UEMX 4253

CONSTRUCTION PROJECT
MANAGEMENT
Topic 1-1: Overview of Construction
Industry

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 LEARNING OUTCOME

Upon completion of this unit, students should

be able to:

Explain the job philosophy for construction

operations and organisational structure

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 TOPIC 1
OVERVIEW OF CONSTRUCTION
INDUSTRY
1 Introduction

2 Project Participants

3 Organizational Structure

4 Project Phases

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 1.1 INTRODUCTION

Historical Background

Categories of Construction Industry

Role of the Construction Industry

Defining Construction Project Management

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 HISTORICAL BACKGROUND
EARLY YEARS OF POST-INDEPENDENCE (1950s-1970s)

Focused on the economic development in areas of agriculture,

infrastructure, rural development as well as rural and urban
housing.
most of the construction work took place in the public sector.
Low-cost housing and housing for public employees were built by
the government.
Towards the end of the 1960s, there was an increase in private
sector investment with the establishments of industrial estates.
Economy shifted towards oriented industrial development.
Private sectors began to concentrate on urban residential and
infrastructure construction.
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 HISTORICAL BACKGROUND
1970 - 1980

New Economic Policy launched in 1970.

expansion of private sector industrial growth and construction

activities associated with manufacturing facilities.

continued from the late 1960s. Construction activities expanded

with the acceleration of public expenditure in infrastructure
projects.

Private investments grew with an increased demand for

residential construction.

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HISTORICAL BACKGROUND
1980 - 1983
Shift towards heavy
industrialisation programmes
Increase construction in
industrial plants, commercial
buildings & physical
infrastructure
Government policy Foreign
direct investment & free trade
zones. Rapid development of
oil installation. Demand on
housing
Promotion of tourism.
Increase hotel construction for construction activities
private sector
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1984 - 1987 1988 - 1989
Mid eighties, Malaysian After recession period
economy underwent a severe
recession.
Construction activities Government promotes private
decelerated from 11.6% to sector investment in low cost
4.18% in 1984 & revive abandon housing
projects
Government reducing Increase in public sector
expenditure via credit expenditure on road works &
availability, increase mortgage industrialisation programmes,
loans and temporary freeze on foreign owenership regulation
housing loan on landed properties
significant slowdown in overall Government began
privatisation programme. Eg.
N-S expressway was the first
privatisation project
Enhance socio-economics in
West coast Malaysia
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 HISTORICAL BACKGROUND OF MALAYSIAN
CONSTRUCTION INDUSTRY
1990 - 1995
Rapid expansion in construction industry in
1990s with implementation of Vision 2020
Large scale infrastructure projects, housing,
schools, hospitals, commercial & industrial
buildings
Private demand on large scale projects such as
complex, energy production activities, leisure
facilities
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1996 - 2000
East Asian economic crisis in mid-nineties
impacted Malaysian construction industrys
growth
Many companies facing financial difficulties
that causes companies collapsed and never
recovered. Construction growth felt from
14.2% to -24% in 1998
Government undertook economic recovery
measures by fixing 1 USD to RM3.8.
Construction regained some growth in
infrastucture and residential projects
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 HISTORICAL BACKGROUND
2001-2010
The completion of several major privatised projects in 2003 saw a
reduction in construction growth. Negative growths were
registered between 2004 and 2006 but the construction growth
stabilised and hovered around 5% of GDP.

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 HISTORICAL BACKGROUND
2011-Present
The last 10 years have seen an increase in the demand for
industrial buildings, offices and commercial buildings in particular
the Klang Valley.

The civil engineering sector registered a gross output of RM 24.9

billion in 2010 from RM17.1 billion in 2005.

The recent budget reveals that the government will set aside
slightly more than RM44 billion in public expenditure for
infrastructure projects to spur the economy.

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 CATEGORIES OF THE CONSTRUCTION INDUSTRY
CONSTRUCTION
INDUSTRY

BUILDING ENGINEERED INDUSTRIAL RESIDENTIAL

CONSTRUCTION CONSTRUCTION CONSTRUCTION CONSTRUCTION
INDUSTRIAL CONSTRUCTION
BUILDING CONSTRUCTION
Petroleum refineries
Schools, colleges
Petrochemical plants
Universities
Synthetic fuel plants
Hospitals
Nuclear power plants
Commercial office towers
Steel mills
Warehouses
Heavy manufacturing plants
Light manufacturing plants
Theaters ENGINEERING
5%- CONSTRUCTION
Government buildings
10% Dams
Commercial malls
Recreation centers 30%- Tunnels
35% 20%- Bridges
25% Highways
RESIDENTIAL
Airports
CONSTRUCTION
Urban transit systems
Single-family homes 35%-
Ports
Multi-unit 40%
Pipelines
townhouses
Water treatment
Walk-up and high
plants
rise apartments Source: Halpin, D,W, & Bolivar A.Senior (2012)
Communication
Condominiums
networks 11
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 IMPORTANCE OF THE CONSTRUCTION INDUSTRY
Third-biggest sector in terms of productivity after manufacturing and
agriculture [Construction Industry Development Board of Malaysia
(CIDB), 2005].

