CONSTRUCTION MANAGEMENT

Construction Management

Functions

 The purpose of operating a business is to earn a profit

by providing a valuable service. In that respect,

construction companies are no different from any others

kind of company. They bid or negotiate for work to earn

profit. To be successful, they must know how to estimate

the cost of construction projects accurately, predict the

schedule of work, control the progress and expenditures

during construction, and complete projects safely and on

time.

 They have a responsibility to construct the project in

accordance with the plans and specifications, and to

satisfy the customer’s cost, quality, and time

expectations. The construction project team is organized

for the purpose of accomplishing those objectives.

Project Strategic Planning

 Construction is a process that consists of the building or

assembling of infrastructure. Far from being a single activity, large

scale construction is a feat of human multitasking. Normally, the job

is managed by a project manager, and supervised by a construction

manager, design engineer, construction engineer, or project

architect.

 For the successful execution of a project, effective planning is

essential. Those involved with the design and execution of the

infrastructure in question must consider the environmental impact of

the job, the successful scheduling, budgeting, construction site

safety, availability of building materials, logistics, inconvenience to

the public caused by construction delays, and bidding, etc.

Project Strategic Planning

 Construction Project Management is the overall

planning, co-ordination and control of a project from

inception to completion aimed at meeting a client’s

requirements in order to produce a functionally and

financially viable project that will be completed on time

within authorized cost and to the required quality

standards.

 Project management is the process by which a project is

brought to a successful conclusion. Construction project

management (CPM) is project management that applies

to the construction sector

Responsibilities of a

Construction Manager

 Most common responsibilities of a Construction Manager

fall into the following 7 categories:

 Project Management Planning, Cost Management, Time

Management, Quality Management, Contract

Administration, Safety Management, and CMs

like defining the responsibilities and management

structure of the project management team, organizing

and leading by implementing project controls, defining

roles and responsibilities and developing communication

protocols, and identifying elements of project design and

construction likely to give rise to disputes and claims.

Functions of Construction

Project Management

 The functions of construction project management

typically include the following :

 Specifying project objectives and plans including

delineation of scope, budgeting, scheduling, setting

performance requirements, and selecting project

participants.

 Maximizing resource efficiency through procurement of

labor, materials and equipment.

 Implementing various operations through proper

coordination and control of planning, design, estimating,

contracting and construction in the entire process.

 Developing effective communications and mechanisms

for resolving conflicts

Project Portfolio Management

 is a term used by project managers and project

management (PM) organizations, (or PMOs), to describe

methods for analyzing and collectively managing a group

of current or proposed projects based on numerous key

characteristics.

 determine the optimal mix and sequencing of proposed

projects to best achieve the organization's overall goals -

typically expressed in terms of hard economic measures,

business strategy goals, or technical strategy goals -

while honoring constraints imposed by management or

external real-world factors.

 Typical attributes of projects being analyzed in a PPM

process include each project's total expected cost,

consumption of scarce resources (human or otherwise)

expected timeline and schedule of investment, expected

nature, magnitude and timing of benefits to be realized,

and relationship or inter-dependencies with other

projects in the portfolio.

Cash Flow Management &

Earned Value Management

 Cash flow is the movement of cash into or out of a

business, project, or financial product.

 It is usually measured during a specified, finite period of

time. Measurement of cash flow can be used for

calculating other parameters that give information on the

companies' value and situation. Cash flow can e.g. be

used for calculating parameters.

Cash Flow Parameters

 to determine a project's rate of return or value. The time of cash flows into

and out of projects are used as inputs in financial models such as internal

rate of return, and net present value.

 to determine problems with a business's liquidity. Being profitable does not

necessarily mean being liquid. A company can fail because of a shortage of

cash, even while profitable.

 as an alternate measure of a business's profits when it is believed that

accrual accounting concepts do not represent economic realities. For

example, a company may be notionally profitable but generating little

operational cash (as may be the case for a company that barters its

products rather than selling for cash). In such a case, the company may be

deriving additional operating cash by issuing shares, or raising additional

debt finance.

 cash flow can be used to evaluate the 'quality' of Income generated by

accrual accounting. When Net Income is composed of large non-cash items

it is considered low quality.

 to evaluate the risks within a financial product, e.g. matching cash

requirements, evaluating default risk, re-investment requirements, etc.

Earned value management

(EVM)

 is a project management technique for measuring project

performance and progress in an objective manner.

 EVM has the ability to combine measurements of scope,

schedule, and cost in a single integrated system.

 Earned Value Management is notable for its ability to

provide accurate forecasts of project performance

problems.

 Early EVM research showed that the areas of planning

and control are significantly impacted by its use; and

similarly, using the methodology improves both scope

definition as well as the analysis of overall project

performance.

 Principles of EVM are positive predictors of project

success.

