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PROJECT MANAGEMENT
(CENG 6101)
2.1 PRE PROJECT PHASE
BY
TADESSE AYALEW (PHD)
MSc. IN CONSTRUCTION TECH. & MANAGEMENT, GONDER
UNIVERSITY FEB 2020
2 2. Construction Project Phase
Content of the chapter
Overview of project life cycle
Pre-project phase
Planning and design phase
Contractor selection phase
Contract formation
Project mobilization phase
Project operations phase
Project closeout and termination phase
2.1 Pre Project Phase
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Prior to the commencement of the construction project, even
before the selection of the designer and the accomplishment of
any planning activities, the project owner faces two important
decisions regarding the relationships among the various parties
and the basis upon which the contractor will be paid.
Because these two issues can be dealt with somewhat
independently, we describe each separately in this section.
Cont…
4
In the first, we review the various project delivery systems
that form the basis for the project’s contractual relationships
and dictate the span and duration of responsibility of each
party.
In the second, we identify different types of contracts that are
used to measure how the construction contractor will be paid
for completed construction work.
2.1.1 Project delivery system
The term delivery method means the approach
used to organize the project team so as to
manage the entire designing and building
(design-build) process.
The owner needs to decide which
designers to hire, when to hire them, and
under what type of contract ?
The owner also needs to decide when to
hire the construction professional and
under what type of contract ?
Which organization gets hired first? Do
both organizations report to the owner,
or does one report to the other?
Project Delivery method is an organizational concept which assigns
specific responsibilities and authorities to people and organizations and
which defines relationship of the various elements in construction of a
project.
Types of PDS
Types of Project Delivery Systems:
Traditional (Design bid Build)
Design- Build
Professional Construction Management
(PCM)
BOT ( Build Operate Transfer)
The Four Phases (every project goes through)
NEED
Traditional Planning Design Bid Construction Occupancy
Linear Process
Fast-Tracking Planning
Process
Design
Construction
Occupancy
Traditional
The owner hires a design professional who prepares a complete set of
contract documents for the owner for a design fee.
The owner either negotiates a price with a general contractor or bids out
the work. In this case, the general contractor is totally responsible for
delivering the completed project as spelled out in the contract
documents.
The general contractor may subcontract out parts of the project, with
each subcontractor reporting directly to the general contractor.
The designer may be involved in overseeing the construction work in the
field. In this delivery method no direct, formal relationship exists
between the designer and the builder.
Traditional
Typical Design-Bid-Build Process (The Four Phases)
NEED
Planning Design Bid Construction Occupancy
Typical
Design-Bid-Build
Process
Design Team Contractor
Advantages and disadvantages of the Traditional
Approach
Advantages Disadvantages
Price competition The approach takes a long time .
Total cost is known before Designer does not benefit from
construction starts construction experience
Well-documented approach used Conflicts between owner & G.C.
in most government projects done and between A/E & G.C.
for public works Changes may lead to disputes and
claims
Design-Bid-Build (Two Separate Contracts for Design &
Construction)
Owner
General
A/E Contractor
Responsible for Design Responsible for
Costs & Schedule
Design build
In this approach, a single organization is responsible for performing both
design and construction . Within the design-build organization, parts of the
design may be subcontracted to specialist consultants.
Being responsible for both design and construction, the design-build
contractor carries most of the project risks, and this can mean additional
cost to owner. The owner's role in this approach is minimal and is only to
express his or her objectives and specifications precisely before detailed
design is started.
Historically, the design-build approach has been used on large, privately
funded, industrial-sector projects. Recently, however, this approach has
begun to be used on commercial building projects, some publicly funded.
Design-Build
Owner
Design-Build
Firm
Designers and Consultants Subcontractors and Suppliers
Design-Build
OWNER
DESIGN-BUILD FIRM
design
subcontractors construction
subcontractors
design
subconsultants
suppliers
Typical Design/Build Process (The Four Phases)
NEED
Typical Planning
Design/Build
Process Design
Construction
Design/Build
Team Occupancy
Advantage and Disadvantage of the Design-Build Approach
Advantages Disadvantages
Single point of responsibility for Design-build company may reduce
owner quality to save cost
Reduced conflict. Less adversary A/E doesn’t work directly for
relationships Owner
Time can be reduced if the design- Cost may not be known until the end
build company overlaps design and of design
construction
Coordination between design and
construction
Easier implementation of changes
BOT (Build Operate Transfer)
Essentially in a BOT project delivery method, a private entity,
usually a consortium is responsible for financing, construction,
operation and maintenance of the facility for agreed duration
known as Concession period and at the end of the period, transfers
the ownership of the facility to the government.