Strong influence on growth because of its extensive backward and

forward linkages with the rest of the economy. It is vital to the socio-
economic development goals of a country in terms of providing
shelter, infrastructure and employment.

Derives demand from other economic sectors and in return, it

contributes to the growth of other industries in its role as a large user
of manufactures goods, specialised tools and heavy machinery and
financial services.

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 IMPORTANCE OF THE CONSTRUCTION INDUSTRY

It makes a vital contribution to the competitiveness and

prosperity of the economy. The construction industry plays a
major role in delivering the built infrastructure in an innovative
and cost effective way.

Infrastructure provides easy accessibility to other stakeholders.

Investors always consider the quality of the built infrastructure
as one of the key factors when considering location decisions.

Flexibility, mobility and effectiveness of the workforce and

productivity of organisations also depend on the availability of
properly configured and located houses and premises.

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 IMPORTANCE OF THE CONSTRUCTION INDUSTRY
It compliments other industries in the economic sector.
Construction Industry Value Chain
Primary

Inception Design Tender Construct Operate and

Maintain
Building Materials C
Tools and Equipment L
I
Finance and Insurance
E
Utilities and Transportation N
Support

Human Resources T
S
Information, Communications and Technology
Regulation and Enforcement
Research and Development

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 CHALLENGES FACED BY MALAYSIAN CONSTRUCTION
INDUSTRY

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TO BE CONTINUED IN NEXT
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Projects
A project:
Is a unique activity with specific task & objective
Has specific duration
Has a beginning.
Has an end a definite end.
Has constraints and requirements.
Scope, Cost, Schedule, Resources, Performance, Value
Has to add value
Has multi functional level

Prepared by Dr. OKTan 17

Project Management Components

Prepared by Dr. OKTan 18

Project Scope

Define the activities to be involved for a

project.
It involves:-
Scope planning
Scope definition
Scope verification
Scope control

Prepared by Dr. OKTan 19

Project Time

Define the duration of each activities to

be completed for a project.
It involves:-
Activity definition
Activity sequencing
Activity resource estimating
Activity duration estimating
Schedule development
Schedule control

Prepared by Dr. OKTan 20

Project Cost Management

Define the processes of planning, estimating,

budgeting and cost controlling to complete a
project
It involves:-
Cost estimation
Cost budgeting
Cost control

Prepared by Dr. OKTan 21

Project Resources

Define the processes of resourcing right

candidates, procurement to complete a
project
It involves:-
HRM
Procurement
Communication

Prepared by Dr. OKTan 22

Project Performance

Define the processes of work

performance to complete a project.
It involves:-
Risk management
Evaluation
Technology
Quality control

Prepared by Dr. OKTan 23

Project Value

Define the processes of achieving the

objectives of a project.
It involves:-
Objectives achievement
Duration vs Quality
Profit earn

Prepared by Dr. OKTan 24

PEST (Political, Economic, Social & Technology)
(External environment analysis)

International & Political Environment

Familiar with International, national, regional and local
standards & requirements
Familiar with the authority bodies
Factors to consider into different time-zone, holidays
Logistic

Prepared by Dr. OKTan 25

PEST (Political, Economic, Social & Technology)

Economic Environment
Resources demand and supply

Social & Culture Environment

Local activity
Accessibility
Flora & fauna protection

Prepared by Dr. OKTan 26

PEST (Political, Economic, Social & Technology)

Technological Environment
Green technology
Traditional vs new technology
construction method
Land protection
Unit design

Prepared by Dr. OKTan 27

 Duties of Project Management
Identification of functional responsibility
Project planning & scheduling (project activities)
Resources allocation, monitoring & control
Budget and cost monitoring & control
QA & QC
Safety management
Risk management
Comply to the requirements and specifications

Prepared by Dr. OKTan 28

 Project Management Failure Factors

Factors and constraints affect either the success or the

failure of projects:
Completion of project:-
Within scope or customer requirements
within allocated budget
within allocated schedule or period of time
Within allocated resources
within established performance and technology standards
to maximize project value for stakeholders

