CIV280F

MANAGEMENT OF CONSTRUCTION
OCTOBER 3-7, 2019

Dr. Gursans GUVEN ISIN

gursans.guven@utoronto.ca
Office Hours: Wednesdays
12:00 – 13:00 GB 213A
WHERE WE ARE

General
Developers / Owners Contractors
Understanding
• Construction process • Drawings – design • Qualify to bid
• Below grade and specifications • Estimating
• Above grade • Procurement – • Bidding and tendering
• Safety organizing the project • Winning a bid (legal
and contracts
• Site visits issues)
• Surety and bonds – • Planning and
ensuring the best resources
team possible
• Cash flow and lien act
• Project controls

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PROJECT DELIVERY ALTERNATIVES
WHAT WE WILL COVER

• Procurement Strategy – To fit particular project and owner

needs, many methods have evolved:
o Design-Bid-Build

o Fast Track (CM, Design-Build, P3)

o Integrated Project Delivery

• Contract agreement – Payments

o Fixed Price

o Unit Price

o Guaranteed Maximum Price

o Cost Plus

• Common Practices: the good, the bad and the ugly

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PROJECT DELIVERY

• The process of organizing and putting together all the

procedures and components of designing and building a
facility in an agreement
• Owner
o defines needs and requirements
o decides how they will purchase services

o identifies criteria for how to select the contractor

• Design decisions are made and set of contract plans

and specifications are prepared
• Contractor
o builds the project

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DESIGN DECISIONS ARE IMPORTANT
ABILITY TO INFLUENCE COSTS

• When contractors are let to influence the design, the owner often
saves money!  How?

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DESIGN-BID-BUILD
• General/Prime Contractor carries
significant risk and financial
responsibility
• In-house architect/engineers or
consultants do the design
• Consultant reviews & certifies
that the work has been completed

• Requires specialty subcontractors

• Payment typically by fixed price or unit cost (for unseen conditions)
• Lowest bid is awarded the project

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DIVERGENT PROJECT OBJECTIVES

Client Contractor
• Lowest Cost • Maximized Profit

• Maximum Quality • Acceptable Quality (as specified)

• Earliest Completion • Most Cost Effective Schedule

• Flexibility to Make Changes • Capitalize on Changes

• Fix Costs and Hand-off Risk • Minimize Risk

• Control the Work • Control the Work

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MOST COMMON METHOD

• When:
o Public projects

o There’s time for longer process

o Buildings

o Client is willing to work with architect to meet

design needs

Design Bid Build

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PROS AND CONS

• Pros:
o Design is complete and therefore the contractors
know exactly what they’re bidding on (in a perfect
world)
o Owner knows what they’re getting and for how
much money
• Cons:
o Contractor has no influence over design
o Must bid on the available design even if they have
ideas for improving design or reducing costs
o Longest duration  because activities are
sequential
o Very adversarial between designers and
contractors
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NOTE!

• In Design-Bid-Build, design can still occur

during construction
o e.g., owner of a student residence building
may change their mind and decide that a
swimming pool is needed on the top floor.
• Even though construction has already started, the
designers would need to redesign the structure
and mechanical systems. This would cause a
construction delay. E.g. Bahen Centre
• Design changes during construction are
typically expensive in time and money.

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LOW-BID SELECTION METHOD

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FAST TRACK

• Reduce overall project timeline by overlapping

design and construction
• Incremental approach
• Defined scope of work
Design
• Achieved by: Bid
o Construction Management
Build
o Design-Build

o Public Private Partnership

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CONSTRUCTION MANAGEMENT

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CONSTRUCTION MANAGEMENT (CM)

• CM represents the owner - paid ~2% of the construction budget as

they do not incur risk
• All aspects of design and construction are planned and coordinated
by CM
o A CM-Agent helps the owner make critical decisions, but does not commit
to delivering the project on-time or on-budget, does not make contracts
with the trade contractors.
• Saves time but often results in rework  higher cost
o Best suited to large projects that generate income or benefit from a
shorter schedule e.g. casinos, airports. Casinos can make $1M per day
(good reason not to gamble).
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CM CONT.

