changes that are made to the drawings and identify how the changes affect the programme, materials ordering and utilisation of resources.

    Instructions given by the owner that change the scope of the work or the timing of the works, can impact on the cost of the works.

    Changes in the completion date for the works frequently arise from:

    -

    access being denied to the site for whatever reasons,

    -

    owner requiring the contractor to stop the works or

    -

    Interrupting or suspending work from public administration

    The contractor should always check how the changes affect the programme, materials ordering and utilisation of resources.

    Change of Orders

    Changes that are dictated during construction, represent an alteration of legal arragement and must be formally handled as a modification to the contract.

    These modifications, which themselves are small augmenting contracts, are called Change orders.

    Procedures for implementing the Change Orders are specified in the general conditions.

    Procedure:

    -

    A formal communication of change is sent to the contractor

    -

    The contractor respond with a price quotation of performing the work

    -

    The owner can accept or negotiate

    Change Conditions

    Engineering design= design of superstructure+ Design of substructure (foundations)

    Superstructure- highly predictable environment

    Substructure- very difficult to predict*.

    *The eyes in establishing the design environment are the geological reports from subsurface investigation (bore holes)

    If the investigation does not represent adequately the site conditions, the contractor estimation will be affected

    Example:

    Based on the boring logs, a reasonable estimate may indicate 2,000 cubic yards of soil excavation and 500 cubic yards of rock. After work commences, the site may be found to contain 1,500 cubic yards of rock and only 1,000 cubic yards of soil

    Value Engineering

    Idea behind VE is the improvement of design by encouraging the contractor to make suggestions during construction.

    VE can also be implemented during the design phase of project development.

    Example:

    If a contractor is constructing bridge tower supported (in the original design) by drilled pile foundation, the contractor can redesign the foundations as spread mat footers with savings of $400,000. 50% of these savings goes to the contractor

    MANAGING TIME

    Suspension, Delay, or Interruption

    The standard general conditions utilized for many government contracts provide that:

    Contracting officer may order the contractor in writing to suspend, delay, or interrupt all or any part of the work for such period of time as he may determine to be appropriate for the convenience of the government.

    Interrupting or suspending work must be costly to the contractor

    These “unreasonable costs must be paid by the owner

    An adjustment shall be made for any increase in cost of performance of this contract (excluding profit) necessarily caused by such unreasonable suspensions, delays or interruption and the contract modified in writing accordingly.

    Penalties for late complete

    Provisions for penalties or delay damages (a monetary value representing the damage caused by the delay) are contained in most construction contracts.

    These are imposed where the employer has specific deadlines or other requirements and will experience a loss of revenue, loss of use of the premises if the project is delivered late or have to pay additional supervision and administration costs relating to the late completion.

    Penalties are deducted from interim payment certificates as soon as they occur and can be objectively quantified.

    Liquidated Damages

    The project has a specific date of completion, specified in the contract documents.

    After the project has been accepted, the occupancy occur (main Scopus of the project)

    If project is not completed on specified duration, the owner may incur certain damages due to the nonavailability of the facility

    Example:

    The project is to be complete for occupancy by 1 October, but in fact is ready on 15 October. The projected monthly rental value of the project is $30,000

    • The entrepreneur has been damaged in the amount of $15,000

    • The contactor must pay for the amount damaged

    • The amount of the liquidated damages must be paid per day as specified in the Special Conditions

    Liquidated Damages

    In case of failure on the part of the Contractor to complete the work

    within the time fixed in the contract or any extensions thereof, the Contractor shall pay the owner as liquidated damages the sum of $3000 for each calendar day of delay until the work is completed or accepted

    • If a project overruns, the owner not only incurs costs due to lost revenues but also must maintain a staff to control and supervise the contract.

    Rental loss: $30,000 rent/month / 30 days = $1,000/day Cost of administration and supervision of contract =$200/day

    Total amount claimed as liquidated damage = $1,200/day

    For government projects, the establishment of liquidated damages is difficult (it is difficult to estimate the social loss)

    Penalty / Bonus

    The amount/day of the liquidate damage amount must be fairy estimated.

    If owner desires to specify a penalty for overrun (rather than Liquidated damages) he must offer a bonus in the same amount for every day thecontractor brings the project in early.

    Example:

    Penalty= $20,000/day 3 days of delay

    Rental loss: $30,000 rent/month / 30 days = $1,000/day • Cost of administration and supervision of

    Progress Payments and Retainage

    During the construction period, contractor is reimbursed on a periodic basis.

    The method of making progress payments is implemented in the contract.

    Retainage: Owner retains or holds back a portion of the monies due the contractor,as an incentive for the contractor to properly complete the project .

    Why? Nearing the completion if contractor receives virtually all of bid price, he may not be motivated to do small close-out jobs.

    In contract documents (in General conditions) a statement like below may exist.

    In making progress payment there should be retained 10 percent of the estimated amount until final completion and acceptance of the work.

    Progress Reporting

    Contracts require the prime contractor to submit a schedule of activity and periodically update the schedule reflecting actual progress.

    This requirement is stated in general conditions.

    Figure 3.3 (p. 57) : Bar chart planning and control models: (a) planned rate of progress

    Figure 3.3 (p. 57) :Bar chart planning and control models: (a) planned rate of progress and (b) actual rate of progress

    Figure 3.3 (p. 57) : Bar chart planning and control models: (a) planned rate of progress

    Figure 3.4 (p. 58)

    Bar chart progress models: (a) bar chart schedule (plan focus) and (b) bar chart updating (control focus).

    Completion

    The different forms of contract have different processes for declaring a contract complete.

    At this point:

    -

    retention moneys are reduced,

    -

    performance bonds are released and

    -

    the defects liability period commences.

    This is a great financial relief for a contractor.

    Acceptance and Final Payment

    Final acceptance of the project is important to all parties concerned:

    Contractor- final acceptance means the release of retainage

    Owner - final acceptance means the occupancy of the project, accomplishment of the scope

    A joint inspection on the part of the owner’s representative and the contractor is

    made

    The owner’s representative notes deficiencies that should be corrected

    (punch list) The contractor makes note of the deficiencies.

    Similar procedure is used between the prime contractor and the subcontractors.

    Partial Delivery

     

    Where the contract allows for it, the contractor is entitled to or required to hand over sections of the project before the whole project is completed.

    Handing over these sections means that the owner is able to utilise that portion of the works before the whole project is completed and the contractor is thereafter not liable for that portion of the works

    The risk of damage to the works also passes to the employer upon completion.

    Early completion

    If the contractor is very efficient, and there are no problems experienced on site, then the contractor will be free to start a new project much earlier.

