PROJECT DELIVERY METHODS

ARE 413
CONSTRUCTION MANAGEMENT
CLASS- 5
By
By
Zulfikar Zulfikar Aliyu Aliyu Adamu Adamu
Presentation Outline
Presentation Outline
Project Delivery Methods
Definition
Types of Project Delivery Methods
Traditional
Design- Build
Professional Construction Management (PCM)
BOT ( Build Operate Transfer)
Advantages & Disadvantages of various PDM
Summary
Objectives of Class :
Objectives of Class :
To introduce various types of project delivery methods.
To distinguish between the common project delivery methods.
To introduce different types of contract and to differentiate
between the different contracting methods.
Project Delivery Methods : What is it ?
The term delivery method means the approach The term delivery method means the approach
used to organize the project team so as to used to organize the project team so as to
manage the entire designing and building manage the entire designing and building
(design (design- -build) process. build) process.
The owner needs to decide which The owner needs to decide which
designers to hire, when to hire them, designers to hire, when to hire them,
and under what type of contract ? and under what type of contract ?
The owner also needs to decide when The owner also needs to decide when
to hire the construction professional to hire the construction professional
and under what type of contract ? and under what type of contract ?
Which organization gets hired first? Which organization gets hired first?
Do both organizations report to the Do both organizations report to the
owner, or does one report to the other? owner, or does one report to the other?
Project Delivery method is an Project Delivery method is an organizational concept which assigns specific organizational concept which assigns specific
responsibilities and authorities to people and organizations responsibilities and authorities to people and organizations and which defines and which defines
relationship of the various elements in construction of a projec relationship of the various elements in construction of a project. t.
Definitions: Project Delivery systems
A project delivery system is the method by which a construction A project delivery system is the method by which a construction project is project is
executed. executed.
It is the first allocation of base responsibilities between the It is the first allocation of base responsibilities between the owner, design owner, design
professional and contractor. Thus, the project delivery system i professional and contractor. Thus, the project delivery system is the foundation s the foundation
on which all subsequent negotiations will be based. on which all subsequent negotiations will be based.
Types of PDM
Types of Project Delivery Methods:
Traditional
Design- Build (Turnkey)
Professional Construction Management
(PCM)
BOT ( Build Operate Transfer)
The Four Phases
(every project goes through)
Design Planning Bid Construction Occupancy
NEED
Traditional
Linear Process
Design
Planning
Occupancy
Construction
Fast-Tracking
Process
Traditional
The owner hires a design professional who prepares a complete se The owner hires a design professional who prepares a complete set of t of
contract documents for the owner for a design fee. contract documents for the owner for a design fee.
The owner either negotiates a price with a general contractor or The owner either negotiates a price with a general contractor or bids out the bids out the
work. work.
The general contractor is totally responsible for delivering the The general contractor is totally responsible for delivering the completed completed
project as spelled out in the contract documents. project as spelled out in the contract documents.
The general contractor may subcontract out parts of the project The general contractor may subcontract out parts of the project, with each , with each
subcontractor reporting directly to the general contractor. subcontractor reporting directly to the general contractor.
The designer may be involved in overseeing the construction work The designer may be involved in overseeing the construction work in the in the
field. field.
In this delivery method no direct, formal relationship exists be In this delivery method no direct, formal relationship exists between the tween the
designer and the builder. They communicate only through the owne designer and the builder. They communicate only through the owner r
Traditional
Typical Design-Bid-Build
Process
(The Four Phases)
Design Planning Bid Construction Occupancy
NEED
Typical
Design-Bid-Build
Process
Design Team Contractor
Advantages- Traditional PDM
Familiarity: Familiarity: Most owners, designers, and builders have worked Most owners, designers, and builders have worked
under this framework on many projects and therefore are familiar under this framework on many projects and therefore are familiar
with the system. with the system.
Overall Job coordination: Overall Job coordination: Their control systems, documentation, Their control systems, documentation,
and organizations are all set up to manage this process. The and organizations are all set up to manage this process. The
workers, subcontractors, and vendors also understand the system, workers, subcontractors, and vendors also understand the system,
improving overall job coordination. improving overall job coordination.
