CON 829

Construction Portfolio Management-Module 8

Venkta Sandeep Kancharla - 901569755

Project Management Plan

- Focus on Good Operation Practices

Brief Introduction:
Its been said that you cant do todays job with yesterdays methods and be in business
tomorrow.
To that end, its no surprise public-private partnerships are rapidly emerging as a way for
municipalities to attract talent and jobs to their communities.
Risk vs Rewards:
Risk is priced and apportioned by those parties best able to understand and mitigate it within the
P3 structure. However, all parties involved in a P3 project have a common goal: to build an
infrastructure asset and have it begin to generate revenue as quickly and efficiently as possible.
Efficiency is the key. Given the long-term operate-and-maintain component typically included in
P3s, everyone involved in project development must focus on its full life cycle. The asset must
be buildable but also productive and cost efficient to operate and maintain.
Financing also must be efficient. Some financing sources are prepared to take on greater risk in
exchange for the higher returns associated with the design-construct phase. Other financing
sources prefer the stability of low risk and lower but generally more predictable returns during
the operations and maintenance cycle.

CON 829
Construction Portfolio Management-Module 8
Venkta Sandeep Kancharla - 901569755
For a select group of contractors, P3s may also create sound investment opportunities. It's not
uncommon for the design-builder to invest in the project's equity. But this investment may not be
suitable for all contractors because:

The investments are not very liquid and require the backing of a large balance sheet.
Even contractors with the financial resources should limit their investments so that the
adverse impact of one job does not damage their entire enterprise.

Current constraints on government capacity are driving the public sector toward the innovation,
quality risk allocation and new revenue sources derived from P3s. Contractors that successfully
navigate P3s can end up in a strong position going forward. This success is connected to the
evaluation of certain risks, which can be segmented into three areas: procurement, performance
and permanency of participation.

PROCUREMENT RISKS:
The P3 procurement process typically includes a municipal-driven RFP or RFQ. Because this
process is a resource-intensive commitment, key initial considerations must be examined. How
committed is the public sector to the project? Is there a public champion in a position to take
action? Has any screening or short listing taken place? How sophisticated is the public partner in
terms of capacity and its objectives? The answers to these questions can help a prospective
construction partner decide if proceeding with the proposal process is worthwhile.
Indications of short-listing also should be considered. Given the resource consumption of the
P3 procurement process and the need for varsity-level teams, the applicant pool is often limited.
In turn, the probability of being selected increases. In addition, RFPs/RFQs containing the details
necessary for tailored responses, as to design and financial structuring, represent a demonstration
of the public sectors capacity and commitment to the project.
PERFORMANCE RISKS:
Construction partners also must review risk allocations tied to the actual performance of a
project. Under the P3 model, project responsibilities should be held by the party best suited to

CON 829
Construction Portfolio Management-Module 8
Venkta Sandeep Kancharla - 901569755
accomplish the task. Permitting, related approvals and design-build factors unique to consortium
participation all require detailed front-end analysis.
The risk of construction delays and city-initiated revisions can put unique pressures on a
construction partner. Typically, the municipal partner should hold obligations to identify all
permitting burdens, secure their issuance and assume any risks tied to delay on this basis.
Contractors should refrain from assuming permitting and approval duties where they may
otherwise hold them in traditional projects.
Within the consortium, construction team members also should properly allocate design risks.
Project requirements such as adequate technology and design sufficiency to meet public sector
needs may be assumed by the private sector consortium. As part of that consortium, construction
partners need to make sure any internal risk allocations are properly placed.
Additionally, in defense of ongoing reputational value, construction partners should benefit from
ensuring design work transparency and be fully engaged in the refinement process throughout
the performance stage.
PERMANENCY OF PARTICIPATION:
The remaining category of risk is connected to the life cycle, operational and residual concerns
of the P3 project. One key argument in support of P3s is that the development team is
economically connected to the long-term efficiency and quality of the project. Therefore, it may
cost more to develop a particular efficiency, but savings can be realized over the projects
anticipated life cycle. For the construction partner, this risk can present itself in the early bidding
stages when a low-cost bid may trump quality work.