    In some contracts, the employer may encourage early completion by offering a bonus for early completion.

    WHAT IS ADMINISTRATION?

    Good contract administration is required to:

    -

    manage design specification,

    -

    contractual agreement,

    -

    competitive tendering,

    -

    evaluation,

    -

    cost control,

    -

    variations,

    final accounts, claims and even disputes, etc.

    -

    RECORD KEEPING

    Construction is a complex business to operate and there are many different activities that need to be managed at any one time. It is not possible to remember what happened at what time, and who did it, and why. Record keeping is essential to ensure that events can be recalled at a later stage.

    There are several main types of records that need to be kept including:

    1) Site diary. 2) Drawing register. 3) Written notices, correspondence and site instructions. 4) Site photographs. 5) Contractual documents. 6) Occupational health and safety documents.

    Site diary

    This site diary should keep specific information relating to:

    -

    the work that is done each day,

    -

    what problems were encountered,

    -

    what instructions were issued by the owner’s representative (principal agent, project

    manager, supervisor, engineer),

    -

    what drawings were received, and

    -

    milestones achieved.

    Information kept for all projects should include:

    a) Day.

    b) Date.

    c) Rainfall measured.

    d) Personnel schedule.

    e) Equipment schedule.

    f) Record of any reportable accidents that occur.

    g) Production targets and achievements.

    h) Site instructions received.

    i) Drawings received.

    j) Issues that are causing delays.

    k) Work that is to be corrected.

    l) Site meetings held and the date for the next one.

    Drawing register

    Must be kept and is essential in identifying changes and dates when these changes are notified.

    This record is essential in determining when changes were implemented in the drawings and how it may have affected the works

    Written notices, correspondence and site instructions

    Correspondence is used to convey messages and confirm verbal discussions held between the parties on site.

    Written notices are similar to correspondence but differ in the fact that they are written in accordance with a specific requirement in terms of the general conditions of contract and usually make reference to a particular clause.

    Site instructions are often given verbally on site in order not to delay the work. These must be confirmed in writing as soon as practically possible, so that they are placed on record and become binding in terms of the contract

    Site photographs

    Site photographs are invaluable in recording conditions at a particular date and time. A picture tells the whole story

    However, it is important to capture additional information about the picture as well.

    • a) Date and time.

    • b) Location.

    • c) Reason for taking the photograph.

    • d) Name of photographer.

    • e) The names of relevant people included in the photograph.

    • f) The names of the subcontractors included in the photograph.

    It is important that the photographs are correctly coded and filed with the appropriate description relating to each photograph

    Other Issues during Construction

    Advance payment / Contractor’s mobilization

    The Employer should supervise Contractor’s mobilization on site and use of the

    advance payment.

    Any delays or deviations in site mobilization (in quantity but also in quantity e.g. unacceptable accommodation or sanitary facilities) should be promptly notified to and remedied by the Contractor

    Contractor’s mobilization should be seen as comprising at least the following key

    aspects:

    (i) financial resources - if advance has been paid, than the Contractor should be able to timely complete the appropriate mobilization arrangements;

    (ii) manpower - both in terms of Contractor’s key staff and sufficient labor to ensure proper and timely execution of the works;

    (iii) plant, equipment, materials; (iv) site facilities check the contractual requirements

    Contractor’s mobilization- FAILURE

    There may be cases where the Contractor receives the advance payment but fails to mobilize up to the value of the advance payment or according to its own Mobilization Schedule (which should have been part of its bid)

    If it is obvious that the Contractor does not have the intention of making the adequate start up arrangements or uses the advance payment for other purposes than the mobilization costs, than the Employer would be entitled and should not hesitate to forfeit the advance payment guarantee,

    Site visits by the Employer

    Whenever visiting the Site, Employer’s staff should bear in mind the following minimum aspects that relate to visual or physical inspection:

    þ Progress of works against planned (how much of the work has been done, compared to the planned progress?);

    þ Quality of works (do all works comply with the quality requirements in the technical specifications?);

    þ Allocation of staff / labor (is the number of people actually working on site sufficient to have the works completed on time?);

    þ Contractor’s mobilization of materials and equipment (does the Contractor have all necessary equipment and construction materials to complete the works according to the specifications and on time?);

    þ Health and safety with regard not only to the Contractor’s personnel, but also to the public safety (have all necessary health and safety measures been implemented?);

    þ Environmental issues (is the Environmental Management Plan being enforced appropriately?).

    Desk control of Engineer’s documents

    Measurement logs

    Activity reports

    Issues Log

    Variation Orders

    Requests to Contractor.

    Correspondence with the Contractor and third parties (Government agencies, local authorities, controlling bodies, end users, beneficiaries etc.)

    Inspection and Control Logbook

    Remedies against non-performing contractors:

    Deny acceptance of non-compliant goods, defective work, or sub-standard materials;

    Rejection of non-performing staff;

    Penalties for failure to meet functional guarantees;

    Actions against the Performance Security;

    Termination of Contract.

    Acceptance / Taking Over Certificate

    Check if all the functional guarantees are met and all tests on completion have been successfully passed;

    WHAT NEXT planning (who takes over the works; do they have funding for the proper care and maintenance; do they know what to do in case of defects etc.).

    Warranty / Defects Liability Period

    Ensure that Performance Security / Retention Money Bank Guarantee and insurance policies (where applicable) are still valid and enforceable for the duration of the Defects Liability Period;

    Ensure that the Contractor is promptly notified about any defect and duly remedies the defects in due time.

    Final Acceptance / Performance Certificate

    § Check how the Contractor fulfilled its duties during the warranty period;

    § Ensure the Contractor has no outstanding obligations, duties or debts;

    § Release Performance Security/ Retention Money Bank Guarantee;

    § Final Payment (if applicable).

    Termination of Contract

    § Check the exact provisions of the Contract with regard to the Termination by the Employer;

    § Assess Contractor’s claims and remedies;

    § Ensure that all Contractor’s reasonable claims have been properly addressed and all due amounts have been paid;

    § Contingency planning.

    Claims and settlement of disputes

    § Check the exact provisions of the Contract with regard to the settlement of disputes and costs incurred (in terms of time, money and resources);

    Check if the contract management team has consistently and correctly enforced the conditions of contract;

    § Duly document any deviations from the specifications and conditions of contract.

    ü Site Daily diary

    ü Site minutes & Files

    ü Instruction Books

    ü Contract close-out.

    Theme: Construction project Planning and Scheduling

    Project Planning

    Planning is a general term that sets a clear road map that should be followed to reach a destination.