Prepared by Dr. OKTan 29

In general, Project Management is:-

To manage and complete a specific

task in a specific given duration with
the minimum cost and resources

Prepared by Dr. OKTan 30

 CONSTRUCTION MANAGEMENT
CM involves the timely and efficient application of the 4Ms of
construction:
Manpower Machines Materials Money

Construction projects require a wide range of specialisation in

terms of knowledge and skills

Physical characteristics of construction projects result from:

Different technologies
Local industries
Construction companies
Local and international building regulations and standards

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 CONSTRUCTION MANAGEMENT
Construction management
(CM) is at the centre of both
company and project Construction
management Management
Only well-run construction
companies can undertake
construction projects
efficiently and predictably Company Project
Management Management
Theory of CM centres around the
assumption that projects need to
be well managed and companies
need to be equally well managed. Source: Windapo, A.(2013), Fundamentals of
Construction Management

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 The objectives of CM is to ensure that productive efforts
undertaken by a company/individual are efficient and effective:

Less time taken

Less waste (lean principles)
Economic use of resources
Higher quality products
More value
Less accidents and fatalities
Satisfaction of client/employer
Products are sustainable (e.g. green buildings, low
impact design, passive energy usage, etc.)

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 Project Life Cycle

Selection of best project
Recognize the benefit of the project
Testing & Prepare document
commissioning Forming of construction team
Authority approval
Final account Initiating Define job scope
Demobilization and requirement
Contractual closure Define quality of
work

Planning
Closing Resources planning
Activities
Scheduling
Risk management

Mobilization
Physical work
Monitoring & control Execution

Cost & Quality Procurement

Progress tracking Manpower
Schedule allocation
Resources Prepared by Dr. OKTan Risk management
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Project Life Cycle

Prepared by Dr. OKTan 35

 PROJECT GOALS

THE CONSTRUCTION MANAGERS CREED

FINISH THE PROJECT SAFELY:

As specified

On schedule

Within budget

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 CONSTRUCTION PROJECT MANAGEMENT
PHILOSOPHY

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 1.2 PROJECT PARTICIPANTS

A construction team is a formal group of participants who

work together to undertake the construction project. The 5
main project participants include:

The Owner Team

The Project Team
The Design Team
The Construction Team
The Facilities Management Team

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 KEY GOAL-ORIENTED PROJECT GROUPS
GROUP DESCRIPTION

Owner/client The one who commissions and

owns the completed facility

Project Team The project manager(s) and key staff

personnel

Design Team The group of consultants

responsible for the design of the
facility

Construction Team The team responsible for delivering

the finished product

Facilities Management Team The team that oversees the

maintenance of the facility
throughout its life-cycle
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 STACKHOLDERS
Owner
Permitting
Agencies & General
Building Contractors
Authorities

Suppliers Subcontractors

Construction
Industry

Designers,
Banks Architects,
Engineers

Insurance Construction
Companies Managers
Trades &
Unions

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 a) The OWNER team

Capital Projects Officer : Strategic Planning

Financial Officer : Financial Planning
Owners Project Manager : Tactical Level Supervision
Owners Inspector : Operational Decisions
End Users : Directly or Indirectly Represented
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 a) The OWNER team
Owners create the need for the facilities and raise the necessary
resources for their creation.
Owners could be from the public sector (typically the government) or
private sector (local or foreign investors). Their needs are simple:
NEED REASON

1. The best facility for the To maximise profit or services

money at a reasonable cost
2. On-time completion To meet production or service
schedules and financial goals

3. Completion within To meet financial plans for the

budget facility and return capital
4. A good project safety To meet owners safety
record standards
Perfect Owner one who knows exactly what needs to be done and
how
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 a) The OWNER team

Public Owners

Private Owners

Hybrid Owners

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 b) The PROJECT team
Responsible to the owner for the direction and coordination of all
facets of the project. Involve representatives of the owner, the design
firm and the constructor depending on the contractual arrangements.

Main responsibilities include overall project schedule, budget, quality

and performance to contract.

GOVERNMENT OF MALAYSIA
(MINISTRY OF TRANSPORT)

GOVERNMENT PROJECT
KTMB CONTRACTOR MANAGEMENT
CONSULTANT

INFRASTRUCTURE SYSTEMS

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 c) The DESIGN team

The Architect

The Engineers
C&S
M&E
Geotechnical
Others

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 c) The DESIGN team
The design team is responsible for the direction and coordination
of all design aspects of the project.
NEED REASON

1. Make a profit on each project Applies to all design consultants

2. Finish on time To satisfy owner/client

To meet contractual requirements

3. Design within budget Ensure profit on project

To satisfy owner/client

4. Furnish quality as per Ensure profit on project

contract To satisfy owner/client
To meet contractual requirements

5. Get repeat business Maintain reputation and reduce selling

expense
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 d) The CONSTRUCTION team
The Contractors Project Manager
The Estimator, QS
The Scheduler
The Construction Manager
The Project Engineer
The Site Supervisor
Subcontractor

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 d) The CONSTRUCTION team

NEED REASON

1. Make a profit on each project Applies to constructors or D&B

teams

2. Finish on time To satisfy owner/client

To meet contractual requirements

3. Build within budget To make profit and to satisfy owner

4. Furnish quality as per contract To make profit and to satisfy owner

To meet contractual requirements

5. Finish the job safely To meet companys and owners

safety goals

6. Get repeat business To maintain companys reputation

To reduce selling expense.

