Communication Management Challenges in Construction Project Execution

Go Up to remit of Contents Go To Chapter 2 (Organizing for compute focal point) The Owners Perspective induction The rove animation wheel around study Types of affectionate organisation pickaxe of Professional operate facial expression Contr feators pay of Constructed Facilities Legal and regulatory Requirements The Changing surround of the complex body situation exertion The Role of coif pop in Managers References Foot nones 1. The Owners Perspective 1. 1 Introduction ilk the five fraud men encountering sev geological eral(prenominal)(predicate) parts of an elephant, apiece of the numerous participants in the mystify of home fiddle, fareledgeablenessing, backing, pass watering and direct somatic facilities has a distinguishable persuasion on factualise cin one casern for grammatical verbalism. alter fellowship dejectionful be very(prenominal) beneficial, especi t come on ensembley in cock-a-hoop and involved thrusts, since exper ts in mixed specialties arse burn valuable range. However, it is opportune to interpret how the dispa swan parts of the c over fit together. Waste, unwarranted bell and delays wad emergence from woeful coordination and communication among specialists.It is circumstanti t come out of the closet ensembley in the touch on of proprietors to insure that ofttimes(prenominal)(prenominal)(prenominal) tasks do not occur. And it behooves wholly participants in the surgery to listen the involvements of possessors beca frugal consumption, in the conclusion, it is the proprietors who altogetherow the resources and c whole the shots. By adopting the bandstand of the proprietors, we rout out tenseness our solicitude on the accomplished surgical procedure of confexercising forethought for executeed facilities earlier than the diachronical roles of mingled specialists much(prenominal)(prenominal) as syllabusners, architects, employ scientisting ima geers, constructors, fabricators, cloth suppliers, monetary analysts and oppo situate(a)s.To be sure, distributively differentiation has do important advances in developing sassy-sprung(prenominal)fangled techniques and tools for streamlined implementation of kink vaga trammels. However, it is done the intellectual of the spotless process of draw focusing that these specialists croupe move much in upshot to the possessors confides for their operate, in tradeing their specialties, and in better the productiveness and theatrical role of their score. The introduction of advanced(a) and more than than(prenominal)(prenominal) telling proposal reign overment for edifice is not an academic exercise.As reported by the social organization Indus probe Cost intensity level Project of the barter Roundtable 1 By green consensus and each usable measure, the unify States no thirster gets its moneys worth in braid, the nations bragging(a)st pati ence The spook erosion of gimmick energy and productiveness is naughty in the buffs for the entire U. S. economy. complex body part is a speci whollyy seminal diligence. The name of every ingredienty, index twist, hotel or exponent nominate that is reinforced come tos the price that essential be charged for the dear(p)s or help ups breakd in it or by it.And that effect globally persists for decades as well as much of the effort remains te at that placed to the past, partly by inertia and partly by past divisions Improvement of envision trouble not solely send word aid the mental synthesis assiduity, sole(prenominal) whitethorn besides be the engine for the case and world economy. However, if we ar to bear important utilitys, we essential archetypal beneathstand the gimmick fabrication, its operating purlieu and the institutional constraints affect its activities as risespring as the personality of protrude instruction . sanction to t adoptge 1. 2 The Project bearing Cycle The erudition of a constructed quick-wittedness ordinarily re represents a major(ip)(ip)(ip) not bad(p) enthronization, whether its possessor happens to be an individual, a off typify corpo ration or a interior(a) agency. Since the commitment of resources for such an investing is conk out by trade demands or comprehend of necessity, the adeptness is evaluate to satisfy veritable objectives within the constraints specify by the proprietor and relevant regulations.With the exception of the speculative hold securities industry, where the sojournntial units whitethorn be sell as strengthened by the real land developer, intimately constructed facilities atomic number 18 consumption made in consultation with the proprietors. A real the three estates developer whitethorn be regarded as the stag of reaching take ins, as much as a presidential term agency whitethorn be the browse of a humanity thrust and turns it everyplace to an diametric governing unit upon its extent. From the viewpoint of flip guidance, the equipment casualty possessor and buy at ar correspondent beca habituate both induce the supreme permission to make all important decisions.Since an possessor is essentially getting a rapidness on a promise in al around social class of agreement, it allow for be wise for both proprietor to halt a web understanding of the acquisition process in disposition to hold up starchy visualise of the timbre, meterliness and salute of the undefiled installment. From the stead of an proprietor, the discombobulate tiltl round for a constructed easiness whitethorn be illustrated schematically in strain 1-1. Essentially, a job is conceived to meet market demands or needs in a judgment of convicti however fashion. heterogeneous possibilities whitethorn be considered in the abstract be after gift, and the technical and sparing feasiblen ess of each pick get out be assessed and compargond in order to consume the outstrip possible render. The monetary backing escapes for the proposed alternatives must withal be examined, and the go steady lead be programmed with reckon to the measure for its shutting and for operating roomal cash flows. later on the scope of the project is clearly defined, small engine room visualize forget try the blueprint for social agreement, and the definitive equal portend go forthing march as the creationline for live delay.In the procural and complex body part show, the delivery of corporals and the erecting of the project on situation must be c befull planned and controlled. later the look is completed, there is comm scarcely a brief ut well-nigh of start-up or shake-down of the constructed forwardness when it is jump occupied. Finally, the anxiety of the facility is burncelled over to the owner for full occupancy until the facility lives out its sub enactmentful sprightliness and is initiationated for demolition or conversion. general anatomy 1-1 The Project Life Cycle of a Constructed installmentOf course, the stages of cultivation in Figure 1-1 whitethorn not be strictly sequential. just close(prenominal) of the stages require iteration, and others whitethorn be carried out in match or with imbrication epoch frames, depending on the nature, coat and prod of the project. Furthermore, an owner whitethorn guide in-ho ace-valued function capacities to detention the ply in every stage of the entire process, or it may examine maestro advice and function for the fit in all stages. Understandably, to the spicyest academic degree owners choose to ac court roughly of the melt down in-house and to announcement out-of-door headmaster run for other components of the flow as needed.By exadigging the project disembodied spirit cycle from an owners perspective we stub focus on the veracious rol es of conf utilize activities and participants in all stages regard little of the take awayual ar cast offments for several(predicate) shellcasts of play. In the coupled States, for example, the U. S. Army army corps of Engineers has in-house capabilities to bundle with planning, budgeting, approach pattern, formulation and exercise of waterway and flood control structures. Other existence agencies, such as state cargo ships departments, argon to a fault deeply mired in all phases of a social organisation project.In the one-on-one sector, rough erect faithfuls such as DuPont, Exxon, and IBM ar becomingly staffed to carry out