    PLANNING- used at different levels (strategic plans, pre-tender plans, pre-contract

    plans, construction plans, etc.) Planning involves the breakdown of the project into definable, measurable, and

    identifiable tasks/activities, and then establishes the logical interdependences

    among them. Generally, planning answers three main questions:

    • - What is to be done?

    • - How to do it?

    • - Who does it?

    Planning - Breakdown of project into work items (activities), define and describe activities to be performed.

    The bid package consisting of the plans and specifications establishes the scope of work to be performed.

    To be properly managed, the scope of work must be broken into components that define work elements

    The assumption is that the project is the summation of its subelements

    Basic Concepts in Development of Construction Plans

    Construction planning is a fundamental and challenging activity in the management and execution of construction projects.

    It involves:

    -

    the choice of technology,

    -

    the definition of work tasks,

    -

    the estimation of the required resources and durations for individual tasks, and

    the identification of any interactions among the different work tasks. Choice of Technology and Construction Method

    -

    Choices of appropriate technology and methods for construction are often ill- structured.

    For example: A decision whether to pump or to transport concrete in buckets will

    directly affect the cost and duration of tasks involved in building construction. A decision between these two alternatives should consider:

    the relative costs, reliabilities, and availability of equipment for the two transport methods. Unfortunately, the exact implications of different methods depend upon numerous considerations such as experience and expertise of workers or the particular underground condition at a site. Basic Concepts in Development of Construction Plans A good plan is the basis for developing the budget and the schedule for work. Developing the construction plan is a critical task in the management of construction, even if the plan is not written or otherwise formally recorded. It may also be necessary to make organizational decisions about the relationships between project participants and even which organizations to include in a project.

    For example: The extent to which sub-contractors will be used on a project is often determined during construction planning.

    Planning requires a rigorous effort by the planning team.

    A planner should know the different categories of work and be familiar with the terminology and knowledge used in general practice.

    Also, the planning team should seek the opinion of experts including actual construction experience.

    This helps produce a realistic plan and avoids problems later on site.

    Adopt a primary emphasis on either cost control or on schedule control.

     For example: A decision whether to pump or to transport concrete in buckets will 

    Forming a construction plan is a highly challenging task. Most people, if you describe a train of events to them, will tell you what the result would be. They can put those events together in their minds, and argue from them that something will come to pass. There are few people, however, who, if you told them a

    result, would be able to evolve themselves what the steps were which led up to that result. This power is what I mean when I talk of reasoning backward

    Cost (or expense) oriented planning: projects are divided into expense categories with associated costs. A distinction is made between costs incurred directly in the performance of an activity and indirectly for the accomplishment of the project.

     

    For example, borrowing expenses for project financing and overhead items are commonly treated as indirect costs.

    Time (or schedule) oriented planning: projects are divided into work activities over time. In this case, the planner insures that the proper precedence among activities are maintained and that efficient scheduling of the available resources prevails.

     

    Traditional scheduling procedures emphasize the maintenance of task precedence (resulting in critical path scheduling procedures) or

    Efficient use of resources over time (resulting in job shop scheduling procedures).

    Most complex projects require consideration of both cost and time. In these cases, the integration of schedule and budget information is a major concern.

    Importance of Simulation

    • In forming a construction plan, a useful approach is to simulate the construction process either in the imagination of the planner or with a formal computer based simulation technique.

    • By observing the result, comparisons among different plans or problems with the existing plan can be identified.

    For example: A decision to use a particular piece of equipment for an operation immediately leads to the question of whether or not there is sufficient access space for the equipment.

    Answer: 3D geometric models in a computer aided design (CAD) system may be helpful in simulating space requirements for operations and for identifying any interferences.

    Project Planning Steps

    The following steps may be used as a guideline, or checklist to develop a project plan:

    2.

    Generate the work breakdown structure (WBS) to produce a complete list of activities.

    • 3. Develop the organization breakdown structure (OBS) and link it with work breakdown structure or identify responsibilities.

    • 4. Determine the relationship between activities.

    • 5. Estimate activities time duration, cost expenditure, and resource requirement.

    Develop the project network.

    Developing the Work Breakdown Structure (WBS)

    PLANNING= WORK BREAKDOWN+ WORK SEQUENCING

    The WBS is described as a hierarchical structure which is designed to logically subdivide all the work-elements of the project into a graphical presentation.

    The full scope of work for the project is placed at the top of the diagram, and then sub-divided smaller elements of work at each lower level of the breakdown.

    At the lowest level of the WBS the elements of work is called a work package.

    A list of project’s activities is developed from the work packages.

    How to establish WBS?

    Guidelines:

     

    Work packages (WP) must be distinguisable from other WPs.

    Each WP must have unique starting and ending dates.

    Each WP should have its own unique budget.

    WP should be small enough that precise measurement of work progress is possible.

    For example

    2. Generate the work breakdown structure (WBS) to produce a complete list of activities. 3. Develop

    level 1- represents the full scope of work for the house level 2- the project is sub-divided into its three main trades, level 3- each trade is subdivided to specific work packages.

    level 1- represents the full scope of work for the house level 2- the project is

    WBS Example: Small Gas Station Example: A Small Gas Station … see plans and concept drawings in APP. I

    In construction various aspects of work that contribute to breakdown of the project into packages relate to:

    • 1. Methods used to place work

    • 2. Skills needed for the work

    • 3. Craft workers involved

    • 4. Critical resources (cranes, crews,etc)

    Definition of WP can be facilitated by using 4 categories which help in establishing a level of uniqueness. These are:

    • 1. Location or area within the project (e.g. Foundation, pile cap)

    • 2. Material type (e.g. Concrete, resteel)

    • 3. Method of placement (e.g. Excavation)

    • 4. Organizational resources required (e.g. Labor and equipment needed)

    Let’s develop WP and a WBS for Gas Station construction

    First, Determine locations which are WP related So location WP are:

    • 1. parking and service area

    • 2. Foundation

    • 3. Building walls

    • 4. Building roof

    • 5. Interior floors/Slabs

    • 6. Interior finishes

    • 7. Exterior finishes

    • 8. Electrical systems

    • 9. Mechanical systems

    When we add category of Material Type WP expands see figure.

    3. Building walls 4. Building roof 5. Interior floors/Slabs 6. Interior finishes 7. Exterior finishes 8.

    Work Packages for the Gas Station Project

    3. Building walls 4. Building roof 5. Interior floors/Slabs 6. Interior finishes 7. Exterior finishes 8.

    WBS for Gas Station Project.

    The WBS elements at various levels can be related to the contractor’s organizational breakdown structure (OBS), which defines the different responsibility levels and their appropriate reporting needs as shown in Figure

    The WBS elements at various levels can be related to the contractor’s organizational breakdown structure (OBS),

    A project code system provides the framework for project planning and control in which each work package in a WBS is given a unique code that is used in project planning and control.

