Construction Fundamentals

Construction Management
Functions
Purpose of operating a business is
to earn a profit!
 Construction Management
Functions
To be successful a construction
company must:
– Estimate the cost of construction
projects accurately
– Predict the schedule of the work
– Control the progress and
expenditures during construction
– Complete projects safely and on time
 Construction Management
Functions
Responsibility to construct the project:
– in accordance with the plans and
specifications
– to satisfy the customer’s cost, quality,
and time expectations
The project team is organized for the
purpose of accomplishing those
missions!
 Owner Functions

• Defining the scope of the project

• Planning the project
• Financing the project
• Ensuring the project team
understands the project’s goals
 Construction Management
Functions
Company level
– Selecting the right jobs to bid
– Preparing the cost estimate
– Submitting the bid
– Procuring the payment and
performance bonds
– Scheduling the work
– Securing project operating capital
 Construction Management
Functions
Construction site level
– Setting the standards for quality
and safety
– Planning the sequence of
construction
– Controlling progress and
expenditures
 Construction Management
Functions
Construction site level
– Communicating effectively with
owner and designer
– Coordinating the work of the
subcontractors
– Managing submittals, change
orders and periodic pay estimates
– Closing out the project
 Project Planning And Design
• Master planning
• Scope definition
– Owner determines exactly what
kind of a facility will be built
– Sets the design objectives for the
Architect/Engineer
• Planning phase
Influence on Construction
Quality
Influence on Construction
Project Cost
Impact of Time on the Cost of
Project Changes
The Business of Construction
Management
 Planning Phase
• Select the designer
• Define the project goals
• Ensure the availability of sufficient
funds to complete the project
• Select and purchase the project site,
• Determine construction
procurement system and the form
of construction contract to be used.
 Design Phase
• Primary requirement for any facility
is that it must be safe!!
– Building codes
• Owner and A/E schedule design
reviews
– schematic drawings
– preliminary drawings
– working drawings
 Bid Phase
First step is to decide whether or not
to bid the job. Contractors are
generally limited in their ability to bid
by two factors:
– their bonding capacity and
– the policies of management
 Policies of Management
Factors contractors consider in
deciding whether or not to bid a
particular project include:
– Location of the work
Factors Contractors Consider
– Identity of the owner
– Availability of key company
personnel

– Experience in the type of work

solicited
Factors Contractors Consider
– Whether or not there is financing
for the project
– Size of the project.
 Bid Preparation
Bid preparation is expensive!
In preparing a bid, contractors
must consider the costs of:
– Equipment
– Labor
– Materials
– Subcontractors
 Bid Preparation
Consider the costs of:
– Job and company overhead,
contingency, and profit
– Should also consider the
number of competitor bidders
and the bidding history of those
competitors on similar projects
 Award Phase
• Owner provides:
– Builder’s Risk insurance
• Successful bidder must provide:
– Payment and performance bonds
– Workers compensation insurance
– Liability insurance
– List of subcontractors
– Detailed project schedule
 Notice to Proceed

Contractor cannot begin the work

until the Notice to Proceed is
received – so
Use the time between bid opening and
contract award for detailed pre-
project planning.
 Pre-project planning
Planning how the work will
proceed and in what sequence
– Construction procedures
– Type of equipment to be used
– Job access
– Location of the field office and
storage areas
– Final selection of subcontractors
and suppliers
 Pre-project planning
• Cash flow analysis should be
completed to determine if the
company needs to borrow money
• Detailed project schedule is
prepared
• Work break down (WBS) and
pay schedule are planned
 Construction Phase

Size of the contractor’s on-site

project management organization
is a function of the size and
complexity of the project.
 Project Management Team
O w n e r

G e n e r a l
C o n t r a c t o r

O t h e r
M e c h a n i c a lE le c t r i c a l C o n c r e t e S t r u c t u r a l
T r a d e s