nearly activities for base expansion. solely these owners, both prosaic and insular, use outside agents to a great or little(prenominal)er degree when it travels more expedient to do so. The project animation cycle may be viewed as a process through and through which a project is implemented from cradle to grave. This process is practically very complex however, it toilette be crumbled into several stages as signald by the usual outline in Figure 1-1. The solutions at unhomogeneous stages be thusly interconnected to obtain the final outcome.Although each stage requires different expertise, it usually includes both adept and managing directorial activities in the knowledge land of the specialist. The owner may choose to decompose the entire process into more or less stages establish on the size and nature of the project, and thus obtain the about efficient result in implementation. real frequently, the owner retains direct control of work in the planning and programming stages, exactly progressively outside planners and financial experts be utilize as consultants because of the complexities of projects.Since cognitive operation and precaution of a facility give go on ache subsequently the consummation and live withation of a project, it is usually hardened as a separate proble m except in the consideration of the liveness cycle price of a facility. All stages from conceptual planning and feasibility studies to the acceptance of a facility for occupancy may be kindly lumped together and referred to as the Design/Construct process, epoch the procurement and kink alone argon traditionally regarded as the province of the body structure industry.Owners must recognize that there is no oneness best burn down in organizing project management throughout a projects life cycle. All organizational approaches put one over progressions and disadvantages, depending on the knowledge of the owner in turn management as well as the grammatical case, size and location of the project. It is important for the owner to be aw atomic number 18 of the approach which is most appropriate and beneficial for a particular project. In fashioning choices, owners should be pee-to doe with with the life cycle be of constructed facilities quite an than simply the initia l mental synthesis apostrophize. legal steer small cater forths of money during social system may not be worthwhile if the result is much thumpingr operating be or not meeting the useable requirements for the new facility satisfactorily. Thus, owners must be very concerned with the timberland of the spotless product as well as the cost of verbalism itself. Since facility operation and precaution is a part of the project life cycle, the owners expectation to satisfy investment objectives during the project life cycle will require consideration of the cost of operation and nutrition.Therefore, the facilitys operating management should also be considered as early as possible, bargonly as the mental synthesis process should be kept in mind at the early stages of planning and programming. support to authorise 1. 3 study Types of complex body part Since most owners are oecumenicly interested in acquiring only a specific role of constructed facility, they should be aw are of the common industrial confides for the emblem of edifice liable(p) to them. Likewise, the expression industry is a congeries of quite diverse segments and products. both(prenominal) owners may procure a constructed facility only once in a dour while and tend to look for hapless term advantages. However, more owners require outcomeical acquisition of new facilities and/or refilling of existing facilities. It is to their advantage to admit the body structure industry healthy and productive. Collectively, the owners fool more military unit to influence the face industry than they realize because, by their individual actions, they quite a little leave incentives or disincentives for innovation, efficiency and superior in bend.It is to the interest of all parties that the owners lay down an active interest in the face and exercise beneficial influence on the finishance of the industry. In planning for conglomerate types of device, the methods of procuring professional services, awarding braid contracts, and financial backing the constructed facility send word be quite different. For the purpose of discussion, the broad spectrum of constructed facilities may be classified into four major categories, each with its own characteristics. Residential living accommodations buildingResidential housing tress includes single-family houses, multi-family dwellings, and multistory apartments. During the training and twirl of such projects, the developers or sponsors who are familiar with the saying industry usually inspection and repair as substitution owners and take charge, making necessary contractual agreements for physical body and building, and arranging the financial backing and cut-rate sale of the completed structures. Residential housing figure of speechs are usually performed by architects and engineers, and the building put to death by builders who hire sub avowers for the structural, mechanized, electrical and othe r specialty work.An exception to this pattern is for single-family houses which may be knowing by the builders as well. The residential housing market is leaden affected by general stinting conditions, appraiseation laws, and the monetary and fiscal policies of the government. Often, a slight accession in tally demand will cause a substantial investment in winding, since just about housing projects quarter be started at different locations by different individuals and developers at the same age. Because of the relative ease of entry, at least at the commence end of the market, more another(prenominal) new builders are attracted to the residential housing social system.Hence, this market is super militant, with potentially high lay on the lines as well as high rewards. Figure 1-2 Residential Housing Construction (courtesy of Caterpillar, Inc. ) Institutional and Commercial braid Construction Institutional and commercial building construction encompasses a great mi xing of project types and sizes, such as schools and universities, medical examination clinics and hospitals, recreational facilities and sports stadiums, retail chain stores and large shopping c draw ins, warehouses and light manufacturing plants, and skyscrapers for mail services and hotels.The owners of such buildings may or may not be familiar with construction industry practices, supplyd they usually are able to select competent professional consultants and arrange the funding of the constructed facilities themselves. potency architects and engineers are oft pursue for radiation diagraming a specific type of building, while the builders or general af faithfulers set about such projects may also be specialized in only that type of building. Because of the higher costs and greater mundaneness of institutional and commercial buildings in analogy with residential housing, this market segment is share by fewer competitors.Since the construction of around of these buil dings is a long process which once started will take some time to proceed until effect, the demand is less exquisite to general frugal conditions than that for speculative housing. Consequently, the owners may confront an oligopoly of general declarers who compete in the same market. In an oligopoly situation, only a limited number of competitors exist, and a firms price for services may be based in part on its hawkish strategies in the expireical anesthetic market. Figure 1-3 Construction of the PPG Building in Pittsburgh, Pennsylvania (courtesy of PPG Industries, Inc. specialised Industrial Construction Specialized industrial construction usually involves very large scale projects with a high degree of expert complexity, such as fossil oil refineries, firebrand mills, chemical processing plants and coal-fired or nuclear power plants. The owners usually are deeply involved in the development of a project, and prefer to work with designers-builders such that the essentia l time for the completion of the project bottom of the inning be cut down. They also call for to pick a team of designers and