    The coding system provides a comprehensive checklist of all items of work that can be found in a specific type of construction.

    Also, it provides uniformity, transfer & comparison of information among projects

    An example of this coding system is the Master Format, which was developed through a joint effort of 8 industry & professional associations.

    The Master format is divided into 16 divisions as follows:

    1) General Requirements. 2) Site work. 3) Concrete. 4) Masonry. 5) Metals. 6) Woods & Plastics. 7) Thermal & Moisture Protection.

    8) Doors & Windows. 9) Finishes. 10) Specialties. 11) Equipment 12) Furnishings. 13) Special Construction. 14) Conveying Systems. 15) Mechanical. 16) Electrical.

    Project Activities

    The building block (the smallest unit) of a WBS is the activity, which is a unique unit of the project that has a specified duration.

    An activity is defined as any function or decision in the project that: consumes time, resources, and cost

    Activities are classified to three types:

    • 1. Production activities: activities that involve the use of resources such as labor, equipment, material, or subcontractor.

    This type of activities can be easily identified by reading the project’s drawings and

    specifications. Examples are: excavation, formwork, reinforcement, concreting, etc.

    Each production activity can have a certain quantity of work, resource needs, costs, and duration.

    • 2. Procurement activities: activities that specify the time for procuring materials or

    equipment that are needed for a production activity. Examples are: brick procurement, etc.

    • 3. Management activities: activities that are related to management decisions such as

    approvals, vacations, etc.

    • An activity can be as small as “steel fixing of first floor columns” or as large as “construct first floor columns”.

    This level of details depends on the purpose of preparing the project plan.

    For Example: In the pre construction stages, less detailed activities can be utilized, however, in the construction stages, detailed activities are required.

    Accordingly, level of details depends on: planning stage, size of the project, complexity of the work, management expertise.

    Determining Sequence of Work Packages In order to identify the relationships among activities, the planning team
    Determining Sequence of Work Packages In order to identify the relationships among activities, the planning team

    Determining Sequence of Work Packages

    In order to identify the relationships among activities, the planning team needs to answer the following questions for each activity in the project:

    • - Which activities must be finished before the current one can start?

    • - What activity(ies) may be constructed concurrently with the current one?

    - What activity(ies) must follow the current one?

    • Consider the simple construction of concrete footings:

    Activities are:

    • A. Layout foundations

    • B. Dig Foundations

    • C. Place formworks

    • D. Place concrete

    • E. Obtain steel reinforcement

    • F. Cut and bend steel reinforcement

    • G. Place steel reinforcement

    • H. Obtain concrete

    Scheduling Logic

    In order to develop a schedule, the logical sequence or scheduling logic which relates the various activities to one another must be developed.

    In order to gain a better understanding of the role played by sequencing in developing a schedule:

    Consider a simple pier made up of two lines of piles with connecting headers and simply supported deck slab.

    Activity Relationships

    A relationship between two activities can be the result of physical restrictions or of a deliberate management decision.

    • Physical relationships: The relations among the activities in each of the two legs

    • Strategic relationships: no physical reason to start with the east side of the structure. The relationship reflects a management choice.

    • Safety: Some relationships result from the need to guarantee the safety of the

    construction personnel.

    Other considerations: A traditional

    rule..

    all

    required resources will be available.

    Determining Sequence of Work Packages

    In arranging WP sequence for time control, the criteria of (1) Location

    (2) Material (3) Method and (4) Required resources. Consideration must be given to other time consuming activities

    a)

    Administrative actions (inspections, permit issuance, noiseconstraints),

    b)

    Material deliveries

    c)

    Certain special activities (like curing of concrete, moisture content measures for soil

    compaction, etc).

    Types of activities relationships

    Four types of relationships among activities can be defined as described and illustrated below

    Typically, relationships are defined from the predecessor to the successor activity.

    a)

    Finish to start (FS). The successor activity can begin only when the current

    activity completes.

    b)

    Finish to finish (FF). The finish of the successor activity depends on the finish of

    the current activity.

    c)

    Start to start (SS). The start of the successor activity depends on the start of the

    current activity.

    d)

    Start to finish (SF). The successor activity cannot finish until the current activity

    starts.

    Drawing Project Network Networks Network: A model consisting of nodes and links connecting between these nodes

    Drawing Project Network

    Drawing Project Network Networks Network: A model consisting of nodes and links connecting between these nodes

    Networks Network: A model consisting of nodes and links connecting between these nodes

    PDM -- Precedence Diagram  PDM Activities comprised of:  Activity description  Node representing the

    PDM -- Precedence Diagram

    • PDM Activities comprised of:

      • Activity description

      • Node representing the activity

      • Arrow representing relationship / dependency

      • Point indicating direction of relationship / dependency

    PDM -- Precedence Diagram  PDM Activities comprised of:  Activity description  Node representing the

    LAG time

    • Sometimes, traditional FS relationships are inefficient to model the relation between two activities.

    • For example, in any project involving cast-in-place concrete, the concrete is poured and then allowed to cure for a number of days before its formwork can be stripped.

    PDM -- Precedence Diagram  PDM Activities comprised of:  Activity description  Node representing the
    • SS relationships are used when a successor activity must begin after at least a LAG number of days after the start of the predecessor activity.

    • Example: The first segment of a long pipe can be laid before its trench is completely finished. All that is required is that the laying begins when an appropriate length of trench is available.

     SS relationships are used when a successor activity must begin after at least a LAG
     SS relationships are used when a successor activity must begin after at least a LAG
    • This type of relationship signifies that the successor activity must be finished after at least the number of days indicated in the LAG between the two activities.

    Same example: Suppose that the trenching operation takes 7 days and the pipe laying must finish at least 3 days after the excavation has been completed

     SS relationships are used when a successor activity must begin after at least a LAG

    Multiple Mutual Relationships

    • Two activities can have more than one mutual relationship, as long as the relationships specify different types of conditions, and the predecessor-successor relation is not swapped. The same two activities can be related by, an SS and an FF relationship, as previously discussed in the example of the pipe laying and trenching activities.

    • But if a relationship indicates that Activity A is the predecessor of Activity B, then another cannot indicate that B precedes A.