• Implies fast tracking or concurrent engineering

• Very important that CM helps design team focus their efforts
 CM directs designers to focus on parts of design that affect foundation so
that they can award the first contract

• Contracts are tendered as the design proceeds.

 As soon as the building footprint and depth are determined, excavation
contract can be tendered and awarded

• All contracts are held by the owner instead of the GC or CM, although
the CM will manage the contracts.
o There is also `CM at Risk` (part CM and part LS) - CM is legally responsible
for delivering the project on-time and on-budget

• e.g., At LBPIA, the GTAA and their CM tendered over 200 contracts. In
traditional design-bid-build, it would be how many contracts?
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PROS AND CONS

• Pros
o Project delivered more quickly as construction can
begin before design is complete.
o Involvement of the CM in the design process helps to cut
costs and improve the constructability of the design 
Why?
• Cons
o Tends to be a bit more expensive
o Greater errors occur because construction is pushing
design. Therefore construction rework should be
expected.
o Owner holds potentially hundreds of contracts
o Don’t know final cost until last contract is tendered

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DESIGN-BUILD

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DESIGN-BUILD

• Single contract for owner

• Designers and contractor work together to
improve efficiency
• RFP process – very expensive to bid

• Called EPC (Engineer, Procure, and Construct)

or Turnkey if in industrial sector

• Best applied when the owner knows what they

want
• Specific function (e.g. pulp mill) facility that can be
scoped and delivered efficiently

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ADVANTAGES

• Single point responsibility - reduced owner

administration
• Contractor influences design
• Can produce cost savings
• Time reduction
• Fewer disputes about who’s to blame
• Presumably better product delivered faster
• Firm project cost identified early in project
• Select on best value, not just cost

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DISADVANTAGES

• Poor project definition will

produce a project that does not
meet the owner’s requirements
• Less ability for owner to influence
design
• Changes during implementation are
costly
• When it goes bad, it really goes bad
• Fast tracking means that it often
costs a little bit more
• Competition is costly for the
participants (honorarium)

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PROPOSAL PROCESS

• The process must not only be fair, it must

appear to be fair !
• Provide adequate time to prepare
proposals
• Provide adequate base information
• Control evaluation process (security)
• Eliminate conflicts of interest
• DB can be expensive to bid

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HONORARIUM

• Indicates a commitment by the owner to the

project, but it is expensive!
• Encourages proponents to invest in the
opportunity
• Reflects an acknowledgment that the proponents
are providing a service to the owner
• Current practice amounts to $1,000/M of
construction cost (0.1%) - NOT MUCH based on
the requirement to undertake 10% of the design
or more.

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HONORARIUM EXAMPLE

• Project Budget $ 160 M

• Design Fee 7.0% of Cost of Work
• If Bid requires 10% of the Design to be complete,
then fee required = 10% of 7% of $160 M = $1.12M
• Remove 15% profit - $974 k
• Honorarium was $150 k, a fee equivalent to 15%
design
• BUT, it is paid to each bidding team, so owner will
limit the number of teams competing
• Should winning team be paid honorarium?

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EVALUATION OF PROPOSALS

• Establish an Evaluation Committee and

Process (secure, accountable, defensible)
• Establish an evaluation criteria before
proposal submission
• Two envelope system
• Mandatory requirements
• Clarifications
• Presentations and Interviews
• Select based on best value

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NEGOTIATIONS AND AWARD

• Identify a preferred proponent

• Do not release other proponents until a
contract is executed
• Ensure all stakeholders have reviewed the
proposal and negotiate refinements
• Modify proposal as necessary to meet
budget constraints
• Ensure there are no misunderstandings
(Proposal vs RFP)

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ENSURE YOU GET WHAT YOU WANT!