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TO BE CONTINUED IN NEXT
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 MANAGEMENT LEVELS IN CONSTRUCTION
There are four (4) levels of hierarchy that can be
identified in construction:

ORGANISATIONAL

PROJECT

OPERATION (and PROCESS)

TASK

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 MANAGEMENT LEVELS IN CONSTRUCTION
This level is concerned with the legal and business
ORGANISATIONAL structure of a firm, the various areas of management, and
the interaction between head office and field managers
performing these management functions.

Project level is dominated by terms relating to the

PROJECT breakdown of the project for the purpose of time and cost
control. The concept of resources is defined and related to
the activity as either an added descriptive attribute of the
activity or for resource scheduling purposes.

This level is concerned with the technology and details of

OPERATION how construction is performed. It focuses on work at the
(PROCESS) field level. The number of distinct processes depends on
the level of complexity of a project.

This level deals with the identification and assignment of

TASK elemental portions of work to field units and work
crews.
Source: Harpin, Daniel W. & Sr.Boliviar A. Construction Management 4th Ed. (2012), John Wiley & Sons
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 ORGANISATIONAL CHART (Organisational Level)

BOARD OF
DIRECTORS

MANAGING
DIRECTOR/CEO

LEGAL &
QUALITY HUMAN
CORPORATE ENGINEERING FINANCE
ASSURANCE RESOURCE
COMMUNICATION

INFRASTRUCTURE
ENGINEERING

SYSTEMS
ENGINEERING

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 ORGANISATIONAL CHART (Project Level)

PROJECT
DIRECTOR

PUBLIC
LIAISON

PROJECT
MANAGER

INFRASTRUCTURE QUALITY SYSTEMS HUMAN

COST CONTROL FINANCE
ENGINEERING ASSURANCE ENGINEERING RESOURCES

CONSTRUCTION CONSTRUCTION SYSTEMS SYSTEMS

MANAGER MANAGER
COST ENGINEERS
MANAGER MANAGER

ENGINEERS ENGINEERS ENGINEERS ENGINEERS

ASST.ENGINEERS ASST. ENGINEERS ASST.ENGINEERS ASST.ENGINEERS
SITE SUPERVIORS SITE SUPERVISORS SITE SUPERVISORS SITE SUPERVISORS
CLERKS-OF-WORKS CLERKS-OF-WORKS CLERKS-OF-WORKS CLERKS-OF-WORKS

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 1.3 ORGANISATIONAL STRUCTURE

Organising can be defined as the function of creating in advance of

execution the basic conditions that are required for successful
achievement of objectives.

An organisational structure is a formal framework by which job

tasks are divided, grouped and coordinated.

It allows the project participants to do their work effectively

and efficiently as it helps define the hierarchy and chain of
command within the organisation.

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 Basically, there are two forms of organisations:

B A

C B C D E F

Vertical Organisation Horizontal Organisation

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 Vertical Organisation

Top down supervision. Authority trickles down from top to

A
bottom.
Has a strong concept of subordination
B
Structure is transparent and predictable. Employees and
management recognize the chain of command; they
C
understand the hierarchy and reporting relationships in the
company.
Top down exhibit poor communication skills.
Provides employees with a path for growth within the
organization. Chances to move up the ladder in a given
department.

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 Horizontal Organisation
Organisation is sub-divided or departmentalised into smaller
units or departments.
Each department has a Department Head that overseas that
division and all employees in the division.
Lower level management reports to department head who then
reports to the CEO, CFO or COO
Structure works to create individual and specific divisions that
oversee specific functions of the organisation
Greater cooperation and teamwork because employees often
have greater input into the workings of and decisions affecting
their particular division or field of expertise

B C D E F

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 For an effective control of the project work, it is best to have an
organisation that comprises of both the vertical and the horizontal
forms.

General Manager
Managers

Vertical & Horizontal Organisation

Although project organisations are set up to serve the duration of a

project, it must blend in with the corporate organisation and
policies.