    NETWORK RULES  Networks flow from left to right  Activity cannot begin until all preceding
    NETWORK RULES  Networks flow from left to right  Activity cannot begin until all preceding

    NETWORK RULES

    • Networks flow from left to right

    • Activity cannot begin until all preceding connected activities have been completed

    • Arrows indicate precedence and flow. Arrows can cross over each other

    • Each activity should have a unique identifier

    • An activity identifier should be larger than any activity that precedes it

    • Looping is not allowed

    • When there are several starts, a common start point can be used. Common end points are helpful

    WBS for a Roof Construction

    • Level 1: Roof Construction

    • Level 2:

    • 1.1 Cast concrete pedestals for roof column supports

    • 1.2 Insulate Roof

    • 1.3 Test Roof insulation

    • 1.4 Tile Roof

    • 1.5 Install water tanks and HVAC machines

    • 1.6 Install Steel Frame to carry roof

    • 1.7 Install wood secondary members to carry Roof tiles

    • 1.8 Install Roof Tiles (per architect & Owner selection)

    • 1.9 Install Gutters

    1.10 Test Roof Tiles for leakage

    Another Example for WBS Example: Development of WBS for a Road Building Project suppose that we

    Another Example for WBS Example: Development of WBS for a Road Building Project

    suppose that we wish to develop a plan for a road construction project including two culverts. Initially, we divide project activities into three categories as shown in Fig. 2:

    structures, roadway, and general. This division is based on the major types of design elements to be constructed.

    Within the roadway work, a further sub-division is into earthwork and pavement. Within these subdivisions, we identify clearing, excavation, filling and finishing (including seeding and sodding) associated with earthwork, and we define watering, compaction and paving sub-activities associated with pavement.

    Finally, we note that the roadway segment is fairly long, and so individual activities can be defined for different physical segments along the roadway path.

    In Fig. 2, we divide each paving and earthwork activity into activities specific to each of two roadway segments. For the culvert construction, we define the sub-divisions of structural excavation, concreting, and reinforcing. Even more specifically, structural excavation is divided into excavation itself and the required backfill and compaction.

    Example: Task Definition for a Road Building Project Similarly, concreting is divided into placing concrete forms,

    Example: Task Definition for a Road Building Project

    Similarly, concreting is divided into placing concrete forms, pouring concrete, stripping forms, and curing the concrete. As a final step in the structural planning, detailed activities are defined for reinforcing each of the two culverts. General work activities are defined for move in, general supervision, and clean up.

    As a result of this planning, over thirty different detailed activities have been defined. At the option of the planner, additional activities might also be defined for this project.

    For example, materials ordering or lane striping might be included as separate activities. It might also be the case that a planner would define a different hierarchy of work breakdowns than that shown in Figure 2.

    For example, placing reinforcing might have been a sub-activity under concreting for culverts. One reason for separating reinforcement placement might be to emphasize the different material and resources required for this activity. Also, the division into separate roadway segments and culverts might have been introduced early in the hierarchy. With all these potential differences, the important aspect is to insure that all necessary activities are included somewhere in the final plan.

    Network Techniques in Project Planning

    • - Critical Path Method

    • - Program Evaluation and Review Technique

    Scheduling Software Primavera MS Project

    Why Construction scheduling ?

    One of the first question an owner or project manager wants answered is “ when can the project be completed” ?

    Schedules identify all tasks required to be completed on a project, determine how long each will take and place them in logical order.

    Schedules start date determines when goods and services need to be brought to the job site, when a work force needs to be mobilized and when equipment rental begins.

    Example: A large crane can be rented from more than $2500 per week. So, if the duration of the project is not figured closely contractors can quickly consume in rental.

    Planning Versus Scheduling

    A plan shows the activities and their logic relationships. The activities in a plan do not have specific start and end dates.

    A schedule establishes the specific start and end dates for the activities. It also establishes the total project duration. A schedule determines what resources are needed when, for how long, for which activity.

    Scheduling Methods

    Bar charts

    CPM (Critical Path Method)

    PERT (Program Evaluation and Review Technique)

    Depending on the user, the schedule can take different forms.

    For instance, owner of a $500 million high rise is interested in when the project is due for completion. Bar charts can provide this type of information.

    Field superintendent or construction manager is responsible for actual details of the project. (e.g. delivery of key materials, dry walls). CPM can provide the necessary details

    Steps to develop a schedule

    What are the steps required to develop a project schedule?

    1) Breaking down the scope of the work into manageable portions, namely its activities. (Discussed previously)

    2) Estimating each activity's duration.

    3) Establishing sequence relationships among activities- build the network. (Discussed previously)

    Example: If one activity is called fabricate formwork for deck Aand another is called pour concrete for deck A, then finishing the former is a necessary condition for executing the latter.

    4) Finding the earliest and latest possible times for the execution of each activity (Network Analysis).

    5) Looking up the project's critical sequence of activities and the leeway that activities not included in this sequence can have.

    6) Reviewing, optimizing, communicating, updating, and in general, using the schedule.

    2.

    Estimating Activity Durations

    The duration of any activity is largely determined by:

    Nature of the work that the activity entails.

    Ex.: Concrete pour in 50th floor take longer time than in 2nd floor.

    Quantities of the work.

    Ex.: Activity involving 6,000 m2 formwork take longer than 3,000 m2.

    Technique used for the task.

    Ex.: A concrete pour with a concrete pump usually takes less time than using buggies.

    The resources used to perform the work.

    Ex.: 20 masons finishes same work in a shorter time than 15 masons.

    The working hours for the resources.

    Ex.: An activity will be finished in fewer days if it is performed using 10-hour shifts instead of 8-hour shifts.

    There areother factors as well, like productivity, etc.

    With all the factors considered here, it would appear that estimating durations is a colossal endeavor.

    One way to simplify this part of the scheduling process is using published data. Example:

    Building Construction Costs” data, published annually by R. S. Means.

    One way to simplify this part of the scheduling process is using published data. Example: “

    This shows the "normal" productivity for a crew fabricating and placing footing formwork.

    Example: Estimating Duration

    Activity: Form Continuous Wall Footings. 6,000 square feet of contact area (SFCA) of continuous wall footing formwork. Estimate this activity's duration!

    Use R. S. Mean's Building Construction Costs data and assume three uses for each plywood section,

    So, one carpentry crew can fabricate 470 SFCA per day (production Rate). Using one crew, duration is 6,000/470 = 12.76 days.

    Using two crews, duration is halved to 12.76/2 = 6.39 = 7 days.

    • The duration is calculated by dividing the quantity of work by the daily production rate.

      • For example: assume a daily production rate of 500 cyd per day with 8000 for completing the activity

    One way to simplify this part of the scheduling process is using published data. Example: “

    After the activities and durations have been determined,

    the next step in preparing a CPM schedule is to arrange the activities in the order in which the activities will be performed (Previously Discussed)

    NETWORK RULES

    • Networks flow from left to right

    • Activity cannot begin until all preceding connected activities have been completed

    • Arrows indicate precedence and flow. Arrows can cross over each other

    • Each activity should have a unique identifier

    • An activity identifier should be larger than any activity that precedes it

    • Looping is not allowed

    • When there are several starts, a common start point can be used. Common end points are helpful

    Network Schedule Analysis

    • When two activities are linked by a traditional relationship, the predecessor must finish before the successor can begin.

