1
Q
10 Knowledge Areas
A
- Scope 2. Time 3. Cost 4. Quality 5. Communication 6. Risk 7. Resources 8. Integration 9. Procurement 10. Stakeholders
2
Q
Resources
A
- Labor, equipment, materials
3
Q
Communication
A
- Most neglected part of construction management - Need to communicate with sub’s, stakeholders, owners
4
Q
Risk
A
- Refers to construction risk, what can happen during the construction process - Does not refer to financial risk
5
Q
Procurement
A
The need to buy or rent, goods and services. In a construction management context this is handling all sub contractors.
6
Q
Not knowledge areas, but note worth
A
- Safety 2. Sustainability
7
Q
Two types of stakeholders
A
Positive: Stakeholders that are interested in the success of your project Negative: Stakeholders are not interested in the success of your project. Think negative externalities.
8
Q
Triple constraint construction
A
Scope, budget, and time
9
Q
Geographical breakdown of megaprojects
A
Canada: 7% USA: 13% Europe: 15% Central Asia: 4% Asia: 9% Oceania: 9% Middle East: 15% Africa: 9% South America: 19%
10
Q
Construction management rules
A
- Win new profitable work 2. Build the project 3. Get paid for the work
11
Q
What is a project?
A
- A project is a temporary endeavor undertaken to create a unique product, service, or result - Temporary is emphasized because it indicates it has a definitive end and start date
12
Q
Communication formula
A
C = N(N-1) / 2 N = Number of participants If N = 6, C (communication) = 15 There are 15 different communication connections involved in that team
13
Q
Most important knowledge area
A
Integration
14
Q
Concrete
A
When you pour 6,000 PSI of concrete, you need 28 days for it to fully cure
15
Q
Jobs in construction
A
- Construction contractors directly employ more than 7 million workers during a typical year - This creates indirect jobs, with a ratio of 4:1 - You hire a steel subcontractor, that subcontractor needs to employ 4 guys
16
Q
Construction project categories
A
- Residential - 31% - Commercial - 28% - Infrastructure - 35% - Industrial - 6%
17
Q
Number of construction firms in the US
A
- 880,000 construction companies in the US - 60% of these firms employ fewer than 4 workers
18
Q
Characteristics of residential construction
A
- Typically wood products and light gauge steel - Low overhead and high competition - Low profit margins and high number of bankruptcies - Close working relationship with owners - Strongly influenced by interest rate and economy
19
Q
Overhead costs
A
- Costs you take one that are not associated with the construction project - Imagine a big firm that employs a secretary and a janitor for their office. These are overhead costs, and small construction firms don’t have these
20
Q
Housing starts
A
- Economic indicator that reflects the number of privately owned new houses - Divided into three types: single family houses, townhouses, or small condos - Each apartment is considered a single star - Single family home, 1 star - Apartment complex with 30 condos, 30 stars
21
Q
Commercial construction
A
- Complicated construction systems - Many subcontractors involved - Variety of construction materials used - Extensive knowledge in construction process, communication, and leadership skills required
22
Q
Industrial construction
A
- Require highly specialized expertise - Substructure construction is key - Heavy materials used, steel and concrete - Technology is more complex - Budget over $1 billion is considered a mega project
23
Q
Knowledge required for a construction manager
A
- Financial - Methods and materials - People are organizational skills - Laws and regulations - Project management skills
24
Q
Project delivery method (PDM)
A
- EPC(M) - Engineer - Build procurement - Construction - M stands for management
25
Biggest challenge as a project manager
The need to convince people to do what you believe is best
26
Project participants
- Owner - Designer - General contractor(s)
27
Owner
- Establishes budget - Defines programs - Selects designer/builder team - Determines project delivery method *risk involved with this
28
Two types of owners
- Public - Private
29
Public owners
- Project is funded with public money - Federal, state, cities - Specific guidelines must be followed, and if not you can be penalized
30
Private owners
- Residential, commercial office buildings - Minimal constraints on how things are organized
31
Architects
An architect translates and develops an owners requirement and graphically presents them so that the constructor can accurately price, schedule and construct the design - Architects are the industry image makers
32
Engineers
- Engineers lead designers on the infrastructure of projects - They are responsible for the design of all the engineered systems in a commercial project (HVAC) - Coordination between the engineered systems is critical, integration
33
Constructors
- Term used to describe construction managers and general contractors - Responsible for the 'means and methods' of construction
34
Two types of constructors
- CM-as-agent - CM-at-risk
35
Specialty contractors
- Generally known as subcontractors - The constructor is responsible for the coordination and hire of all specialty (sub) contractors
36
The trades
- The building trades are responsible for the physical construction of the project - The more complex the project, the more subs needed
37
Material suppliers
- Owners, designers, and trade associations need to work together to establish product standards
38
Good project managers:
- Confront problems - Are organized - Are enthusiastic - Communicate well - Motivate well - Are flexible - Delegate well - Multi-task - Have strong moral grounding