Also, it is not uncommon for a P3 agreement to run for a 30-year term, including operations and
maintenance obligations. If that aspect of the structure does not contain provisions to share
unanticipated residual value or tail-end losses, then it is possible for the final verdict to become
highly negative and impact the reputational value of the consortium partners long after their

CON 829
Construction Portfolio Management-Module 8
Venkta Sandeep Kancharla - 901569755
work is done. This can exclude construction partners from additional public projects if the public
partner reaches the conclusion that private sector risk considerations were not properly valued.
Tail-end flexibility as to shared risks and rewards can tend to facilitate trust and future
opportunities.
Strategic Value Index:
In order to achieve financial success, your company must satisfy two essential requirements:
operational effectiveness and a superior business strategy. This program offers in-depth
explanations of the concepts necessary to achieve both requirements, along with exercises that
guide you through the development of your own unique business strategy.
A study funded by Harvard Business School found that companies that obsessively focus on
these needs out-perform comparable companies in four critical ways (Kotter & Heskitt):
A.

Revenue increases 4 times faster.

B.

Job creation is 7 times faster.

C.

Owner equity grows 12 times faster.

D.

Profit performance is 750 times higher.

WorkSmart Leverage Analysis:

It should be completed by the company managers.
The WorkSmart analysis assesses the following:
-

Processes
Organization
Financial Management
Perception of Managers support
Effectiveness of Company Management processes and Communication
Confirm information and fill in gaps

WorkSmart Good Operational Practices:

1.) Worker Safety & Productivity:

CON 829
Construction Portfolio Management-Module 8
Venkta Sandeep Kancharla - 901569755
Worker safety is a top concern. Construction is one of the most dangerous occupations in the
world, incurring more occupational fatalities in both the United States and European Union than
any other sector. To protect the health and safety of workers better project planning and clearer
communication is needed. Safety can also be improved by educating workers on how to identify
and manage potential hazards during the construction process. Trained workers are more
comfortable with the job and know what to expect, reducing safety risks and improving
construction project results.
2.) Need for better Communication:
The construction process requires ongoing and clear communication between each of the project
stakeholders. The construction manager must communicate instructions to the entire team that
clearly define the scope, scale, and process to accomplish a task. The construction manager must
also communicate with the different trades, some of whom may not be fluent in the local
language or have any experience working together. An improved means of communication is
necessary to address the gap between project complexity and worker skill levels to perform the
task.
3.) Work instructions for construction:
Work Instructions for Construction is an application for authoring clear and concise 2D or 3D
interactive work instructions using existing CAD models and other digital assets. The easy-to-use
application, enables construction managers, planners, engineers, and building product
manufacturers to visually communicate, instruct, and create how to experiences that ensure
workers clearly understand assembly, installation, and maintenance procedures. By leveraging
existing CAD models, team members can more quickly create work instructions because they do
not have to create the models or drawings from scratch. Workers can access work instructions
anywhere - from home, office, or on the job site. The work instructions can be exported into a
number of different file formats depending on need.

CON 829
Construction Portfolio Management-Module 8
Venkta Sandeep Kancharla - 901569755
4.) Work Instructions in action:
To ensure workers know the proper method and location for caulking the work instruction step
includes both a 3D animation with the caulking gun, and a section view depicting the exact
placement of the sealant along the window frame. The work instruction can be created in parallel
with the design, so should the frame design change, the instructions will automatically update to
show the revised section view. This is because the work instructions are associative to the
original CAD model. In this way, the workers always have the most up-to-date information and
installation procedures that match the parts and assemblies they are installing on the site.

References:
1.) Rick Ciullo (2013), Risk Vs. Rewards in P3s for Design-Build Contractors; Issue: 05/06/2013,
Retrieved from http://enr.construction.com/opinions/viewpoint/2013/0506-risk-vs-rewards-in-p3s-for-design-buildcontractors.asp.

2.) Charles G. Renner & Steve James (2014), Contractor Risks and Rewards in Public-Private
Partnerships; Retrieved from
http://enewsletters.constructionexec.com/managingyourbusiness/2014/10/contractor-risks-andrewards-in-public-private-partnerships/
3.) A text book titled The construction MBA: practical approaches to construction contracting.

Thank you Dr. Arias: ))