    • The earliest possible dates to execute each activity in the network can be found when this rationale is successively applied to all activities in the diagram.

    • This process is known as CPM forward pass and also determines the minimum possible duration of the project.

    • A similar procedure is then performed backward, from last to first activities. This is called CPM backward pass and computes the latest dates.

    • The difference between the earliest and latest possible dates to execute each activity is its total float, which is the time that an activity can "drift" or be "floated" between its two extreme dates.

    • A chain of critical activities will not have any available float. This activity chain is appropriately called the critical path (CP) of the project.

    • CP is central to the schedule that the entire scheduling technique is called the critical path method.

    • The objective of analysing a project network is;

      • To find critical activities

      • To calculate early start times of each activity

      • To calculate early finish times of each activity

      • To calculate the float, or time, available for delay for each activity

  • By definition: critical activity can not be delayed without extending the project duration. Therefore, float of critical activity is ZERO.

  • Activities that are critical lie along the longest path through the network.

  • To determine that path (longest path) a variety of methods have been developed.

  • Here, a method based on the use of two algorithms is used to identify the longest and critical path.

  • a) Forward pass algorithm

  • b) Backward pass algorithm

    • Small precedence diagram shown below will be used to illustrate CPM's scheduling computations.

    • It contains seven activities linked by traditional relationships (FS with LAG =0).

    • The second item in each box is the activity duration in working days.

     Small precedence diagram shown below will be used to illustrate CPM's scheduling computations.  It
     Small precedence diagram shown below will be used to illustrate CPM's scheduling computations.  It

    Forward Pass Calculations

    The forward pass is the first phase of the scheduling computations. It computes the earliest dates. The initial activity, A in the case of Figure 7.18, is assigned an early start date (ESD) of zero.

    The early finish date (EFD) for this initial activity is equal to its ESD plus its duration, that is 0 + 1 = 1.

     Small precedence diagram shown below will be used to illustrate CPM's scheduling computations.  It

    Critical Path Calculations:

    a) Forward pass algorithm

    EFD (I) = ESD (I) + DUR(I) ESD (J) = max [all EFT(I)] b) Backward pass algorithm LST(J) = LFT(J) - DUR(J) LF (I) = min [all LST(J)]

    Backward Pass Calculations

    The backward pass begins by assigning an LFD to the last activity. LFD = EFD.

    For our example, Activity G would have an LFD of 20? The LSD for G is computed by subtracting its duration TG: LSDG = EFDG - TG = 20 - 1 = 19

    For our example, Activity G would have an LFD of 20? The LSD for G is

    Float Calculations With PDM

    All activities that are not on critical path can be delayed a certain number of time units (e.g. Days) without causing an extention of the project duration.

    For non-Critical activities 4 types of float can be defined.

    1) Total float

    2) Free float

    3) Interfering float

    4) Independent float

    Of these 4 types of float, 3 have a practical interpretation within the context of a construction project.

    Total float:

    TF(I) = LFT(I) EFT(I) Free float:

    FF(I) = min [ all EST(J)] EFT(I) Interfering float:

    IF(I) = TF(I) FF(I) Independent float:

    Ind. F(I) = min [all EST(J)] (LST(I) + DUR(I)) = min [all EST(J)] [(LFT(I)]

    Summary :Construction Project Scheduling  To plan and schedule a construction project uncertainty and complexity. 

    Summary :Construction Project Scheduling

    • To plan and schedule a construction project uncertainty and complexity.

    • A construction project:

      • involves many parties and people: owner, contractor, engineer, suppliers and subcontractors.

      • requires resources: money, materials, equipment, and labors.

      • takes time, months or years.

  • In summary, to plan and schedule a construction project, we need decide:

    • what to do?

    • how to do?

    • who will do?

    • when will do?

    • How much will it cost and how long will it take?

    Critical Path Analysis

    • Provides activity information

      • Earliest (ES) & latest (LS) start

      • Earliest (EF) & latest (LF) finish

      • Slack (S): Allowable delay

  • Identifies critical path

    • Longest path in network

    • Shortest time project can be completed

    • Any delay on activities delays project

    • Activities have 0 slack

  • Total Float

    • The total float (TF) for each activity is the difference between its latest finish and its earliest finish or its latest start and its earliest start.

    • TF (i, j) = LS(i,j) – ES(İ,j)

    • Free Float: Differs from TF in that it is the max. Time an activity can be delayed without affecting early start of any succeeding activity.

    • FF(i,j) = Min[ES(j,k) for all k] EF(i,j)

    Project Scheduling: PERT

    • Acquisition of Bar Charts and CPM

    • Assumption: activity duration is assumed to remain same throughout the life of the project.

    • In fact, this assumption is not realistic. In actual working conditions, assumed durations begin to vary.

    • PERT addresses variability of project duration

    PERT incorporates uncertainty into the project by assuming ‘durations of activities are

    variable

    • PERT have been used to plan, schedule, and control a wide variety of projects:

      • R&D of new products and processes

      • Construction of buildings and highways

      • Maintenance of large and complex equipment

    • Design and installation of new systems

    Three Estimate

     

    Variability is defined in terms of three estimates 1) Most optimistic duration (t a )

    2) Most pessimistic duration (t b ) 3) Most likely duration (t m ) Expected Duration

     
     

    Let’s assume that a 2,000 m 2 slab on grade is to be cast in place. For scheduling purposes, project superintendent is asked for 3 durations rather than single one.

    These 3 estimates are used to calculate an expected activity duration.

    The calculations are loosely based on concepts from mathematical probability.

    The expected duration, (t e ) is assumed to be the avarage value of a probability distribution defined by three-estimate set.

    Expected duration is:

     
     

    t e

    =

    (t a + 4t m + t b )/6

     

    t a = most optimistic duration estimate t b = most pessimistic, duration estimate t m = most likely duration estimate

    For example: If for slab pour, superintendent estimates as

    t a = 5 days,

    t b = 12 days

    and t m = 8 days

    t e

    =

    (5 + 4(8) + 12)/6 = 49/6 = 8.17 days, say 9 working days.

    Probability of project completion time

    • Once t e values calculated, Critical Path calculation is performed like CPM.

    • Then, probability of completing project within a predetermined time duration is calculated by assuming that the probability distribution of total project duration is normally distributed with the longest path of t e values as a mean value of the normal distribution.