Owner can get a Owner can get a firm fixed price firm fixed price for the project before any work for the project before any work
begins. The owner knows before construction begins what the cost begins. The owner knows before construction begins what the cost
of the project will be. of the project will be.
Opportunity to get good Opportunity to get good price competition price competition from the open market. from the open market.
Pros and Cons of the Traditional Approach
Advantages
Advantages
Disadvantages
Disadvantages
Price competition Price competition The approach takes a long time . The approach takes a long time .
Total cost is known before Total cost is known before
construction starts construction starts
Design does not benefit from Design does not benefit from
construction experience construction experience
Well Well- -documented approach used documented approach used
in most government projects done in most government projects done
for public works for public works
Conflicts between owner & G.C. Conflicts between owner & G.C.
and between and between AlE AlE & G.C. & G.C.
Changes may lead to disputes and Changes may lead to disputes and
claims claims
Design-Build
In this approach, a single organization is responsible for perfo In this approach, a single organization is responsible for performing rming
both design and construction . both design and construction .
Within the design Within the design- -build organization, parts of the design may be build organization, parts of the design may be
subcontracted to specialist consultants. subcontracted to specialist consultants.
Being responsible for both design and construction, the design Being responsible for both design and construction, the design- -build build
contractor carries most of the project risks, and this can mean contractor carries most of the project risks, and this can mean
additional cost to owner. additional cost to owner.
The owner's role in this approach is minimal and is only to expr The owner's role in this approach is minimal and is only to express his ess his
or her objectives and specifications precisely before detailed d or her objectives and specifications precisely before detailed design is esign is
started. started.
Historically, the design Historically, the design- -build approach has been used on large, build approach has been used on large,
privately funded, industrial privately funded, industrial- -sector projects. Recently, however, this sector projects. Recently, however, this
approach has begun to be used on commercial building projects, s approach has begun to be used on commercial building projects, some ome
publicly funded. publicly funded.
Design-Build
Design-Build
Firm
Owner
Subcontractors and Suppliers Designers and Consultants
Design-Build
OWNER
OWNER
DESIGN
DESIGN
-
-
BUILD
BUILD
FIRM
FIRM
design
subcontractors
suppliers
construction
subcontractors
design
subconsultants
Typical Design/Build Process
(The Four Phases)
NEED
Design
Planning
Occupancy
Construction
Typical
Design/Build
Process
Design/Build
Team
Design-Build Advantages
Good communication occurs between the design team and the Good communication occurs between the design team and the
construction team. Allows for constructability analyses and valu construction team. Allows for constructability analyses and value e
engineering. engineering.
This collaboration allows the project to be easily fast This collaboration allows the project to be easily fast- -tracked, tracked,
cutting down on the design cutting down on the design- -build time for the project. build time for the project.
Good cost estimating and scheduling should occur throughout the Good cost estimating and scheduling should occur throughout the
entire project. entire project.
Long Long- -lead item identification and ordering should also be able to lead item identification and ordering should also be able to
proceed smoothly. proceed smoothly.
In general, this arrangement allows easier incorporation of chan In general, this arrangement allows easier incorporation of changes ges
due to changed scope or unforeseen conditions than in the other due to changed scope or unforeseen conditions than in the other
arrangements, since the coordination is to occur within the same arrangements, since the coordination is to occur within the same
company. company.
Pros and Cons of the Design-Build Approach
Advantages
Advantages
Disadvantages
Disadvantages
Single point of responsibility for Single point of responsibility for
owner owner
New learning curve for owners New learning curve for owners
Reduced conflict. Less adversary Reduced conflict. Less adversary
relationships relationships
A/E doesn A/E doesn t work directly for t work directly for
Owner Owner
Time can be reduced if the design Time can be reduced if the design- -
build company overlaps design and build company overlaps design and
construction construction
Cost may not be known until the end Cost may not be known until the end
of design of design
Coordination between design and Coordination between design and
construction construction
New learning curve for owners New learning curve for owners
Easier implementation of changes Easier implementation of changes
Design Design- -build company may reduce build company may reduce
quality to save cost Constraints with public quality to save cost Constraints with public
laws laws
How Are Design-Builders
Organized?