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BEST-VALUE SELECTION METHOD
• Preferred for design-build
• Looks at factors other than only price, such as quality and expertise,
when selecting contractors  to reduce the amount of bidders on a
project to only those that qualify for the project

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EXAMPLES

• SkyDome (Roger Centre)

• CNE Trade Centre

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PUBLIC PRIVATE PARTNERSHIP (P3)

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PUBLIC PRIVATE PARTNERSHIP (P3)

• Allows governments to build facilities that

they would not otherwise be able to build
• Private consortium designs and builds facility;
rents it to public agency until costs + profit are
recovered
• Also called DBOOT – design, build, own,
operate, transfer
• Paid negotiated lump sum plus guarantees
to address risk
• e.g. Highway 407, Confederation Bridge

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TYPES OF PPP
PPP PROJECTS INVOLVE SEVERAL PARTICIPANTS
Public Sector User
Promoters/
as Principal
Sponsors
PPP (virtual)
Contractors,
Service
Banks
Contract
suppliers,
consultants Contract
operators,
banks,
Loan
Shareholders
insurances, Agreement
Agreement
free stock owner Project Company
... (Special Purpose Vehicle)
FM
Contract
Fixed Price Maintenance/Operation
Turnkey
Contract Facility Manager/
Main Contractor
Supply/Construction Operator

Supply Material Suppliers Supply

Contracts Contracts
MINISTRY OF TRANSPORTATION OF ONTARIO
(MTO) – P3 PROJECT – HIGHWAY 407
• In 1994, the Ontario government selected CHIC as its
private-sector partner to design, build, operate and
maintain the $1-billion, 69 km, 407 Express Toll Route
near Toronto.
• CHIC is composed of four companies: AGRA Monenco
Inc., Armbro Construction Ltd., BFC Construction
Corporation, and Dufferin Construction Company, a
division of St. Lawrence Cement Inc.
• An average of 300,000 users per weekday travel along
the road running from Burlington to Pickering.
• The rigid pavement design was performed by John
Emery Geotechnical Engineering Limited (JEGEL) for a
25 year design life, for the initial 68 km.

Road was sold to 407 ETR in 1999 for $3.1 billion, which operates
Who is 407 ETR? it under a 99-year lease contract. WHY DO YOU THINK THE
GOVERNMENT SOLD THIS?
EGLINTON CROSSTOWN

• This project is the largest transit expansion in the history of Toronto.

WHAT DO YOU THINK THE VALUE IS? WHY THIS METHOD OF
PROCUREMENT?
• This light rail transit line will run along Eglinton Avenue between
Mount Dennis (Weston Road) and Kennedy station.
• A 19 km corridor (10 km underground). Up to 25 stations & stops.
• The Crosstown is currently under construction and is scheduled to
be complete by 2021.

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COMPARISON OF PPP
AND TRADITIONAL

• Two bridges on the same river.

o Downtown bridge built by Kentucky
DOT by traditional procurement
o East End crossing built by Indiana Article & Picture in The Economist March 2, 2013

DOT using PPP

o Both expect completion in 2016
• Same teams!
o Walsh Construction
o Parsons on environmental
assessment & preliminary design

• At time of article PPP design reduced maintenance costs,

8 months shorter construction time, and $225M less cost

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INNOVATION?

• P3s are supposed to encourage

innovation
o Recent study of work completed by
Infrastructure Ontario indicates some
innovation results, but innovation is
difficult to measure
• Innovation is often risky. Why?

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INTEGRTED PROJECT DELIVERY (IPD)
https://www.designingbuildings.co.uk/wiki/Integrated_project_delivery_(IPD)

• Built around a collaborative alliance of stakeholders who each

share risk and reward
• Involves key project stakeholders (client, architect, contractor,
etc.) entering into a single contract that
encourages collaboration, optimizes results, reduces waste and
maximizes efficiency and expertise
• Stakeholders collectively determine project goals, budgets,
allocation of risk and compensation.
• Contract typically specifies the separate responsibilities of
the stakeholders but focuses on collective responsibility for
the project’s successful delivery

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IPD CONTRACT AGREEMENT

• Typically signed by a ‘leadership team’ made up of the

client, lead designer/architect and contractor  Primarily
responsible for delivering the project to the budget,
schedule and quality specified by the client.
• Subcontractors and other stakeholders may agree to
become ‘risk/reward partners’ (or they can be
contracted on conventional sub-contract agreements).
• Risk/reward partners agree to be reimbursed on a cost
plus overhead and profit basis if the project performs
well.
• Profit is fixed as a lump sum amount  partners may
lose some or all of their profit if the project falls behind