    Normal Distribution & Standard Deviation

    • Normal distribution is defined by its mean value x and σ (standard deviation).

    • Standard deviation is a measure of how widely about the mean value the actual observed values are spread or distributed.

    • Another parameter called the variance is the square of standard deviation or σ 2 .

    • It can be shown mathematically that 99.7% of values will lie in range of 3σ.

     Another parameter called the variance is the square of standard deviation or σ . 

    Variance Calculation

    • An activity’s completion time variance is:

    s 2

    =

    ((t b -t a )/6) 2

    t a = optimistic, t b = pessimistic

    If the variance of each activity on critical path is summed, that value is assumed to be the variance of the normal distribution of the entire project duration values.

    Questions Answered by PERT

    As a summary:

    Completion date?

    On schedule? Within budget?

    Probability of completing by

    ?

    Critical activities?

    Enough resources available?

    How can the project be finished early at the least cost?

    Used to obtain probability of project completion!

    • Expected project time (T)

      • Sum of critical path activity times, t

    • Project variance (V)

      • Sum of critical path activity variances, v

    Normal Distribution

    Standardized Normal Distribution

     Project variance ( V )  Sum of critical path activity variances, v Normal Distribution
     Project variance ( V )  Sum of critical path activity variances, v Normal Distribution
    • Calculation of expected duration, variance for each activity, the standard deviation

    • “What is the probability that the project can be completed in N days?”

    • What is the probability that the project can be completed in 19 days? (see fig. 8.3, and example

    • For instance for Activity 7

     Project variance ( V )  Sum of critical path activity variances, v Normal Distribution
     Project variance ( V )  Sum of critical path activity variances, v Normal Distribution
    Example 1

    Example 1

    Example 1
    Example 1
    Example 1
    Example 1

    Benefits of PERT

    • Useful at many stages of project management

    • Mathematically simple

    • Use graphical displays

    • Give critical path & slack time

    • Provide project documentation

    • Useful in monitoring costs

    Limitations of PERT

    • Clearly defined, independent, & stable activities

    • Specified precedence relationships

    • Activity times (PERT) follow beta distribution

    • Subjective time estimates

    Over emphasis on critical path

    Benefits of PERT  Useful at many stages of project management  Mathematically simple  Use
    D J H A E I C F Start Finish K B G
    D
    J
    H
    A
    E
    I
    C
    F
    Start
    Finish
    K
    B
    G
     Determining the Critical Path  A critical path is a path of activities, from the
     Determining the Critical Path  A critical path is a path of activities, from the
    • Determining the Critical Path

      • A critical path is a path of activities, from the Start node to Finish node, with 0 slack times.

      • Critical Path: A C F I K

      • The project completion time equals the maximum of the activities’ earliest finish times.

      • Project Completion Time:

    23 hours

     Probability the project will be completed within 24 hrs s = s + s +

    Probability the project will be completed within 24 hrs

     

    s 2 =

    s 2 A + s 2 C + s 2 F + s 2 I + s 2 K

    =

    4/9 + 0 + 1/9 + 1 + 4/9 = 2

    s

    =

    1.414

    z = (24 - 23)/s = (24-23)/1.414 = .71 From the Standard Normal Distribution table:

    P(z < 0.71) = 0.5 + .2612 = 0.7612

    A software project has an expected completion time of 30 weeks, with a standard deviation of 6 weeks.

    What is the probability of finishing the project in 40 weeks or less?

    Z

    X

    T

    40

    30

    1.67

     

    6

    From Standard Normal Distribution Table, Probability = 0.95254 --- 95,25%

    Quality Assurance Systems

    The Construction Quality Assurance (CQA) Plan:

    • introduces personnel,

    • defines responsibilities, and

    • describes the quality assurance (QA) program, such as inspections, testing, record keeping, and corrective action for construction of the specific project

    The objective in developing and implementing the CQA Plan is to define the management system that will control and document:

    • The quality assurance procedures to be used during the project to assure that the techniques, materials, and equipment meet design specifications;

    • The integration of quality assurance inspections and corrective measures into the project documentation; and

    • The framework for communicating the quality assurance procedures and requirements to the construction project personnel

    CQA Plan Distribution

    • The CQA Plan, as well as other construction documents, is required reading for all construction personnel participating in the work effort.

    • A copy of the CQA Plan will be provided to all field personnel.

    • Construction subcontractors will be required to comply with the procedures documented in the CQA Plan in order to ensure the quality and effectiveness of the construction work.

    CQA Plan Revisions

    • If revisions are needed, they should be made through addenda added to the CQA Plan,

    • Such changes will be distributed to ensure that all parties holding a controlled copy of the CQA Plan will receive the revisions/addenda.

    CQA PLAN FORMAT

    CQA Plan has been organized to outline the personnel and procedures that will be utilized to maintain work quality during the project.

    This information has been organized as follows:

    • Section 2 Background and Scope

    • Section 3 Quality Management Organizational Structure

    • Section 4 Definable Features of Work

    • Section 5 Inspections and Verification Activities

    • Section 6 Non-Conformance and Construction Deficiencies

    • Section 7 Sampling Requirements

    CQA PLAN FORMAT

    • Section 8 Waste Disposal

    • Section 9 Documentation

    Additional plans pertinent to construction quality are summarized below:

    • Health and Safety Plan (HASP)

    • Site Management Plan (SMP)

    • Construction Schedule

    • Treatment System Performance Evaluation Test Plan

    • Bid Package Documents

    Bid documents are an important indicator of party intentions and expectations. Bid proposals submitted by contractors should be very complete, and include guidance as to how everything from weather to subcontractors can potentially impact on a project and a bid submittal.

     Section 5 – Inspections and Verification Activities  Section 6 – Non-Conformance and Construction Deficiencies

    Construction Project Documentation

    General Conditions

    This contract document will define the obligations and rights on how to execute the project. Overhead costs, what to claim and your rights must be included in this portion of the contract

    Special Conditions This is usually an extension of the contract and to the general conditions. This

    Special Conditions

    This is usually an extension of the contract and to the general conditions. This part must specify specific conditions and clauses to each particular project or job. Pay special attention to specific instructions and requirements on how to perform the work.

    A typical index of specifications for a heavy construction project might be as follows:

    Special Conditions This is usually an extension of the contract and to the general conditions. This

    Technical Specifications

    Define the qualitative requirements for products, materials, and workmanship upon which the contract is based

    SPECIFY: DESCRIBE OR DEFINE IN DETAIL

    Organized into CSI 16 Divisions

    Dictionary Definition: "Specifications are written or Printed description of work to be done, forming Part of the contract and describing qualities of material and mode of construction, and also giving dimensions and oother information not shown in the drawings."