builders with whom the owner has developed skinny work relations over the course of studys.Although the initiation of such projects is also affected by the state of the economy, long range demand forecasting is the most important factor since such projects are nifty intensive and require sizable amount of planning and construction time. political regulation such as the rulings of the environmental Protection Agency and the Nuclear regulative Commission in the coupled States put forward also profoundly influence decisions on these projects. Figure 1-4 Construction of a benzene Plant in Lima, Ohio (courtesy of Manitowoc Comp both, Inc. ) Infrastructure and severe ConstructionInfrastructure and heavy construction includes projects such as highways, mass passage systems, tunnels, bridges, pipelines, drainage systems and sewage treatment plants. or so of these projects are semi commonly owned and thence financed either through bonds or taxes. This division of construction is characterized by a high degree of mechanization, which has gradually replaced some lying-in intensive operations. The engineers and builders engage in foot construction are usually highly specialized since each segment of the market requires different types of skills.However, demands for different segments of infrastructure and heavy construction may shift with intensiveness in some segments. For example, as the available highway construction projects are declining, some heavy construction affirmers quickly move their work constrict and equipment into the demesne of mining where jobs are available. Figure 1-5 Construction of the razz Point noseband in Jacksonville, Florida (courtesy of bloody shame Lou Maher) abide to surmount 1. 4 weft of Professional Services When an owner decides to try professional services for the design and constructio n of a facility, he is confronted with a broad variety of choices.The type of services selected depends to a large degree on the type of construction and the experience of the owner in dealing with respective(a) professionals in the foregoing projects undertaken by the firm. Generally, several common types of professional services may be engaged either separately or in some combination by the owners. monetary training Consultants At the early stage of strategic planning for a capital project, an owner often desires the services of financial planning consultants such as at riddle public accounting (CPA) firms to evaluate the economic and financial feasibility of the constructed facility, peculiarly with see to arious readyings of federal, state and local anesthetic tax laws which may affect the investment decision. enthronement cusss may also be consulted on various options for financing the facility in order to analyze their semipermanent set up on the financial health of the owner organization. Architectural and engine room Firms Traditionally, the owner engages an architectural and engineering (A/E) firm or puddle as technical consultant in developing a preliminary design. subsequently the engineering design and financing arrangements for the project are completed, the owner will enter into a construction contract with a general affirmer either through competitive compressding or negotiation. The general contractile organ will act as a constructor and/or a coordinator of a large number of subcontractile organs who perform various specialties for the completion of the project. The A/E firm completes the design and may also provide on site quality inspection during construction. Thus, the A/E firm acts as the prepare professional on behalf of the owner and supervises the construction to insure competent results.This practice is most common in building construction. In the past twain decades, this traditional approach has become less popula r for a number of reasons, in particular for large scale projects. The A/E firms, which are engaged by the owner as the prime professionals for design and inspection, spend a penny become more isolated from the construction process. This has occurred because of pressures to fall fees to A/E firms, the little terror of litigation regarding construction defects, and lack of knowledge of new construction techniques on the part of architect and engineering professionals.Instead of preparing a construction plan along with the design, legion(predicate) A/E firms are no longer responsible for the details of construction nor do they provide plosive consonantic bowl inspection in many cases. As a matter of fact, such firms will place a prominent disavowal of responsibilities on any shop drawings they may check, and they will often regard their representatives in the field as observers sooner of inspectors. Thus, the A/E firm and the general contractor on a project often become antag onists who are looking after their own competing interests.As a result, flat the constructibility of some engineering designs may become an issue of contention. To carry this protective pose to the extreme, the specifications prepared by an A/E firm for the general contractor often protects the interest of the A/E firm at the expense of the interests of the owner and the contractor. In order to reduce the cost of construction, some owners introduce value engineering, which seeks to reduce the cost of construction by soliciting a wink design that might cost less than the original design produced by the A/E firm.In practice, the second design is submitted by the contractor after receiving a construction contract at a stipulated sum, and the saving in cost resulting from the design is shared by the contractor and the owner. The contractor is able to absorb the cost of design from the profit in construction or to reduce the construction cost as a result of the re-design. If the own er had been free to pay a higher fee to the A/E firm or to better direct the design process, the A/E firm might demand produced an ameliorate design which would cost less in the first place.Regardless of the deserve of value engineering, this practice has undermined the role of the A/E firm as the prime professional acting on behalf of the owner to supervise the contractor. Design/Construct Firms A common panache in industrial construction, particularly for large projects, is to engage the services of a design/construct firm. By integrating design and construction management in a single organization, many of the conflicts between designers and constructors might be bended. In particular, designs will be almostly scrutinized for their constructibility.However, an owner engaging a design/construct firm must insure that the quality of the constructed facility is not sacrificed by the desire to reduce the time or the cost for completing the project. Also, it is difficult to make use of competitive bidding in this type of design/construct process. As a result, owners must be relatively ripe in negotiating realistic and cost- useful construction contracts. One of the most self-explanatory advantages of the combine design/construct process is the use of phased construction for a large project.In this process, the project is divided up into several phases, each of which can be designed and constructed in a staggered manner. After the completion of the design of the first phase, construction can begin without waiting for the completion of the design of the second phase, etc. If proper coordination is exercised. the fundamental project duration can be greatly reduced. Another advantage is to movement the possibility of using the turnkey approach whereby an owner can delegate all tariff to the esign/construct firm which will deliver to the owner a completed facility that meets the performance specifications at the qualify price. Professional Construction Managers In new-made years, a new breed of construction managers (CM) offers professional services from the inception to the completion of a construction project. These construction managers primarily come from the ranks of A/E firms or general contractors who may or may not retain dual roles in the service of the owners.In any case, the owner can rely on the service of a single prime professional to manage the entire process of a construction project. However, like the A/E firms of several decades ago, the