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BENEFITS OF IPD

• Contract removes barriers to collaboration and

innovation  Combining incentives for the project team
as a whole rather than having them seek increased
profits individually
o Instead of individual successes or failures, the overall
outcomes determine the collective rewards

• Project goals, risk and rewards are openly shared

o A more dependable flow of information between the
main parties,
o Sharing of knowledge and technology

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CONTRACT PAYMENT TYPES
ON WHAT BASIS DO YOU GET PAID?
DEFINITIONS – PESSIMISTIC OR REALISTIC?
• CONTRACTOR - A gambler who never gets to shuffle, cut or deal!
• BID OPENING - A poker game in which the losing hand wins
• LOW BIDDER - A contractor who is wondering what he/she has left out
• ENGINEER'S ESTIMATE - The cost of construction in Heaven
• CRITICAL PATH METHOD - A management technique for losing your shirt
under perfect control
• OSHA - A protective coating made by half-baking a mixture of fine print,
split hairs, red tape and baloney - usually applied at random with a spray
gun
• STRIKE - An effort to increase egg production by strangling the chicken
• DELAYED PAYMENT - A tourniquet applied at the pockets
• COMPLETION DATE - The point at which liquidated damages begin
• LIQUIDATED DAMAGES - A penalty for failing to achieve the impossible

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FIXED PRICE
AKA STIPULATED PRICE OR LUMP SUM

• Most common
• Fixed price is bid for the project and awarded
on that basis
• Any errors or changes that result from the
owner’s actions or omissions are generally
extras

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UNIT PRICE

• Used primarily in excavation where mass

earthmoving takes place.
• Amount of rock vs. earth, for example, is unknown
and the price for each material differs:
o Disputes can occur in the interpretation of what is
rock and what is soil.
• Also called piece work in buildings where
independent operators are paid by the amount of
work they get done each year.
o In this case, it is often detrimental to the quality of
the project.

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UNIT PRICE
EXAMPLE

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COST PLUS

• Actual cost of construction + overheads + a profit

margin (generally low)
• Used in emergencies  They will call the
company with which they have the best
relationship.
• e.g., when Suncor experienced a large fire in their
coker, they were losing $2M per day – they just
wanted it fixed!
• Owner and contractor must agree in advance to
the payment amounts and schedule.

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BAHEN CENTRE

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BAHEN CENTRE EXAMPLE

• Depts identify that they need space – apply

• University assigns priority
• If money is available, then get higher priority
• Users Committee – faculty members outline
needs in User Report
• Budget approved (conceptual) by governing
council
• Implementation committee establishes work with
planning and development to hire architects
• Architect had to fit building to budget

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GETTING GOING

• 2 faculties, several
departments to
coordinate
• CM and partnering used
– cost about 3-4% more
than traditional BUT
faster
• 6 months to excavate
and come out of ground

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SITE CHALLENGES

• Found oil tanks in ground  contaminated soils

• 100k gallons of fuel in tank still in use with minor
leakage – had to be relined
• Must hold stormwater from roof into concrete silos
and pumped into reflective pool
• 44 St George: 3 months lost in schedule,
otherwise 6+ months to fight OMB (Ontario
Municipal Board), historical society, so the Dean’s
house stayed

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PROBLEMS

• Design keeping up with site - structure is critical path

• Coordination of consultants and subs
o e.g. Had to know lighting placement so conduit could be
put in slab
• Sequential tendering – many contracts held by owner
• Size of project meant fewer contractors able to bid: had
one bid only for glazing, elevator, and precast
• Errors are bound to happen - error in power distribution
drawings - electrical had to redo; 2 mos lost
• Didn’t know total cost until last tender submitted

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INTERESTING FEATURES
• Exposed structural materials
• Smoke evacuation system
• Despite the claims of
sustainability, the performance of
the building is:
• 470 kWh/m2 of energy in 2009-
2010
o Average new commercial
buildings is 300-350 kWh/m2
o Target for energy efficient
building is 100-150 kWh/m2

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