     SPECIFY: DESCRIBE OR DEFINE IN DETAIL  Organized into CSI 16 Divisions  Dictionary Definition:

    Contract Agreements and Contracts

    The agreement to be used by the contracting officer (owner) and the contractor.The essential part of the contract documents

    Statement of Work (SOW)

    A solid scope will be helpful during the bidding process and later on during the construction sequence. A well-defined scope will be used to determine the amount of work needed to complete the work.

    Bill of Quantities

    This is formed by the list of diverse trades, and materials included that form part of the construction. Sometimes this document is not required by the contracting officer.

    Drawings

    All set of drawings that form part of the job to be performed. These drawings are usually the latest drawings and must be received by the contractor prior to the date of commencement. It must include all drawings from consultants, and will constitute the entire project being contracted.

    Construction Schedule

    The construction schedule is an important piece of the document. In this part, the contracting office will know how and when the project will be completed. Sometimes, construction contracts will require updated schedules throughout the construction progress, and might form part of the monthly, or agreed term, application for payments

    List of Common Types of Construction Insurance

    This part will be an essential part of the contracting officer, since, it will provide the guarantee to the owner that the contractor has the means and the economic backup to perform the construction contract. It will include specific types of coverage’s, required bonding, and all insurance protections to the owner, the contractor and third parties

    2.15 Bid Bond Concept of bond allows one party to protect itself

    Against default in a relationship with a second party.

    A third party (surety) provides protection such that,if a default between two parties occurs that results in damage (loss ofmoney) the surety protects the damaged party.

    This protection is typically in the form of offsetting or covering the damage involved.

    So, a bond involves a relationship between three parties; the principal, the obligee and the surety.

    Drawings All set of drawings that form part of the job to be performed. These drawings

    2.16 Performance and Payment Bonds

    PERFORMANCE BOND

    Provides a guarantee that if the contractor defaults of fails to perform, the surety will either complete the contract in accordance with it terms, or provide sufficient funds up to the penal amount for such completion.

    PAYMENT BOND Provide a guarantee that subcontractor, material suppliers, and others providing labor, material goods, and services to the project will be paid. 2.17 Cost and Requirements for Bonds Bonds are issued for a service charge. Common rate is 1% (or €10 per €1000) on first €200 000 of contract cost. A surety seeks to keep itself well informed of a contractor’s progress on bonded projects and contractors changing business and financial status. To help to surety, contractor makes periodic reports on progress.

    Based on these reports, the contractor’s bonding capacity can be determined. This is calculated as a multiple of the net quick assets as reflected in the company balance sheet.

    The multiple to determine bonding capacity is based on contractor’s performance over the years. New contractor…. 5 or 6. Old one 40 or more.

    Advantages of Using Formal Project Management

    Better control of financial, physical, and human resources

    Improved customer relations

    Shorter development times

    Lower costs

    Higher quality and increased reliability

    Higher profit margins

    Improved productivity

    Better internal coordination

    Higher worker morale

    What Is a Project?

    A project is “a temporary endeavor undertaken to accomplish a unique product or service”

    Attributes of Construction Industry o Unique o Complexity o Large projects o Varies types of constructions o Risk dominated industry Type of Construction Projects

    Advantages of Using Formal Project Management • Better control of financial, physical, and human resources •

    Attributes of Construction Projects

    Attributes of Construction Projects The Triple Constraint • Every project is constrained in different ways by
    Attributes of Construction Projects The Triple Constraint • Every project is constrained in different ways by

    The Triple Constraint Every project is constrained in different ways by its Scope goals: What is the project trying to accomplish? Time goals: How long should it take to complete? Cost goals: What should it cost?

    It is the project manager’s duty to balance these three often competing goals What is Project Management?

    Project management is: “the application of knowledge, skills, tools, and techniques to project activities in order to meet project requirements”

    Study of Construction Two Themes:

    • 1. CONSTRUCTION TECHNOLOGY

    • Relates to methods and techniques used to place the physical materials and elements of construction at the Job site

    • 2. CONSTRUCTION MANAGEMENT Addresses how available resources will be applied

    Study of Construction Two Themes:  1. CONSTRUCTION TECHNOLOGY  – Relates to methods and techniques

    Project Management Knowledge Areas

    Knowledge areas describe the key competencies that project managers must develop

    core knowledge areas lead to specific project objectives (scope, time, cost, and quality)

    facilitating knowledge areas are the means through which the project objectives are achieved (human resources, communication, risk, and procurement management)

    knowledge area (project integration management) affects and is affected by all of the other knowledge areas

    Integration Management, which includes the processes and activities that integrate the various elements of project management, which are identified, defined, combined, unified and coordinated within the project management phases.

    Scope Management, which includes the processes involved in ascertaining that the project includes all the work required, and only the work required, to complete the project successfully.

    Time Management, which includes the processes concerning the timely completion of the project.

    Cost Management, which includes the processes involved in planning, estimating, budgeting and controlling costs so that the project is completed within the approved budget.

    Quality Management, which includes the processes involved in assuring that the project will satisfy the objectives for which ot was undertaken.

    Human Resource Management, which includes the processes that organise and manage the project team.

    Communications Management, which includes the processes concerning the timely and appropriate generation, collection, dissemination, storage and ultimate disposition of project information.

    Risk Management, which includes the processes concerned with conducting risk management on a project.

    Procurement Management, which include the processes that purchase or acquire products, services or results, as well as contract management processes.

    Project Management Processes

    • Cost Management , which includes the processes involved in planning, estimating, budgeting and controlling costs

    Project Management Phases

    While no two projects are exactly alike, all projects should progress through the same 5 project management phases (or process groups):

    Initiation

    Planning

    Execution

    Monitoring and Control

    Closure

    • 1. The Initiation Phase consists of the processes that facilitate the formal authorization to

    start a new project or a project phase

    For example,

    • - Before project initiation, the organization's business needs are identified and documented.

    • - As a next step the feasibility of a new project may be established through a process of evaluating alternatives documented in a formal feasibility study

    • 2. During the Planning Phase, information is gathered from many sources with each having

    varying levels of completeness and confidence.

    • - The planning processes identify, define and mature the project scope, project cost, and schedule the project activities.

    - As new project information is discovered, additional dependencies, requirements, risks, opportunities, assumptions and constraints will be identified or resolved.

    • 3. The Execution Phase aims at completing the work defined during the Planning Phase to

    accomplish the project’s requirements.

    • - This phase involves coordinating people and resources, as well as integrating and performing the activities of the project in accordance with the plan.

    • - Normal execution variances cause some replanning of the work. These variances may include activity durations, resource productivity and availability, and unanticipated risks.

    • - 4. Mo