P lu m b i n g H V A C
Construction Company
Team Functions
• Project managers (PM)
• Superintendents
• Schedulers
• Estimators
• Material expediters
 Owner’s Project Team
• Size of the owner’s project team will
depend on the size and complexity of
the project – small project (A/E)
• Large highway project
– Resident engineer
– Inspectors
– Surveyors
– Quality assurance technicians
 Managing Critical Activities
• Contracts are broken down into
activities for purposes of
scheduling, estimating, progress
control, and cost control. Large
projects can have several hundred
activities, or more!
• Trick is to know which activities are
critical
 Critical Activities
Critical activities are those that could
impact the cost of the work by at least
one half of one percent of the bid price:
– For example, on a $1,000,000
project, any activity with a potential
for cost over-run or under-run of
$5,000 or more is by definition a
critical activity.
 Pareto’s 80-20 rule
• 20% of the activities are critical
and should be managed
carefully
• The other 80% will average
out…
 Project Control
• Cost control
• Cash Flow Analysis
• Schedule Control
• Material
Management
 Cost Control
Possible corrective actions could include:
• Adding additional trade workers or
crews
• Adding or removing equipment
• Working overtime
• Bringing in additional subcontractors
 Cost Control
Possible corrective actions could
include:
• Making the job more efficient
• Eliminating factors that cause
subcontractors to interfere with
each other
 Productivity Q
Let R = Production rate T =
R
Where: T is total time, Q is the
total quantity to be installed
The total cost is determined by the
equation:
Ct = C h × T
Where Ct = total cost and Ch = cost
per hour, or
Ct = Ch × (Q/R)
 Cash Flow Analysis
Cost

Time
 Front Loaded Cost Curve
Cost

Time
Cash Flow
Schematic
Diagram
 Profit (loss) To Date
Project Manager must calculate profit
(loss) to date on a regular, weekly basis
– Cost to date
– Re-estimated cost to complete
– Amount billed
– Contract amount (including change
orders)
– Example 3.2
 Schedule Control
• Chapter 4
• Critical path - By definition, activities
on the critical path will delay the
entire project if they are delayed
• Physical progress can be compared
with the financial progress to
determine if the project is:
– on schedule or late
– over budget or under budget
 Materials Management
Ensure that materials are delivered
in a timely manner to the site in the
quantity and quality required. When
materials arrive they are:
– Counted
– Inspected
– if necessary, Tested
 Materials Management
Must determine the latest order date
accounting for the:
– shop drawing
• Preparation
• submission and
• approval time
– lead time required for fabrication
– shipping
 Materials Management
Too many materials stored on the site
can lead to problem of:
– space allocation
– weather damage
– theft
 Construction Related Design
Temporary structures such as:
– Scaffolding
– Forms
– Temporary bridges
– Shoring
– Cofferdams
– Rigging
must be designed by the contractor
 Risk Management
Risks are inherent in construction
• Industry is moving toward allocating
risks to the party most able to
control the specific risk
• Managing risks means:
– minimizing risks
– insuring against risks
– and sharing risks
 Risk Management
• Construction risks - inability of a
subcontractor to perform
• Economic risks - cost escalation
• Political/public risks - disapproval of
the required project permits
• Physical risks - subsurface conditions
 Risk Management

• Contractual and legal risks -

risks assigned by contract over
which the contractor has no control
• Design risks - a project design that
is not constructible
 Risk Management

• Worker injured or killed

• A job accident that injures the public
• A construction vehicle is involved in
an accident off the project
 Risk Management
Risks are best assumed by the
party with the ability to best
control the risk
The best way to manage risks is to
avoid them, but the construction
industry is characterized by risks!
 Risk Management
• Contractors manage risks by
purchasing insurance
• Examining the contract language
addressing changed conditions…
• Contractor safety programs
• Subcontracting is also a form of risk
management –require performance
and payment bonds
 Value Engineering (VE)
• Function analysis or value analysis
• Main objective to reduce project
cost, without reducing the quality
of the structure
• VE exists because contractors know
better ways to build projects, and
owners are willing to pay for that
knowledge!!