Integrated Design
Integrated Design
-
-
Build Firm
Build Firm

Contractor as lead
Contractor as lead

A/E as lead
A/E as lead

Joint Venture
Joint Venture

Developer as lead
Developer as lead
BOT (Build Operate Transfer)
The term Build The term Build- -Operate Operate- -Transfer (BOT) was first coined by Ex Transfer (BOT) was first coined by Ex- -
Prime Minister of Turkey, Prime Minister of Turkey, Turgut Turgut Ozal Ozal in 1984 in 1984
Essentially in a BOT project delivery method, a private entity, Essentially in a BOT project delivery method, a private entity,
usually a consortium is responsible for financing, construction, usually a consortium is responsible for financing, construction,
operation and maintenance of the facility for agreed duration operation and maintenance of the facility for agreed duration
known as Concession period and at the end of the period, transfe known as Concession period and at the end of the period, transfers rs
the ownership of the facility to the government. the ownership of the facility to the government.
A BOT mechanism is a complex structure comprising multiple, A BOT mechanism is a complex structure comprising multiple,
inter inter- -dependent agreements among various participants. dependent agreements among various participants.
The concession agreement is between the government and the The concession agreement is between the government and the
concessionaire. The concession agreement is regarded as the concessionaire. The concession agreement is regarded as the
heart heart of a BOT project of a BOT project
Examples of BOT Projects
Examples of BOT Projects
BOT Contractual Structure
BOT Contractual Structure
BOT (Build Operate Transfer)
BOT Advantages
The private sector invests directly in the development of infras The private sector invests directly in the development of infrastructure, tructure,
thereby reducing public debt, balancing the budget deficit, an thereby reducing public debt, balancing the budget deficit, and d
reduced role of public sector. Financing mechanism for infrastr reduced role of public sector. Financing mechanism for infrastructure ucture
The private firms are more efficient, hence project or service c The private firms are more efficient, hence project or service can be an be
delivered at lower cost delivered at lower cost
BOT projects create business opportunities for the local privat BOT projects create business opportunities for the local private e
sector, create employment avenues as well as attract substantia sector, create employment avenues as well as attract substantial l
foreign direct investment foreign direct investment
BOT projects help in facilitating transfer of technology by int BOT projects help in facilitating transfer of technology by introducing roducing
international contractors in the host countries international contractors in the host countries
BOT Disadvantages
BOT is not a easy method and requires high capability of BOT is not a easy method and requires high capability of
promoters. promoters.
Not suitable for smaller projects. Victorian Government of Not suitable for smaller projects. Victorian Government of
Australia has suggested that projects with a value of less than Australia has suggested that projects with a value of less than
Australian dollar $15m are unlikely to gain benefits from BOT Australian dollar $15m are unlikely to gain benefits from BOT
delivery method. delivery method.
The success of BOT project depends upon successful raising of The success of BOT project depends upon successful raising of
necessary finance. necessary finance.
Transaction costs are high, they amount to 5 Transaction costs are high, they amount to 5- -10% of total project 10% of total project
cost cost
BOT projects are successful only when substantial revenues are BOT projects are successful only when substantial revenues are
generated during the operation phase. generated during the operation phase.
Professional Construction Management
In this approach, the owner appoints a PCM organization (also kn In this approach, the owner appoints a PCM organization (also known as own as
construction management organization) to manage and coordinate t construction management organization) to manage and coordinate the he
design and construction phases of a project using a teamwork app design and construction phases of a project using a teamwork approach. roach.
The design may be provided by specialist design firms and in so The design may be provided by specialist design firms and in some cases me cases
by the PCM organization. by the PCM organization.
With a high level of coordination between the participants, inno With a high level of coordination between the participants, innovative vative
approaches of overlapping design and construction (i.e., fast approaches of overlapping design and construction (i.e., fast- - tracking) tracking)
can be adopted. can be adopted.
The PCM organization aims at holding a friendly position similar The PCM organization aims at holding a friendly position similar to that to that
of the consultants in the traditional approach. of the consultants in the traditional approach.
The services offered by the PCM organization overlap those tradi The services offered by the PCM organization overlap those traditionally tionally
performed by the architect, the engineer, and the contractor. performed by the architect, the engineer, and the contractor.