Cost Control System

 Elemental cost planning is a system of Cost planning

and Cost control, typically for buildings, which enables

the cost of a scheme to be monitored during design

development.

 Elemental Cost Planning relies upon the adoption of a

Standard Form of Cost Analysis for buildings which

allows costs to be compared on a common format and

forms the basis of the bench marking analysis central to

the concept of Elemental Cost Plans.

 It should :-

 Ensure that the tender amount is close to the first estimate, or that

any likely difference between the two is anticipated and is

acceptable.

 Ensure that the money available for the projects is allocated

consciously and economically to the various components and

finishes.

 Always involves the measurement and pricing of approximate

quantities at some stage of the process.

 Aim to achieve good value at the desired level of expenditure.

 Elemental cost planning is often referred to as 'designing to a cost'

or 'target cost planning' since a cost limit is fixed for the scheme and

the architect must then prepare a design not to exceed this cost.

Construction Cost Estimates

 Estimating is determining how to construct the specified

work in the most economical manner and within the time

allowed by the contract. The format of all estimates

should be as consistent as possible.

 A work breakdown structure should be established for

this purpose.

 An alternate method to detailed task –by- task estimate

preparation, especially in the early stages of project

development when details are not available, is

parametric estimating.

 Direct costs are those that can be attributed to a single

task of construction work. Indirect costs are those that

cannot be attributed to a single task of construction

work.

Basic For Preparation Of

Estimates

 Construction cost estimates consist of:

1. Descriptions of work elements to be accomplished

(tasks).

2. A quantity of work required for each task.

3. A cost for each task quantity.

4. A time to complete each task.

A unit cost for each task is to developed to increased

the accuracy of the estimating procedure and should

provide a reference comparison to historic experience.

Lump sum estimating, when used at the task level,

must be documented.

Document Management Concept, Types

of Contract, Selection of Nominated

Supplier and Sub-contractors

Construction Contract

Administration

 Everyone involved in the construction process must

understand contracts-the sections of the contract it self,

such as the agreement and the specifications and other

required contract documents such as bonds and

insurance – and the process involved in contract

administration. Some contracts are more complicated

than others, and no two projects are the exact same

size, duration, or type of design; but all contracts require

similar administrative processes.

Construction Contract

Administration

For instance, a complicated contract

might require a complicated monthly pay

estimate system, with as many as 10 or 11

copies of all documents, while a simple

contract might have a more basic monthly

pay estimate system; but they both require

a monthly pay estimate and processes of

developing and approving the monthly pay

estimate.

Description Of A Contract

Contract are the vehicles used for the

procurement of everything in the

construction business, both goods and

services.

The makeup of a contract, whether the

owner is a public agency or a private

corporation, is essentially the same. The

form of the document may change, but the

elements of the contracts are the same.

Contract Definition

Agreement between two parties that is

enforceable by law. It requires a “meeting

of the minds” and there must be a service

and consideration. One party must agree

to perform work (service) for the other

party and receive payment (consideration)

for the work.

The contract must be enforceable by law,

which for all practical purposes means the

contract must be for a service that is legal.

Criteria's to be valid &

Enforceable By Law

 To be valid & enforceable by law, it must meet certain criteria:

 - must be mutual agreement or meeting of the minds.

 -must be an offer. An offer can normally be withdrawn up until

the time it is accepted, except the bid documents used in public

works generally state that the bid may not be withdrawn once

submitted.

 -The offer must be accepted.

 - must be consideration for the service performed-payment.

 - The subject matter of the contract must be lawful. A contract to

commit a crime is not legal and not enforceable.

 - The contracting parties must have the legal capacity to enter a

contract. A contract is a minor is not lawful. Contract are signed

by representatives of both the owner and contractor who have

the legal authority to sign for their organizations.

 The purpose of the contract should be to produce a safe, quality

construction project on schedule and within budget.

Essential Contract Documents

The Four essential documents are:

 -The agreement.

 -The general Conditions.

 -The special conditions.

 -The drawings and specifications.

Types Of Construction

Contracts

Lump Sum

Unit Price

Cost Plus

Incentive Contracts

Negotiated Contracts

Job Order Contracts

BONDS (Guarantees)

Bid Bonds

Performance Bonds

Payment Bonds

Bonding Limits

Contractor Insurance

-Worker’s Compensation Insurance

Commercial General Liability Insurance

 -Premises/ operations liability insurance

 -Completed operations and product liability

insurance

 -Contractor’s protective insurance

 -Contractual liability insurance

Administering A Construction

Contract

 Preconstruction Conference

 Subcontracts

 Submitting

 Request For Information

 Pay Estimates

 Change Orders

 Claims

 Dispute Resolution

 Alternative Dispute Resolution

 Liquidated Damages and Substantial Completion

 Final Inspection.