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 The organisational structure will dictate who the project
manager goes to for help with resources, how
communications must be handled, and many other aspects of
project management

There are typically three (3) main types of organisational

structure:

a) Functional

b) Projectised

c) Matrix

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 CEO

Human Quality
Engineering Accounting R&D
Resource Assurance

Project
FUNCTIONAL ORGANISATION
Most common form of organisation.

Grouped by areas of specialisation within different functional areas

(e.g., accounting, quality assurances, design engineering, etc.)

Functional organisations are embedded in the functional group where

the project is procured.

Projects generally occur within a single department. If information or

project work is needed from another department, employees transmit
the request to the head of the department, who then communicates the
request to the other department head.
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 CEO
FUNCTIONAL ORGANISATION Railway Building
Highway R&D Personnel
Sector Sector

ADVANTAGES DISADVANTAGES Project

a) Easier management of a) People place more emphasis on

specialists their functional specialty to the
detriment of the project
b) Team members report
to only one supervisor b) Lines of communication to people
or units outside functional division
c) Similar resources are is slow and tortuous impedes open
centralised, as the and frank communication
company is grouped by
specialties c) No career path in project
management
d) Clearly defined career
paths in area of work d) Project manager has little or no
specialisation authority as project is rarely a
high-priority item in the life of the
division. 62
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 CEO

Railway Building
Sector Highway R&D Personnel
Sector

Manager, Manager,
Project A Project B
PROJECTISED ORGANISATION
Trackwork Trackwork
The entire company is organised by
Building Building projects. The project manager has
Works Works
control of the project. Personnel are
Roadworks Roadworks assigned and report to the project
manager. Team members complete
Finance Finance only project work and when the
project is over, they need to be
Personnel Personnel assigned to another project or get a
job with another employer.

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 PROJECTISED ORGANISATION
ADVANTAGES DISADVANTAGES

a) Efficient and a) Expensive for small projects where

effective project normal ebb and flow of work is not as
organisation evened out (eg. personnel shortages in
b) Loyalty to the one week and overages the next)
project b) No home when project is completed
c) More effective c) Projectitis strong attachments to
communication project give rise to reluctance to work
than functional with other team members, submission
of proposals for follow up projects in
CEO

Railway Building
Highway R&D Personnel
the same area of interest
Sector Sector

Manager, Manager,
d) Lack of specialisation in disciplines
Project A Project B

Trackwork Trackwork
e) Duplication of facilities and job
Building
Works
Building
Works
functions
Roadworks Roadworks f) May result in less efficient use of
Finance Finance
resources (eg. accountants may not be
Personnel Personnel
needed full-time)
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 MATRIX ORGANISATION

Combination of the functional and projectised

organisations. A projectised organisation is superimposed
onto a functional organisation.

It is an attempt to maximise the strengths of both types of

organisations.

Team members report to two bosses: the project

manager and the functional manager.

Communication goes from team members to both bosses.

Team members are required to do project work in addition
to normal departmental work.

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 MATRIX ORGANISATION
ADVANTAGES DISADVANTAGES

Highly visible project objectives Extra administration is required

Improved project manager control over More than one boss for project teams
resources

More support from functional areas Resource allocation is more complex

Maximum utilisation of scarce resources More complex to monitor and control

Better coordination Need extensive policies and procedures

Better horizontal and vertical Functional managers may have different

dissemination of information priorities than project managers

Team members maintain a home Higher potential for conflict

Good training ground for project

managers
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TO BE CONTINUED IN NEXT
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 1.4 PROJECT PHASES
A construction project typically runs through the following phases in a sequential
manner:
a) Master Planning
b) Project Planning
c) Design Phase
d) Contract Procurement
e) Construction
f) Implementation or Start-up
g) Operations or Utilisation

CONCEPTUAL DEFINITION EXECUTION START-UP DIVESTMENT

Initiating Planning Performing Closing

(a) (b) (c) (d) (e) (f) (g)

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 CONCEPTUAL

1.4(a) Master Planning

This is planning stage of a construction

project.

Scope definition to determine the type of

project to be built , set design objectives
for the designers, determine present and
forecast costs, socio-economic impacts to
the community, resources, etc.

Is in the best interest of the owner to

define scope of project early, clearly and
accurately

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 1.4(b) Project Planning
This is different from Master Planning.
Either owner or an appointed consultant
will undertake the compilation of planning
documents.
At this stage, the following are required:
Define project goals DEFINITION

Check availability of sufficient funds to

complete project (loans, mortgages,
refinancing, etc.)
Site selection, purchase of site
Undertake environmental impact
assessments and secure permits
Determine construction procurement
strategy (type of construction system
and contract)
Undertake risk management and
address issues
Undertake feasibility studies such as
geological investigation, etc.