Professional Construction Management
This may include: This may include:
management and programming of design; management and programming of design;
cost forecasting and financial arrangements; cost forecasting and financial arrangements;
preparation of tender documents; tender analysis preparation of tender documents; tender analysis
and selection of contractors; and selection of contractors;
selection of methods of construction; selection of methods of construction;
planning and scheduling construction works; planning and scheduling construction works;
materials procurement and delivery materials procurement and delivery expeition expeition
Although this approach is likely to prove marginally more expens Although this approach is likely to prove marginally more expensive than ive than
the traditional approach, it offers greater guarantee of perform the traditional approach, it offers greater guarantee of performance and ance and
the potential to avoid time overruns and to reduce the cost of c the potential to avoid time overruns and to reduce the cost of claims. laims.
The payment to the PCM organization is usually a fixed fee or a The payment to the PCM organization is usually a fixed fee or a
percentage of the total project cost. percentage of the total project cost.
Use of PCM approach, should be considered when there is a need f Use of PCM approach, should be considered when there is a need for time or time
saving and flexibility for design changes, and the owner has ins saving and flexibility for design changes, and the owner has insufficient ufficient
management resources management resources
Professional Construction Management
PCM Agency with GC
Owner
A/E
Agency
CM
Designers and Consultants
GC
Subcontractors and Suppliers
Construction Management:
Agency Form
ARCHITECT
ARCHITECT
OWNER
OWNER
Architects
design
consultants
subcontractors
LIMITED
CONSTRUCTION
ADMINISTRATION
CMa
CMa
DETAILED
CONSTRUCTION
COORDINATION
FEASIBILITY
+COST DATA
materials suppliers
GENERAL GENERAL
CONTRACTOR CONTRACTOR
DESIGN
DATA
Source: Modified AL( 1998)
41 41
PCM Advantages & Disadvantages
Advantages over traditional A/E construction administration: Advantages over traditional A/E construction administration:
CM with a construction background may be BETTER CM with a construction background may be BETTER
QUALIFIED QUALIFIED
CM provides greater QUANTITY of construction phase CM provides greater QUANTITY of construction phase
services services
CM often assumes greater DEGREE of control over CM often assumes greater DEGREE of control over
contractors contractors
limitations: the limitations: the professional professional or or agent agent CM: CM:
DOES NOT guarantee construction cost or time DOES NOT guarantee construction cost or time
DOES NOT perform any work or contract with the trade DOES NOT perform any work or contract with the trade
contractors contractors
IS NOT RESPONSIBLE for their performance IS NOT RESPONSIBLE for their performance
usually DOES NOT assume responsibility for safety usually DOES NOT assume responsibility for safety
Pros and Cons of the PCM Approach
Advantages
Advantages
Disadvantages
Disadvantages
Utilization of construction skills at all Utilization of construction skills at all
stages with no conflict among participants stages with no conflict among participants
Higher owner involvement and Higher owner involvement and
responsibilities responsibilities
Independent evaluation of cost and Independent evaluation of cost and
schedule to the best owner interest schedule to the best owner interest
Need skilled construction managers Need skilled construction managers
Time could be much less Time could be much less PCM fees (up to 4%) PCM fees (up to 4%)
Principals such as "value engineering Principals such as "value engineering
could be applied in all phases could be applied in all phases
CONCLUSION
Types of Project Delivery Methods
Traditional
Design- Build
Professional Construction Management (PCM)
BOT ( Build Operate Transfer)
Advantages & Disadvantages of various PDM