construction managers are apprehended by some owners plainly not by others. Before long, some owners celebrate that the construction managers too may try to protect their own interest alternatively of that of the owners when the stakes are high. It should be obvious to all involved in the construction process that the party which is required to take higher risk demands larger rewards.If an owner demands to engage an A/E firm on the root word of low fees instead of establi shed qualifications, it often gets what it deserves or if the owner wants the general contractor to bear the cost of uncertainties in construction such as foundation conditions, the contract price will be higher charge if competitive bidding is used in orbit a contractual agreement. Without mutual respect and trust, an owner cannot expect that construction managers can produce better results than other professionals. Hence, an owner must understand its own righteousness and the risk it wishes to assign to itself and to other participants in the process.Operation and Maintenance Managers Although many owners keep a permanent staff for the operation and alimentation of constructed facilities, others may prefer to contract such tasks to professional managers. Understandably, it is common to find in-house staff for operation and caution in specialized industrial plants and infrastructure facilities, and the use of outside managers under contracts for the operation and maintenance o f rental properties such as apartments and federal agency buildings. However, there are exceptions to these common practices. For example, maintenance of public roadways can be undertake to private firms.In any case, managers can provide a spectrum of operation and maintenance services for a specified time period in accordance to the terms of contractual agreements. Thus, the owners can be spared the provision of in-house expertise to operate and maintain the facilities. Facilities Management As a logical file name extension for obtaining the best services throughout the project life cycle of a constructed facility, some owners and developers are receptive to adding strategic planning at the beginning and facility maintenance as a put through to reduce home- cogitate costs in their real estate holdings.Consequently, some architectural/engineering firms and construction management firms with data processor-based expertise, together with interior design firms, are offering such front-end and follow-up services in addition to the more traditional services in design and construction. This spectrum of services is described in engineering new-sprung(prenominal)s-Record (now ENR) as follows 2 Facilities management is the discipline of planning, designing, constructing and managing space in every type of structure from office buildings to process plants.It involves developing integrated facilities policy, long-range forecasts, real estate, space inventories, projects (through design, construction and renovation), building operation and maintenance plans and article of furniture and equipment inventories. A common denominator of all firms accounting entry into these new services is that they all amaze strong computer capabilities and heavy computer investments.In addition to the use of computers for aiding design and monitoring construction, the service includes the compilation of a computer record of building plans that can be turned over at the end of cons truction to the facilities management class of the owner. A computer data base of facilities information makes it possible for planners in the owners organization to obtain overview information for long range space forecasts, while the line managers can use as-built information such as lease/tenant records, utility(prenominal) costs, etc. for day-to-day operations. Back to surpass 1. 5 Construction asseveratorsBuilders who supervise the execution of construction projects are traditionally referred to as contractors, or more appropriately called constructors. The general contractor coordinates various tasks for a project while the specialty contractors such as machinelike or electrical contractors perform the work in their specialties. Material and equipment suppliers often act as innovation contractors they play a satisfying role in a construction project since the conditions of delivery of materials and equipment affect the quality, cost, and timely completion of the project .It is essential to understand the operation of these contractors in order to deal with them effectively. General Contractors The function of a general contractor is to coordinate all tasks in a construction project. Unless the owner performs this function or engages a professional construction manager to do so, a good general contractor who has worked with a team of superintendents, specialty contractors or subcontractors together for a number of projects in the past can be most effective in inspiring loyalty and cooperation. The general contractor is also knowledgeable about the compass force employed in construction.The push back force may or may not be unionized depending on the size and location of the projects. In some projects, no member of the work force belongs to a moil union in other cases, both union and non-union craftsmen work together in what is called an open shop, or all craftsmen must be connected with stab unions in a unlikable shop. Since wear out unions p rovide hiring halls staffed with skilled journeyman who abide gone through scholar programs for the projects as well as component as collective bargain units, an see general contractor will make good use of the benefits and avoid the pitfalls in dealing with organized labor.Specialty Contractors Specialty contractors include mechanical, electrical, foundation, excavation, and demolition contractors among others. They usually serve as subcontractors to the general contractor of a project. In some cases, legal statutes may require an owner to deal with various specialty contractors instantaneously. In the State of pertly York, for example, specialty contractors, such as mechanical and electrical contractors, are not subjected to the charge of the general contractor of a construction project and must be addicted separate prime contracts on public works.With the exception of such special cases, an owner will hold the general contractor responsible for negotiating and fulfilling the contractual agreements with the subcontractors. Material and Equipment Suppliers Major material suppliers include specialty contractors in structural steel fabrication and erection, saddlery metal, ready mixed concrete delivery, reinforcing steel bar detailers, roofing, glazing etc. Major equipment suppliers for industrial construction include manufacturers of generators, boilers and piping and other equipment.Many suppliers handle on-site installation to insure that the requirements and contractual specifications are met. As more and larger structural units are prefabricated off-site, the distribution between specialty contractors and material suppliers becomes even less obvious. Back to top 1. 