A BOT mechanism is a complex structure comprising multiple,
inter-dependent agreements among various participants.
The concession agreement is between the government and the
concessionaire and it is regarded as the “heart” of a BOT project
BOT Contractual Structure
BOT Advantages
The private sector invests directly in the development of
infrastructure, thereby reducing public debt, balancing the budget
deficit, and reduced role of public sector. Financing mechanism for
infrastructure
The private firms are more efficient, hence project or service can be
delivered at lower cost
BOT projects create business opportunities for the local private
sector, create employment avenues
BOT projects help in facilitating transfer of technology by
introducing international contractors in the host countries
BOT Disadvantages
BOT is not a easy method and requires high capability of
promoters.
Not suitable for smaller projects. Because it is unlikely to gain
benefits from BOT delivery method.
The success of BOT project depends upon successful raising of
necessary finance.
BOT projects are successful only when substantial revenues are
generated during the operation phase.
Discussion Points
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Do you propose BOT arrangement for Ethiopia as a
country with foreign contractors/investors?
If so in which projects?
Professional Construction
Management
In this approach, the owner appoints a PCM organization (also known as
construction management organization) to manage and coordinate the
design and construction phases of a project using a teamwork approach.
With a high level of coordination between the participants, innovative
approaches of overlapping design and construction (i.e., fast- tracking) can
be adopted.
The PCM organization aims at holding a friendly position similar to that of
the consultants in the traditional approach.
The services offered by the PCM organization overlap those traditionally
performed by the architect, the engineer, and the contractor.
Professional Construction Management (Cont…)
This may include:
management and programming of design;
cost forecasting and financial arrangements;
preparation of tender documents; tender analysis
and selection of contractors;
selection of methods of construction;
planning and scheduling construction works;
materials procurement and delivery
Professional Construction Management (Cont…)
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Although this approach is likely to prove marginally more expensive
than the traditional approach, it offers greater guarantee of performance
and the potential to avoid time overruns and to reduce the cost of claims.
The payment to the PCM organization is usually a fixed fee or a
percentage of the total project cost.
Use of PCM approach, should be considered when there is a need for
time saving and flexibility for design changes, and the owner has
insufficient management resources
Professional Construction Management PCM Agency
with GC
Owner
Agency
CM
A/E
GC
Designers and Consultants
Subcontractors and Suppliers
Professional Construction Management (Cont…)
OWNER
ARCHITECT LIMITED
CONSTRUCTION
ADMINISTRATION
DESIGN
DATA DETAILED
CONSTRUCTION
COORDINATION
FEASIBILITY
+COST DATA
Architect’s
GENERAL
design
consultants CMa CONTRACTOR
subcontractors
Construction Management:
materials suppliers
“Agency” Form
PCM Advantages & Disadvantages
Advantages over traditional A/E construction
administration:
CM with a construction background may be BETTER
QUALIFIED
CM provides greater QUANTITY of construction phase services
CM often assumes greater DEGREE of control over contractors
limitations: the “professional” or “agent” CM:
DOES NOT guarantee construction cost or time
IS NOT RESPONSIBLE for their performance
Reading Assignment
35
Read About Integrated Project Delivery
System and Project Alliance
2.1.2 Types of construction contract
Lump sum contract
Unit Price contract: Example
Unit price contract
In a unit price contract the owner and the contractor
agree as to the price that will be charged per unit for
the major elements of the project.
The owner/designer will typically provide estimated
quantities for the project, then ask contractors to "bid" the
job by calculating unit prices for these items and
calculating a final price
Contractor overhead, profit, and other project expenses
must be included within the unit prices that are provided
The owner then compares the final prices and selects the
low bidder The advantage of this type of contracting
method is that in many projects (heavy engineering
projects being a perfect example), it is difficult to
quantify accurately the work necessary.
Unit Price contract: Example
Cost Plus Fee Type Contracts
In a cost-plus contract arrangement, also called a
reimbursable or a time and materials contract, the
contractor works on the project and is reimbursed by the
owner for its costs, plus is paid either an additional
agreed-upon fee or is paid a fee that is a percentage of
those costs.
It is important for the owner to spell out clearly in
advance what costs will be reimbursed and which costs
are to be covered by the fee.
By using this type of contract the contractor can start
work without a clearly defined project scope, since all
costs will be reimbursed and a profit guaranteed
Some of the cost plus contract types
1. Cost +percentage of cost
2. Cost + fixed cost
3. Cost + fixed fee+ profit-sharing
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Thank you