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 At this phase, the owner at the advice of his consultants, will determine which
project procurement strategy to adopt that best suits the needs of the owner. In
Malaysia, several project procurement methods are adopted for various types of
projects:

Design-Bid-Build (DBB) (Traditional Method)

Design and Build (DB)

Design-Build-Operate-Transfer (DBOT)

Construction Management Contracts

Construction Management at Risk

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(All images shown are for illustration purposes only) 73
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 Traditional System (Design-Bid-Build)

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 Traditional System (Design-Bid-Build)

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 Traditional System (Design-Bid-Build)

FEATURES

Hire a design professional (architect or engineer) in charge of the

preparation of the design and contract documents

Usually competitive bid or negotiation with contractors

Contractor in charge of the execution of the work and the delivery of

the completed project

Sequential construction process

Lump sum bids are commonly adopted Owner assigns project risks to
the contractor (results in built-in adversarial relationship)

Trust-based collaborative relationship between A/E and the owner

Different participants interest/goals (see earlier slides)

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 Traditional System (Design-Bid-Build)

ADVANTAGES

Well-known method

Easy to justify selection of lowest bidder; known lump sum costs

Low-bid regulations are firmly entrenched in most government systems

for purpose of promoting fairness

Owner/client has control over design and quality

Variation and contract changes are identifiable

Variation of process is a 2-step procurement involves prequalification of

contractors and then award of contract to lowest bidder

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 Traditional System (Design-Bid-Build)

DISADVANTAGES

X Generally, design is not reviewed for constructability before

construction

X Sequential and linear process prevents task overlapping and

implementation of time and cost saving strategies

X Few interactions among the participants

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 Integrated Method (Design-Build (DB))

LENDERS
OWNER
/FINANCIERS

DB CONTRACT

DESIGN BUILD
CONTRACTOR

CONSTRUCTION VENDORS /
DESIGN TEAM
TEAM SUPPLIERS

CONTRACTUAL LINK

INTERNAL RELATIONSHIP

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 Integrated Method (Design-Build (DB))

FEATURES

Designer and builder are hired as a team under a single contract

Owner only deals with one entity

DB contracts are structured on a cost plus with a guaranteed

maximum price (GMP) basis.

Owner puts more emphasis on schedule

Owners must possess enough knowledge about design and

construction to establish initial parameters, review proposals and to
monitor the process

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 Integrated Method (Design-Build (DB))

ADVANTAGES

Design and construction can be done concurrently fast track

construction period

Owners only deal with one entity in the contract

DB firm is driven by profit motive to optimise design for functional use

and for construction

Availability of construction technology input in the design phase can

substantially reduce construction cost.

Good interaction among the design and construction project

participants

Suitable for complex projects

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 Integrated Method (Design-Build (DB))

DISADVANTAGES

X Designers normally do not have the financial strength to obtain

payment and performance bonds or liability insurance in
magnitudes as demanded by the owner. A dominant contractor
will overrule the designers recommendations for quality in the
interest of cost.

X Pricing may not be possible at the beginning

X Risk of sacrificing quality to protect profit

X Final product may take a direction that the owner does not really
want

X Lack of checks and balances

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 Integrated Method (Build-Operate-Transfer (BOT))

LENDERS PUBLIC SECTOR

/FINANCIERS SPONSORS /AUTHORITY

SHAREHOLDERS
AGREEMENT

OPERATOR OPERATION & CONCESSION

MAINTENANCE COMPANY
AGREEMENT

CONSULTANTS
CONTRACT

CONSTRUCTION
CONSULTANTS SUPPLIERS
CONTRACTOR

CONTRACTUAL LINK (HANDS BACK FACILITY TO AUTHORITY AT END OF CONCESSION PERIOD)

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 Integrated Method (Build-Operate-Transfer (BOT))

FEATURES

A variation of the DBO form of procurement

Public sector grants to a private company the right to develop and

operate a facility or system for a certain period (known as the
Concession Period)

Operator finances, own and constructs the facility or system and

operates it commercially for the concession period, after which the
facility is transferred back to the authority.

Mainly used for the development of toll roads and highways, railway
systems, ports, airports, hospitals, etc.

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 Management Oriented Method (Construction Management)

OWNER

CM ARCHITECT /
ENGINEERS

TRADE VENDORS SUPPLIERS

CONTRACTORS

CONTRACTUAL/AGREEMENT LINK

COMMUNICATION LINK

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 Management Oriented Method (Construction Management)
FEATURES

One contraction management (CM) firm is retained to coordinate all

activities, from concept design through acceptance of the facility.

The CM represents the owner in all construction management

activities.

CM works with the designer during the design phase and then acts as
the general contractor during construction phase.