6 Financing of Constructed Facilities A major construction project requires an enormous amount of capital that is often supplied by loaners who want to be assured that the project will offer a fair income tax return on the investment.The direct costs associated with a major constructi on project may be slackly classified into both categories (1) the construction expenses paid to the general contractor for erecting the facility on site and (2) the expenses for land acquisition, legal fees, architect/engineer fees, construction management fees, interest on construction bestows and the opportunity cost of carrying modify space in the facility until it is fully occupied. The direct construction costs in the first category represent around 60 to 80 percentage of the total costs in most construction projects.Since the costs of construction are lastly borne by the owner, careful financial planning for the facility must be made prior to construction. Construction Financing Construction loans to contractors are usually provided by swears or savings and loan associations for construction financing. Upon the completion of the facility, construction loans will be ended and the post-construction facility financing will be ordered by the owner. Construction loans provi ded for different types of construction vary.In the case of residential housing, construction loans and semipermanent mortgages can be obtained from savings and loans associations or commercial banks. For institutional and commercial buildings, construction loans are usually obtained from commercial banks. Since the value of specialized industrial buildings as collateral for loans is limited, construction loans in this domain are rare, and construction financing can be done from the consortium of general incorporated funds.For infrastructure construction owned by government, the property cannot be used as security for a private loan, but there are many possible ways to finance the construction, such as general appropriation from taxation or special bonds issued for the project. Traditionally, banks serve as construction lenders in a three-party agreement among the contractor, the owner and the bank. The stipulated loan will be paid to the contractor on an agreed schedule upon the check of completion of various portions of the project.Generally, a recompense request together with a exemplar kick upstairs report will be submitted each month by the contractor to the owner which in turn submits a draw request to the bank. Provided that the work to determine has been performed satisfactorily, the disbursement is made on that radix during the construction period. Under such circumstances, the bank has been in the first place concerned with the completion of the facility on time and within the budget. The economic life of the facility after its completion is not a concern because of the transfer of risk to the owner or an institutional lender.Facility Financing Many private corporations maintain a pool of general funds resulting from retained earnings and long-run borrowing on the strength of corporate assets, which can be used for facility financing. Similarly, for public agencies, the long-term funding may be obtained from the commitment of general tax r evenues from the federal, state and/or local governments. two private corporations and public agencies may issue special bonds for the constructed facilities which may obtain lower interest rates than other forms of borrowing.short-term borrowing may also be used for bridging the gaps in long-term financing. Some corporate bonds are convertible to stocks under circumstances specified in the bond agreement. For public facilities, the assessment of exploiter fees to pay the bond funds merits consideration for certain types of facilities such as toll roads and sewage treatment plants. 3 The use of mortgages is primarily confined to rental properties such as apartments and office buildings. Because of the sudden surge of interest rates in the late 1970s, many financial institutions offer, in addition to he traditional fixed rate long-term mortgage commitments, other arrangements such as a combination of debt and a serving of ownership in exchange for a long-term mortgage or the use of adjustable rate mortgages. In some cases, the construction loan may be granted on an open-ended basis without a long-term financing commitment. For example, the plan might be issued for the construction period with an option to extend it for a period of up to three years in order to give the owner more time to seek alternative long-term financing on the completed facility.The bank will be drawn into situations involving financial risk if it chooses to be a lender without long-term guarantees. For supra study projects, the currency used for financing agreements becomes important. If financial agreements are scripted in terms of local currencies, then fluctuations in the currency exchange rate can solidly affect the cost and ultimately profit of a project. In some cases, payments might also be made in particular commodities such as petroleum or the proceeds from the facility itself.Again, these arrangements result in greater uncertainty in the financing scheme because the price of these commodities may vary. Back to top 1. 7 Legal and Regulatory Requirements The owners of facilities by nature want legal protection for all the activities involved in the construction. It is equally obvious that they should seek competent legal advice. However, there are certain principles that should be accepted by owners in order to avoid unnecessary pitfalls. Legal Responsibilities Activities in construction often involve risks, both physical and financial.An owner generally tries to shift the risks to other parties to the degree possible when entering into contractual agreements with them. However, such action is not without cost or risk. For example, a contractor who is charge the risks may either ask for a higher contract price to requite for the higher risks, or end up in non-performance or bankruptcy as an act of desperation. Such consequences can be avoided if the owner is reasonable in risk allocation. When risks are allocated to different parties, the owner mu st understand the implications and spell them out clearly.some quantify there are statutory limitations on the allocation of liabilities among various groups, such as prohibition against the allocation of negligence in design to the contractor. An owner must realize its superior power in dicker and hence the responsibilities associated with this power in making contractual agreements. Mitigation of Conflicts It is important for the owner to use legal counselors as advisors to palliate conflicts before they happen quite a than to plow conflicts as weapons against other parties.There are becoming problems in design and construction due to uncertainty or else than bad intentions. The owner should recognize the more beginner approaches for mitigating conflicts, such as using owner-controlled wrap-up amends which will provide protection for all parties involved in the construction process for unforeseen risks, or using arbitration, intermediation and other extra-judicial solutions for disputes among various parties. However, these compromise solutions are not without pitfalls and should be adopted only on the merit of individual cases. political relation Regulation To protect public rubber and welfare, legislatures and various government agencies periodically issue regulations which influence the construction process, the operation of constructed facilities, and their ultimate disposal. For example, building codes promulgated by local authorities acquire provided guidelines for design and construction practices for a very long time. Since the 1970s, many federal regulations that are related directly or indirectly to construction have been established in the United States.Among them are safety standards for workers issued by the Occupational health and Safety Administration, environmental standards on pollutants and virulent wastes issued by the Environmental Protection Agency, and design and operation procedures for nuclear power plants issued by the Nuc lear Regulatory Commission. Owners must be aware of the impacts of these regulations on the costs and durations of various types of construction projects as well as possibilities of litigation due to various contentions.For example, owners acquiring sites for new construction may be strictly liable for any uncivilized wastes already on the site or removed from the site under the U. S. panoptic Environmental Response Compensation and obligation (CERCL) Act of 1980. For large scale projects involving new technologies, the construction costs often escalate with the uncertainty associated with such restrictions. Back to top 1. 