Construction Fundamentals

Chapter 3 Construction
Management Functions
Purpose of operating a business is
to earn a profit!

Chapter 3 Construction
Management Functions
To be successful a construction
company must:
Estimate the cost of construction
projects accurately
Predict the schedule of the work
Control the progress and
expenditures during construction
Complete projects safely and on time

Construction Management
Functions
Responsibility to construct the project:
in accordance with the plans and
specifications
to satisfy the customers cost, quality,
and time expectations
The project team is organized for the
purpose of accomplishing those
missions!

Owner Functions

Defining the scope of the project

Planning the project
Financing the project
Ensuring the project team
understands the projects goals

Construction Management
Functions
Company level
Selecting the right jobs to bid
Preparing the cost estimate
Submitting the bid
Procuring the payment and
performance bonds
Scheduling the work
Securing project operating capital

Construction Management
Functions
Construction site level
Setting the standards for quality
and safety

Planning the sequence of

construction

Controlling progress and

expenditures

Construction Management
Functions
Construction site level

Communicating effectively with

owner and designer
Coordinating the work of the
subcontractors
Managing submittals, change
orders and periodic pay estimates
Closing out the project

Project Planning And Design

Master planning
Scope definition
Owner determines exactly what
kind of a facility will be built
Sets the design objectives for the
Architect/Engineer

Planning phase

Influence on Construction
Quality

Influence on Construction
Project Cost

Impact of Time on the Cost of

Project Changes

The Business of Construction

Management

Planning Phase
Select the designer
Define the project goals
Ensure the availability of sufficient
funds to complete the project
Select and purchase the project site,
Determine construction
procurement system and the form
of construction contract to be used.

Design Phase
Primary requirement for any facility
is that it must be safe!!

Building codes
Owner and A/E schedule design
reviews
schematic drawings
preliminary drawings
working drawings

Bid Phase
First step is to decide whether or not
to bid the job. Contractors are
generally limited in their ability to bid
by two factors:
their bonding capacity and
the policies of management

Policies of Management
Factors contractors consider in
deciding whether or not to bid a
particular project include:
Location of the work

Factors Contractors Consider

Identity of the owner
Availability of key company

personnel

Experience in the type of work

solicited

Factors Contractors Consider

Whether or not there is financing
for the project

Size of the project.

Bid Preparation
Bid preparation is expensive!
In preparing a bid, contractors
must consider the costs of:
Equipment
Labor
Materials
Subcontractors

Bid Preparation
Consider the costs of:
Job and company overhead,
contingency, and profit
Should also consider the

number of competitor bidders

and the bidding history of those
competitors on similar projects

Award Phase
Owner provides:
Builders Risk insurance
Successful bidder must provide:
Payment and performance bonds
Workers compensation insurance
Liability insurance
List of subcontractors
Detailed project schedule

Notice to Proceed
Contractor cannot begin the work
until the Notice to Proceed is
received so
Use the time between bid opening and
contract award for detailed pre-

project planning.

Pre-project planning
Planning how the work will
proceed and in what sequence
Construction procedures
Type of equipment to be used
Job access
Location of the field office and
storage areas
Final selection of subcontractors
and suppliers

Pre-project planning
Cash flow analysis should be
completed to determine if the
company needs to borrow money
Detailed project schedule is
prepared
Work break down (WBS) and
pay schedule are planned

Construction Phase
Size of the contractors on-site
project management organization
is a function of the size and

complexity of the project.

Project Management Team

O w ner

G e n e ra l
C o n tr a c to r

M e c h a n ic a l

E le c t r i c a l

P lu m b i n g

C o n c r e te

HVAC

S tr u c tu r a l

O th e r
T ra d e s

Construction Company
Team Functions

Project managers (PM)

Superintendents
Schedulers
Estimators
Material expediters

Owners Project Team

Size of the owners project team will
depend on the size and complexity of
the project small project (A/E)
Large highway project
Resident engineer
Inspectors
Surveyors
Quality assurance technicians

Managing Critical Activities

Contracts are broken down into

activities for purposes of

scheduling, estimating, progress
control, and cost control. Large

projects can have several hundred

activities, or more!
Trick is to know which activities are

critical

Critical Activities
Critical activities are those that could
impact the cost of the work by at least
one half of one percent of the bid price:
For example, on a $1,000,000
project, any activity with a potential
for cost over-run or under-run of
$5,000 or more is by definition a
critical activity.

Paretos 80-20 rule

20% of the activities are critical
and should be managed

carefully
The other 80% will average
out

Project Control
Cost control
Cash Flow Analysis
Schedule Control
Material
Management

Cost Control
Possible corrective actions could include:
Adding additional trade workers or
crews
Adding or removing equipment
Working overtime
Bringing in additional subcontractors

Cost Control
Possible corrective actions could
include:
Making the job more efficient

Eliminating factors that cause

subcontractors to interfere with
each other

Productivity

Q
Let R = Production rate T
R
Where: T is total time, Q is the
total quantity to be installed
The total cost is determined by the
equation:
C t = Ch T
Where Ct = total cost and Ch = cost
per hour, or
Ct = Ch (Q/R)

Cost

Cash Flow Analysis

Time

Cost

Front Loaded Cost Curve

Time

Cash Flow
Schematic
Diagram

Profit (loss) To Date

Project Manager must calculate profit
(loss) to date on a regular, weekly basis
Cost to date

Re-estimated cost to complete

Amount billed
Contract amount (including change
orders)

Example 3.2

Schedule Control

Chapter 4
Critical path - By definition, activities
on the critical path will delay the
entire project if they are delayed
Physical progress can be compared
with the financial progress to
determine if the project is:
on schedule or late
over budget or under budget

Materials Management
Ensure that materials are delivered
in a timely manner to the site in the
quantity and quality required. When
materials arrive they are:
Counted
Inspected
if necessary, Tested

Materials Management
Must determine the latest order date
accounting for the:

shop drawing
Preparation
submission and
approval time

lead time required for fabrication

shipping

Materials Management
Too many materials stored on the site
can lead to problem of:

space allocation
weather damage
theft

Construction Related Design

Temporary structures such as:
Scaffolding
Forms
Temporary bridges
Shoring
Cofferdams
Rigging
must be designed by the contractor

Risk Management
Risks are inherent in construction
Industry is moving toward allocating
risks to the party most able to
control the specific risk
Managing risks means:
minimizing risks
insuring against risks
and sharing risks

Risk Management
Construction risks - inability of a
subcontractor to perform
Economic risks - cost escalation

Political/public risks - disapproval of

the required project permits

Physical risks - subsurface conditions

Risk Management
Contractual and legal risks risks assigned by contract over
which the contractor has no control

Design risks - a project design that

is not constructible

Risk Management
Worker injured or killed
A job accident that injures the public
A construction vehicle is involved in
an accident off the project

Risk Management
Risks are best assumed by the
party with the ability to best
control the risk
The best way to manage risks is to
avoid them, but the construction
industry is characterized by risks!

Risk Management
Contractors manage risks by

purchasing insurance
Examining the contract language
addressing changed conditions

Contractor safety programs

Subcontracting is also a form of risk
management require performance
and payment bonds

Value Engineering (VE)

Function analysis or value analysis
Main objective to reduce project

cost, without reducing the quality

of the structure
VE exists because contractors know
better ways to build projects, and
owners are willing to pay for that
knowledge!!

Assignment
Due next class
Chapter 3 Review Questions
3.5
3.10
3.15