39
Skills of a project manager
- Leadership - Team building - Motivation - Communication - Influencing - Decision making - Political and cultural awareness - Negotiation - Trust building - Conflict management
40
Management
- The field of management focuses on the scientific study of decision making - Good management systems help good leaders get better
41
Managing projects
- Define levels of specialization and authority - Establish a structure for decision making - Create an organizational structure - Define the project work breakdown structure - Establish workflow
42
Authority
- The ability to act or make decisions without obtaining approval from a superior - Implies accountability of a supervisor for the successful accomplishment of an assigned function or duty
43
Construction projects:
- Compressed schedules - Complex organizations - Large number of people - Cost pressure
44
Communication in the construction industry
People remember: - 10% of what they hear - 20% of what they read - 30% of what they see - 50% of what they hear and say The people sending the message remember: - 70% of what they say - 90% of what they say and do
45
3 types of business ownership
1. Sole proprietorship 2. Partnership 3. Corporation
46
Sole proprietorship
- You are the owner - You need a bookkeep, accountant, field supervisor
47
Sole proprietor
An individual who owns, manages, and provides the necessary financial backing
48
Benefits of sole proprietorship
- Easy start up - Simplest business form - No tax payment as the business entity - Owner retains all company profit - Easy to dissolve
49
Disadvantages of a sole proprietorship
- Limited financial capacity - Unlimited liability to business debts and obligations - Single perspective on business decisions - Vulnerable to business environment - Debt needs to be paid back with private funds if the company assets are insufficient - All losses are personal losses to the owner
50
Types of partnerships
- General partnership - Limited partnership - Joint venture
51
General partnership
A general partnership is one or more persons who co-own a business by contributing capital, equipment, and/or property. Profit is allocated based on the original contributions made the partners. 70%, 30%. 50%, 50%. Etc
52
Benefits of a general partnership
- Each partner is active in managing the partnership - Each partner is personally liable for the business debts and profits - Business continuity can be stipulated in the partnership agreement - Combined financial resources
53
Disadvantages of a general partnership
- Each partner has unlimited liability to the third party - Any partner can bind the partnership into responsibilities without the authority of other partners - Double taxes - annual salary + shared profits - Requires strong trust among the partners
54
Limited partnership
- A co owners liabilities and profits are equal to the amount of capital and property invested in the company - Liability does not extend to a partners personal assets - Limited partners: invest money in a business, but don't contribute to the management of the firm
55
Benefits of a limited partnership
- Increased opportunity to raise financial capital - Limited liability - personal assets protected - The partnerships are not automatically dissolved by the death of a limited partner - Prior agreement is necessary
56
Disadvantages of limited partnership
- Limited partner provides no service to the business - No authority in the signing of contracts and acquiring debt - You need to trust
57
Joint venture
A joint venture is a relationship between two or more companies which unite to form a single company for specific undertaking. This is done to share the risks and rewards.
58
Advantages of a joint venture
- Additional resources - financial and technical - Shared project risk - Each partner carries individual liability for the ventures performance and debts
59
Disadvantages of a joint venture
- Each partner shares equally in the profits and the losses of the venture - Very limited power to control the relations and actions of other partners - May be difficult at times to arrive at a consensus on key project decisions
60
Corporation
- Corporations are legal entities created by binding individuals into one group under a corporate name - Owned by stockholders, whom may reside in or out of the company - Controlled by a board of directors which is elected by stock holders - Depending on how much stock you own, gives you the power to vote on next board members
61
Benefits of a corporation
- Limited owner liability - Extended financial resources - Perpetual life of the company
62
Disadvantages of a corporation
- Costly to start up - Double taxation of the companies profit at both federal and state level - Strict government regulation - May be bureaucratic - Management may not carry the same incentive
63
General risk areas
1. Financial 2. Time (schedule) 3. Design 4. Quality
64
Financial risks
The project may cost more money than the original budget allocated
65
Time risks
The project will not be completed within the planned time. The scope is unclear
66
Design risks
- The project will not perform as planned - Unsure if the design or engineering will perform as it was intended too
67
Quality risks
The quality of materials used will not perform as intended
68
Project risk and liability
- The delivery method utilized to manage a project should be in response to the risks inherit in a planned project - Sources of risk: - Project type - Project site or locations - Owner organizations - Accelerated design-build schedule
69
Owners are the greatest source of project risk. Why?