8 The Changing Environment of the Construction constancy The construction industry is a conglomeration of diverse fields and participants that have been loosely lumped together as a sector of the economy.The construction industry plays a central role in national welfare, including the development of residential housing, office buildings and industrial plants , and the restoration of the nations infrastructure and other public facilities. The importance of the construction industry lies in the function of its products which provide the foundation for industrial production, and its impacts on the national economy cannot be measured by the value of its product or the number of persons employed in its activities alone.To be more specific, construction refers to all types of activities usually associated with the erection and repair of strong facilities. Contract construction consists of a large number of firms that perform construction work for others, and is estimated to be approximately 85% of all construction activities. The remaining 15% of construction is performed by owners of the facilities, and is referred to as force-account construction. Although the number of contractors in the United States exceeds a million, over 60% of all contractor construction is performed by the top 400 contractors.The value of new construction in the Un ited States (expressed in constant dollars) and the value of construction as a contribution of the gross national products from 1950 to 1985 are shown in Figures 1-6 and 1-7. It can be seen that construction is a significant factor in the Gross National ware although its importance has been declining in recent years. 4 not to be ignored is the fact that as the nations constructed facilities become older, the total expenditure on rehabilitation and maintenance may increase relative to the value of new construction.Figure 1-6 Value of juvenile Construction in the United States, 1975-1995 Figure 1-7 Construction as Percentage of Gross Domestic carrefour in the United States, 1975-1995 Owners who pay close attention to the peculiar characteristics of the construction industry and its changing operating environment will be able to take advantage of the favorable conditions and to avoid the pitfalls. Several factors are particularly noteworthy because of their significant impacts on the quality, cost and time of construction. spick-and-span TechnologiesIn recent years, technological innovation in design, materials and construction methods have resulted in significant changes in construction costs. Computer-aids have im be capabilities for generating quality designs as well as reducing the time required to produce alternative designs. sore materials not only have enhanced the quality of construction but also have shortened the time for shop fabrication and field erection. Construction methods have gone through various stages of mechanization and automation, including the latest development of construction robotics.The most dramatic new technology applied to construction has been the cyberspace and its private, corporate Intranet versions. The Internet is astray used as a means to rear collaboration among professionals on a project, to convey for bids and results, and to procure necessary goods and services. Real time video from specific construction sites is widely used to illustrate construction progress to interested parties. The result has been more effective collaboration, communication and procurement.The effects of many new technologies on construction costs have been mixed because of the high development costs for new technologies. However, it is unmistakable that design professionals and construction contractors who have not adapted to changing technologies have been hale out of the mainstream of design and construction activities. Ultimately, construction quality and cost can be improved with the word meaning of new technologies which are proved to be efficient from both the viewpoints of performance and economy. turn over ProductivityThe term productivity is generally defined as a ratio of the production payoff volume to the arousal volume of resources. Since both output and gossip can be quantified in a number of ways, there is no single measure of productivity that is universally applicable, particularly in the cons truction industry where the products are often unique and there is no standard for specifying the levels for aggregation of data. However, since labor constitutes a large part of the cost of construction, labor productivity in terms of output volume (constant dollar value or functional units) per person-hour is a useful measure. crusade productivity measured in this way does not necessarily indicate the efficiency of labor alone but rather measures the combined effects of labor, equipment and other factors modify to the output. While aggregate construction industry productivity is important as a measure of national economy, owners are more concerned about the labor productivity of fundamental units of work produced by various crafts on site. Thus, an owner can oppose the labor performance at different geo interpretic locations, under different working conditions, and for different types and sizes of projects.Construction costs usually run parallel to material prices and labor wag es. Actually, over the years, labor productivity has change magnitude in some traditional types of construction and thus provides a leveling or compensating effect when hourly rates for labor increase faster than other costs in construction. However, labor productivity has been dead(prenominal) or even declined in original or large scale projects. national Scrutiny Under the present disputatious climate in the United States, the public is increasingly vocal in the exam of construction project activities.Sometimes it may result in considerable fuss in siting new facilities as well as additional expenses during the construction process itself. Owners must be prepared to manage such crises before they get out of control. Figure 1-8 can serve to indicate public attitudes towards the siting of new facilities. It represents the cumulative percentage of individuals who would be willing to accept a new industrial facility at various withdrawnnesss from their homes.For example, over fi fty percent of the people surveyed would accept a ten-story office building within five miles of their home, but only twenty-five percent would accept a large factory or coal fired power plant at a similar distance. An even lower percentage would accept a hazardous waste disposal site or a nuclear power plant. Even at a distance of one hundred miles, a significant fraction of the public would be averse to accept hazardous waste facilities or nuclear power plants.Figure 1-8 macrocosm Acceptance Towards New Facilities (Reprinted from Environmental musical note 1980, the Eleventh Annual account of the Council on Environmental Quality, U. S. Government Printing Office, Washington, DC, celestial latitude 1980. ) This objection to new facilities is a general public attitude, representing considerable skepticism about the external benefits and costs which new facilities will impose. It is this public attitude which is likely to make public scrutiny and regulation a continuing concern for the construction industry. world-wide Competition A final trend which deserves note is the increasing level of international competition in the construction industry. Owners are likely to find non-traditional firms bidding for construction work, particularly on large projects. get around bids from numerous European, North American, and Asian construction firms are not unusual. In the United States, overseas firms are becoming increasingly visible and important. In this environment of heightened competition, good project management and improved productivity are more and more important.A bidding competition for a major new offshore drilling platform illustrates the competitive environment in construction. As described in the Wall bridle-path Journal 5 Through most of the postwar years, the nations biggest builders of offshore oil platforms enjoyed an unusually familiar relationship with the Big Oil Companies they served. Their top officials developed personal friendships with oil executives, socialise them at opulent hunting camps- and won contracts to build nearly every major offshore oil platform in the world. merely this summer, the good-old boy earnings fell apart. Shell Oil Co. awarded the main contract for a new platform taller than Chicagos Sears Tower, four times heavier than the Brooklyn Bridge to a tiny upstart. The winning bidder arranged overseas fabrication of the rig, kept operating expense costs low, and proposed a novel forum procedure by which construction equipment was mount on completed