Construction Management firm coordinates the schedule, quality

control and work execution through the subcontractors site
superintendents acts as facilitator/mediator in conflicts

Generally paid a fixed fee

Adopted in construction of schools and large projects such as sports

arenas, hospitals, transit systems
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 Management Oriented Method (Construction Management)
ADVANTAGES

The CM acts as one trusted common reference point for construction

There is greater flexibility in the schedule and in changes

Small financial risks for the CM

DISADVANTAGES

X Project participants must be cooperative and have open communication

X All parties must be committed from the beginning of the project to ensure
successful completion

X Small incentive for the CM

X High risk of loss of reputation

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 Management Oriented Method (Construction Management at Risk)

OWNER

CM @ RISK ARCHITECT /
ENGINEERS

TRADE VENDORS SUPPLIERS

CONTRACTORS

CONTRACTUAL/AGREEMENT LINK

COMMUNICATION LINK

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 Management Oriented Method (Construction Management at Risk)
FEATURES

A variation of the CM contract format. CM @ risk coordinates the project

and assumes responsibility for the construction phase of the work.

Guarantees maximum pricing to give assurance to the Owner that project

will not exceed budget

Signs all contracts related to the construction phase of the work. The
design and other preconstruction contracts and responsibilities are
signed by or remain with the owner.

Design and construction contracts are separate contracts.

Selection of CM @ risk are based on issues other than lowest total

construction cost.

CM @ risk is to reduce the risk of cost overrun and schedule creep, and
to expedite the construction process without compromising on quality.
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 Management Oriented Method (Construction Management at Risk)

ADVANTAGES

Risk of cost overrun and schedule creep is reduced for architect and
owner

Produces a more manageable and predictable project cost and schedule

outcomes

Centralises responsibilities

Owner benefits from CMs experience during design and construction

phases

Allows for possible early start to construction by phasing the work

Results in better quality construction because selection of C M is based

on record performance of same type of work
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Management Oriented Method (Construction Management at Risk)
DISADVANTAGES

X Owner takes responsibility of design defects or omissions

X Owner does not have control on contract changes as desired

X Disputes can arise regarding what was implied but was not in the contract
at time CM submitted the GMP as GMP is a defined price for an undefined
product

X CM is at a risk of having to pay any costs that exceed the GMP but that do
not result from owner scope changes

X CM must rely on its own estimate because of incomplete design

documents

X Not suitable for small projects

X CM @ risk may diminish role of the architect or engineer on the design

team. This could be problematic if the architect/engineer does not
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 COMPARISON BETWEEN PROJECT DELIVERY METHODS

Construction
Management
Design Build
Traditional
Approach
Type of contracts
Advantages
Legal and contractual precedent X
Cost determined before contract commitment X
Fast-tracked construction allowed X X
Minimum owner involvement X X
Cost benefit from competition X X
Negotiation with quality contractor for unique expertise X X
Allow adjustment to new conditions without changing agreement X X
Single firm control of design/construct process X

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 COMPARISON BETWEEN PROJECT DELIVERY METHODS

Construction
Management
Design Build
Traditional
Approach
Type of contracts
Disadvantages
Design does not benefit from construction expertise X
Design construction time is the longest X
Adversarial relationship owner/designer vs contractor X X
Contract agreement affected by changes X
Few checks and balances X
Cost control occurs late in project X
Contract amount may be complicated by continual contractor negotiations X
Contract agreement affected by unforeseen conditions X

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TO BE CONTINUED IN NEXT
ONE HOUR
(Pop Quiz) 94
 Pop Quiz No. 1

Prepare a piece of paper

Question:-
List and briefly define the three (3) main
types of organisational structure.

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 1.4(c) Design Phase
Owners typically select A/E based on demonstrated ability to design the project, in
the time frame available, and at a cost acceptable to the owner.

Sometimes, public agencies may want the best-qualified designers to design the
project.

A process called qualifications-based-selection (QBS) is undertaken to select the

most qualified designers through an evaluation of current workload of the designer,
availability of key personnel in the firm, etc.

DEFINITION
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 1.4(c) Design Phase (contd.)
This phase involves interaction between the owner and his team of appointed
consultants or in-house designers (design reviews, discussions and meetings)

This phase involves the following:

Schematic designs
Design development CODES OF
Construction documents PRACTICE

OWNERS
SPECIFICATIONS BY-LAWS

SOCIO-
PROJECT DESIGN ECONOMIC
BUDGET IMPACT

PROJECT
TIME

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 1.4(c) Design Phase (contd.)
The end product of this phase is a set of plans and specifications that define the
project to be constructed. The drawings are a graphical or schematic indication of
the work to be accomplished and the specifications are a verbal or written
description of what is to be constructed and to what levels of quality. When
completed these documents are included as legally binding elements of the
contract.