- They often change the scope - They are unsure of what they want in the project so they change ideas often - They mainly speak to the architect, who's duty is to translate ideas into drawings
70
How risk can be managed by the delivery method
- Lump sum: fixed price, problem with a fixed price is that it is on you if you forget something - Unit price: you provide the price
71
'A dog with two owners will die' saying
- If two people are in charge, they may assume either partner is feeding the dog - If no one feeds the dog, it will die - If they both feed the dog, it will get fat and die
72
Two delivery methods
1. Design-bid-build 2. Design-build
73
Differences between the two
- Number of contracts - Relationships among project participants - Involvement of contractor in the design phase - Assignment of risk
74
Design-bid-build advantages
- Single fixed price - Historical precedence - Open competition - Active owner not required
75
Design-bid-build disadvantages
- Difficult to fast track - No constructor input - Change orders needed
76
Design-build advantages
- Early construction input prevents constructibility problems - Accelerated project delivery through pre-purchase of equipment and/or fast track approach - Single source responsibility/fewer disputes
77
Design-build disadvantages
- Builders interests may drive design; who's guarding the henhouse? - Owners requirements must be very clear to avoid surprises - Design has to be frozen in early stages due to overlapping construction
78
Three kinds of services, good, cheap and fast
You can pick any two: - Good service, cheap, but won't be fast - Good service, fast, but won't be cheap - Fast service, cheap, but won't be good
79
Professional construction management main functions
- Constructibility analysis - Value engineering - Schedule - Cost estimate - Bid packages - Pre-qualifications of contractors - Assistance with bid and award - Construction start up - Construction administration - Construction inspection - Project close out
80
Professional construction management - CM
- Use when cost, time, quality are need particular attention: are constrained or involve tradeoffs - Used to minimize conflict in relationships - In many cases, processes payments of architect or contractor - Two types: CM - as - agent CM - at - risk
81
CM - as - agent
- CM does not perform or share risk in design or construction - CM provides contract administration services - Free based compensation by owner
82
Contract types
1. Unit price 2. Single fixed price/lump sum
83
Lump sum advantages
- The owners know before the work begins what the final cost of the project will be - Usually used with the design/bid/build delivery method
84
Lump sum risks
- Risk for the owner is that the contract is only as good as the accuracy of the contract documents - If the scope of the project changes, the contract will need to be renegotiated
85
Unit price advantages
- The end of the contractor agree on the price that will be charged per unit price for the major elements of the project
86
Unit price - unbalanced bid
Happens when quantities are significantly different from the estimated quantities. Mistaken quantities also expose the owner to an unbalanced bid, increasing the project cost.
87
Breaking down bids in a unit price contract
- Both bidders will submit an estimate sheet, and there will be discrepancies among each contract - You need to meet with both bidders and get a run down on their estimate - Why is bidder 1 charging $5.00 per cubic feet of soil, when bidder 2 is charging $2.00?
88
Project chronology
1. Project initial 2. Feasibility - Design 3. Procurement - Construction 4. Turnover - Operation 5. Disposal
89
NPV
Net present value
90
ROI
Return on investment
91
IRR
Internal rate of return
92
VPI
Present value of investment
93
VPL/VPI
Indicates project with higher return potential compared to the required investment
94
RFI
Request for information
95
Net present value (NPV)
- The difference between the present value of cash inflows and the present value of cash outflows over a period of time - Net present value is profit
96
NPV equation
Net cash flow / (1+discount rate) raised to the time of the cash flow. Formula on excel for this.
97
Project initiation
- Owners needs, desires - Outside opportunities - Go/no go decisions
98
4 stages of project design
1. Programming
99
/VPI
Indicates project with higher return potential compared to the required investment
100
Net present value (NPV)
- The difference between the present value of cash inflows and the present value of cash outflows over a period of time
- Net present value is profit
101
Project initation
- Owners needs, desires
- Outside opportunities
- Go/no go decisions
102
4 stages of project design
1. Programming
2. Schematic design
3. Design development
4. Construction documents
103
Design phase 1: programming
- A written statement of the requirements of the building
- Owners need to:
- Establish building population and functions to be housed within the facility
Choose the building site
Select desirable systems and materials (specifications)
- Define budget and timeframe for construction: to include any key milestone turnover dates
104
Design phase 2: schematic design
- Preliminary design of the project
- Contents of schematic design
- Site and locations of the project, alternative design schemes, rough floor plans
- Architects: compare the alternative design options
- Constriction manager: break down the construction work, square foot pricing
105
Design phase 3: design development
- Focus on the design of the major building systems
- Delivery of design development
- Architectural, structural, mechanical, and electrical systems refines floor plan, elevation plans and sections plans, outline specifications
106
Design phase responsibilies
- Architect: selection all the major systems and components
CM: evaluate the cost and schedule and conduct value engineering
- Value engineering: making a change to the project
107
Design phase 4: contract documents
- Complete set of well-defined working drawings and technical specifications
- Considerations of this phase:
- Project scope
- Project budget
- Delivery of this phase:
- Contract documents - risk analysis
108
Bid documents
- Five step process
1. Advertise
2. Bid opening
3. Award contract
4. Sign contract
5. Notice to proceed
109
Notice to proceed
- Formal, written notice authorizing construction company to proceed with work
- Allows you to move labor, equipment, and materials into the job site and begin construction
110
Procurement phase
- Contractor selection
- Bidding
- Award of contracts/notice to proceed
bct 353 exam 1
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