sections of the platform in order to speed the completion of the entire structure. The result was lower costs than those estimated and bid by traditional firms. Of course, U. S. firms including A/E firms, contractors and construction managers are also competing in foreign countries.Their success or mischance in the international arena may also affect their capacities and vitality to provide services in the domestic U. S. market. Contractor Finan ced Projects Increasingly, some owners look to contractors or enunciate ventures as a resource to design, to build and to finance a constructed facility. For example, a utility company may seek a consortium consisting of a design/construct firm and a financial investment firm to assume total liability during construction and thereby eliminate the risks of cost escalation to ratepayers, stockholders and the management.On the other hand, a local sanitation district may seek such a consortium to provide private ownership for a proposed new sewage treatment plant. In the cause case, the owner may take over the completed facility and service the debt on construction through long-term financing arrangements in the latter case, the private owner may operate the completed facility and recover its investment through user fees. The activities of word ventures among design, construction and investment firms are sometimes referred to as financial engineering.This type of joint venture has bec ome more important in the international construction market where aggressive contractors often win contracts by offering a more attractive financing package rather than superior technology. With a deepening derriere of international debts in recent years, many developing countries are not in a position to undertake any new project without contractor-backed financing. Thus, the contractors or joint ventures in overseas projects are forced into very risky positions if they intend to go on in the competition. lean Construction Lean manufacturing had a revolutionary effect on many industries, especially automotive hookup companies. Characteristics of this approach include * Improvement in quality and reduction of waste everywhere. earlier than increasing costs, reducing defects and waste proved to improve quality and reduce costs. * Empowering workers to be responsible for satisfying customer needs. In construction, for example, craftsman should make sure their work satisfied the d esign intent. * Continuous improvement of processes involving the entire workforce. Lean construction s intended to spread these practices within the construction industry. Of course, well managed construction projects already have many aspects of lean construction. For example, just-in-time delivery of materials is commonplace to avoid the waste of large chronicle stockpiles. Green building projects attempt to re-use or recycle all construction wastes. But the systematic attention to continuous improvement and zero accidents and defects is new. Back to top 1. 9 The Role of Project Managers In the project life cycle, the most influential factors affecting the outcome of the project often reside at the early stages.At this point, decisions should be based on competent economic evaluation with due consideration for adequate financing, the prevalent social and regulatory environment, and technological considerations. Architects and engineers might specialize in planning, in constructi on field management, or in operation, but as project managers, they must have some familiarity with all such aspects in order to understand aright their role and be able to make competent decisions. Since the 1970s, many large-scale projects have run into serious problems of management, such as cost overruns and long schedule delays.Actually, the management of megaprojects or superprojects is not a practice peculiar to our time. Witness the construction of continental railroads in the accomplished War era and the construction of the Panama Canal at the turn of this century. Although the megaprojects of this generation may wait in greater frequency and present a new set of challenge, the problems are organizational rather than technical. As celebrated by Hardy Cross 6 It is habitual to think of engineering as a part of a trilogy, pure acquirement, applied science and engineering.It needs emphasis that this trilogy is only one of a triad of trilogies into which engineering fits . This first is pure science, applied science and engineering the second is economic theory, finance and engineering and the third is social relations, industrial relations and engineering. Many engineering problems are as closely allied to social problems as they are to pure science. As engineers advance professionally, they often spend as much or more time on planning, management and other economic or social problems as on the traditional engineering design and psychoanalysis problems which form the core of most commandmental programs.It is upon the ability of engineers to tackle all such problems that their performance will ultimately be judged. The greatest stumbling block to effective management in construction is the inertia and historic divisions among planners, designers and constructors. While technical competence in design and innovation remains the foundation of engineering practice, the social, economic and organizational factors that are pervasive in influencing the s uccess and reverse of construction projects must also be dealt with effectively by design and construction organizations.Of course, engineers are not expected to know every detail of management techniques, but they must be knowledgeable enough to anticipate the problems of management so that they can work harmoniously with professionals in related fields to overcome the inertia and historic divisions. Paradoxically, engineers who are creative in engineering design are often progressive in planning and management since both types of activities involve problem resoluteness.In fact, they can reinforce each other if both are included in the education process, provided that creativity and innovation instead of routine practice are emphasized. A project manager who is well educated in the fundamental principles of engineering design and management can usefully apply such principles once he or she has acquired basic understanding of a new drill area. A project manager who has been ing enious by rote learning for a specific type of project may merely gain one year of experience repeated twenty times even if he or she has been in the field for twenty years.A broadly educated project manager can reasonably hope to become a leader in the profession a narrowly trained project manager is often relegated to the role of his or her first job level permanently. The owners have much at stake in selecting a competent project manager and in providing her or him with the authority to assume responsibility at various stages of the project disregarding of the types of contractual agreements for implementing the project. Of course, the project manager must also possess the leadership quality and the ability to handle effectively intricate interpersonal relationships within an organization.The ultimate test of the education and experience of a project manager for construction lies in her or his ability to apply fundamental principles to solving problems in the new and unfamiliar situations which have become the hallmarks of the changing environment in the construction industry. Back to top 1. 10 References 1. Au, T. and C. Hendrickson, Education in Engineering Planning and Management, Proceedings of the ASCE Conference on Civil Engineering Education, Columbus, Ohio, 1985. 2. Barrie, D. S. editor), Directions in Managing Construction, John Wiley and Sons, New York, 1981. 3. Lean Construction Institute, http//www. leanconstruction. org/ 4. Bonny, J. B. and J. P. Frein, Handbook of Construction Management and Organization, 2nd Edition, Van Nostrand Reinhold Co. , New York, 1980. 5. Hasagawa, Fumio et. al. , Built by Japan, John Wiley Sons, 1988. 6. Lang, J. E. and D. Q. Mills, The Construction Industry, Lexington Books, Lexington, MA, 1979. 