In addition, the A/E also produces a final owners estimate (or cost estimate)
indicating the total job cost minus mark-up. This estimate should be approximately
3% accuracy.

Cost estimate is used to:

a) Ensure the design produced is within the owners financial resources to
construct
b) Establish a reference point in evaluating the bids submitted by the competing
contractors

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 1.4(c) Design Phase (contd.)

Value Engineering (VE)

Also known as value analysis or function analysis.
Should be undertaken early in the design process to maximise results.
Main objective is to increase the projects value without reducing the quality,
reliability, performance or other critical factors important in meeting the owners
requirements.
VE is a rigorous, systematic effort to improve the value and to optimise the life
cycle costs of a project.
VE generates cost improvements without sacrificing needed performance levels
Large construction companies can expect to spend 0.1% - 0.3% of total project
costs for an effective VE programme but should result in a minimum 5% - 10%
savings in initial costs and 5% - 10% savings in annual maintenance and operation
costs.

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 1.4(d) Contract Procurement EXECUTION

The proposed job is now advertised to contractors who are capable of completing the
work at a reasonable price. The document announcing to prospective bidders is called
Notice to Bidders.

This document contains information regarding the general type and size of the project,
the availability of plans and specifications for review, and the time, place and date of bid
opening.

Main activities in this phase include:

i. Preparing bid proposal
ii. Cost estimation of proposed project collection of quotations from subcontractors
and material suppliers
iii. Tender clarification in some public projects, bid contractors may be requested to
present their bid proposal to owner during this period

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 1.4(d) Contract Procurement (contd.)

Bid package that are available to the bid contractor include but not limited to:
a) Proposal form
b) Plans and technical specifications
c) General conditions of contract
d) Special conditions of contract General Conditions
Technical
Specifications
of Contract
Special Conditions of
Contract

Proposal
NOTICE TO
Form
BIDDERS

BID PACKAGE
Plans and Drawings

Topic 1-2 Contract & Tender

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 1.4(e) Construction EXECUTION

The main player during this phase is the

contractor.
Main activities that take place during this
phase includes, but not limited to:
Site planning
Preparation of shop drawings
Mobilisation of resources, equipment and materials
Procurement of equipment that require long lead time
Coordination with subcontractors and trade vendors/suppliers
Application of permits from and liaison with local approving
authorities such as permit to commence work, piling permit,
earthworks permit, road permits for low loaders, etc.
Maintaining site safety and health requirements
Monitoring and control of schedule, costs, cash flow, quality, etc.
Administrative requirements such as progress reports to owner,
presentations to authorities, requests for information, change
requests, etc.
Public liaison work setting up and maintaining hotline for the
public

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 1.4(f) Implementation / Start-Up START-UP

This marks the start of the testing and commission of the facility.
Equipment housed in the proposed facility are subjected to various
tests as recommended by their respective codes of practice to ensure
that the equipment is fit for use and that the specifications as laid out
in the contract are met.
For most construction projects, this is the phase where the following
activities are carried out:
a) Rectification of defects and non-conforming works
b) Preparation and submission of as-built drawings (electronic and
hard copies)
c) Compilation of manuals of all equipment and products used in
constructing the facility
d) Clearing of all construction equipment and tools from the work
site and ensure completed facility is ready for handing over to the
owner
e) Compilation of documents for submission
to A/E or owner to facilitate issuance of
Certificate of Completion and
Compliance(CCC)
f) Closing of accounts
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 DIVESTMENT

Owners take over the operation and utilisation of the facility although
there is a defects liability period where contractor is liable for any defects
or malfunction for a specified period (1 3 years) after the end of
construction.

For DBOT, the contractor is responsible for the operations of the facility for
an agreed period of time (concession period)

Facility managers may be contracted by owners during this phase to

ensure smooth running of the facility. Maintenance and regular
inspections are handled by facility managers.

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 Characteristics of Straight Forward Construction Project

Clear and complete brief

Single organisation responsible for project
Clear and complete designs and plans
Competent teams with established internal
relationships
Standard and readily available materials and
components
Efficient production and commissioning

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 Characteristics of Difficult Construction Project

Vague and incomplete brief

Complex, contradictory and incomplete designs and
plans
Technologies specified are outside the competency of
companies
Selection of teams which lack the required skills and
knowledge
Boundary relationships used to defend individual
interests
Construction teams forced to accept tough
unenforceable contracts which give rise to delays
Materials and components that are not readily available
or outside the competency of project participants
Commissioning delivers an incomplete facility which fall
short of the brief.
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 END OF TOPIC 1

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