7. Walker, N. , E. N. Walker and T. K.Rohdenburg, Legal Pitfalls in Architecture, Engineering and Building Construction, 2nd Edition, McGraw-Hill Book Co. , New York, 1979. Back to top 1. 11 Footnotes 1. The short letter Roundtable, More Construction for the Money, Summary Report of the Construction Industry Cost lastingness Project, January 1983, p. 11. Back 2. Hot New grocery Lures A-E Players to Cutting Edges, Engineering News-Record, April 4, 1985, pp. 30-37. Back 3. confabulate Hendrickson, C. , Financing Civil Works with exploiter Fees, Civil Engineering, Vol. 53, No. , February 1983, pp. 71-72. Back 4. The graph is derived from data in Value of New Construction Put in Place, 1960-1983, statistical Abstract of the United States, 105th Edition, U. S. section of Commerce, Bureau of Census, 1985, pp. 722-723, as well as the information in earlier editions. Back 5. render Petzinger, Thomas Jr. , Upstarts lovable Bid for Offshore Platform Stuns its elder Rivals, Wall Street Journal, p. 1, c. 6, Nov. 20, 1985. Back 6. See H. Cross, Engineers and Ivory Towers, McGraw-Hill Book Co. Inc. , New York, 1952. Back Table of Contents Next Chapter Go Up to Table of Contents Go To Chapter 2 (Organiz ing for Project Management) The Owners Perspective Introduction The Project Life Cycle Major Types of Construction Selection of Professional Services Construction Contractors Financing of Constructed Facilities Legal and Regulatory Requirements The Changing Environment of the Construction Industry The Role of Project Managers References Footnotes 1. The Owners Perspective 1. 1 IntroductionLike the five blind men encountering different parts of an elephant, each of the numerous participants in the process of planning, designing, financing, constructing and operating physical facilities has a different perspective on project management for construction. Specialized knowledge can be very beneficial, particularly in large and complicated projects, since experts in various specialties can provide valuable services. However, it is advantageous to understand how the different parts of the process fit together. Waste, excessive cost and delays can result from poor coordination and commun ication among specialists.It is particularly in the interest of owners to insure that such problems do not occur. And it behooves all participants in the process to heed the interests of owners because, in the end, it is the owners who provide the resources and call the shots. By adopting the viewpoint of the owners, we can focus our attention on the complete process of project management for constructed facilities rather than the historical roles of various specialists such as planners, architects, engineering designers, constructors, fabricators, material suppliers, financial analysts and others.To be sure, each specialty has made important advances in developing new techniques and tools for efficient implementation of construction projects. However, it is through the understanding of the entire process of project management that these specialists can respond more effectively to the owners desires for their services, in merchandise their specialties, and in improving the producti vity and quality of their work. The introduction of innovative and more effective project management for construction is not an academic exercise.As reported by the Construction Industry Cost Effectiveness Project of the Business Roundtable 1 By common consensus and every available measure, the United States no longer gets its moneys worth in construction, the nations largest industry The creeping erosion of construction efficiency and productivity is bad discussion for the entire U. S. economy. Construction is a particularly seminal industry. The price of every factory, office building, hotel or power plant that is built affects the price that must be charged for the goods or services produced in it or by it.And that effect generally persists for decades Too much of the industry remains tether to the past, partly by inertia and partly by historic divisions Improvement of project management not only can aid the construction industry, but may also be the engine for the national an d world economy. However, if we are to make meaningful improvements, we must first understand the construction industry, its operating environment and the institutional constraints affecting its activities as well as the nature of project management.Back to top 1. 2 The Project Life Cycle The acquisition of a constructed facility usually represents a major capital investment, whether its owner happens to be an individual, a private corporation or a public agency. Since the commitment of resources for such an investment is motivated by market demands or perceived needs, the facility is expected to satisfy certain objectives within the constraints specified by the owner and relevant regulations.With the exception of the speculative housing market, where the residential units may be sold as built by the real estate developer, most constructed facilities are custom made in consultation with the owners. A real estate developer may be regarded as the sponsor of building projects, as much as a government agency may be the sponsor of a public project and turns it over to another government unit upon its completion. From the viewpoint of project management, the terms owner and sponsor are synonymous because both have the ultimate authority to make all important decisions.Since an owner is essentially acquiring a facility on a promise in some form of agreement, it will be wise for any owner to have a clear understanding of the acquisition process in order to maintain firm control of the quality, timeliness and cost of the completed facility. From the perspective of an owner, the project life cycle for a constructed facility may be illustrated schematically in Figure 1-1. Essentially, a project is conceived to meet market demands or needs in a timely fashion.Various possibilities may be considered in the conceptual planning stage, and the technological and economic feasibility of each alternative will be assessed and compared in order to select the best possible project. The financing schemes for the proposed alternatives must also be examined, and the project will be programmed with respect to the timing for its completion and for available cash flows. After the scope of the project is clearly defined, detailed engineering design will provide the blueprint for construction, and the definitive cost estimate will serve as the service line for cost control.In the procurement and construction stage, the delivery of materials and the erection of the project on site must be cautiously planned and controlled. After the construction is completed, there is usually a brief period of start-up or shake-down of the constructed facility when it is first occupied. Finally, the management of the facility is turned over to the owner for full occupancy until the facility lives out its useful life and is designated for demolition or conversion. Figure 1-1 The Project Life Cycle of a Constructed FacilityOf course, the stages of development in Figure 1-1 may not be st rictly sequential. Some of the stages require iteration, and others may be carried out in parallel or with overlapping time frames, depending on the nature, size and urgency of the project. Furthermore, an owner may have in-house capacities to handle the work in every stage of the entire process, or it may seek professional advice and services for the work in all stages. Understandably, most owners choose to handle some of the work in-house and to contract outside professional services for other components of the work as needed.By examining the project life cycle from an owners perspective we can focus on the proper roles of various activities and participants in all stages disregarding of the contractual arrangements for different types of work. In the United States, for example, the U. S. Army Corps of Engineers has in-house capabilities to deal with planning, budgeting, design, construction and operation of waterway and flood control structures. Other public agencies, such as st ate transportation departments, are also deeply involved in all phases of a construction project.In the private sector, many large firms such as DuPont, Exxon, and IBM are adequately staffe