1. Overview of the Construction Industry
BCT 100
Overview of the Construction Industry

2. The Construction Industry
What is the ‘Construction Industry’?
Who works in this industry?
Why is it important?

3. Construction…. Is misunderstood by the average person
Accounts for 16% of the GNP in the US
Is an ever evolving industry
Do you agree with Ralph Leibing’s assertions above?
Why is our industry misunderstood?
The construction industry impacts everyday life in very disruptive ways, whether it be in your kitchen during a remodeling project, on the block near your office (requiring you to cross the street, cover your ears), or interfering with the flow of automobile traffic along your commute.

4. The Size of the Construction Industry
Construction spending in 1988 was estimated at 3.22 trillion dollars
In 2007, construction spending was estimated to be near 4.8 trillion dollars
15% of industrial workers employed in the US work in the construction trades
5% of all workers in the United States work in construction and related fields. The current economic downturn has temporarily altered this

5. Construction is influenced by:
Materials Available
Knowledge/Innovation of the builders
Skills Available in the Labor Force
Needs and Functions of the Proposed Structure
Desires of the Building Owners
Climate
Research and Development of New Technologies
In earlier sessions we discussed the importance of these criteria, and examined examples of each.

6. Categories of Construction
Residential Buildings
Nonresidential Buildings
Engineering Facilities
Industrial Facilities
Ralph Leibing, in his book, The Construction Industry, divides building types into four major categories. These categories are useful because they do represent the broad distinctions between types of buildings and projects that contractors work on. Many contractors, and design professionals, and specialty contractors, will specialize in a particular area, and often these are based upon building type. A company specializing in bridges may never build a building. Industrial facilities are highly specialized, and general building contractors leave this work to the professionals that specialize in industrial work. There will always be exceptions, but the general rule holds true.

7. Residential Buildings
Structures which house people. Single and Multi Family structures. Apartments, Townhouses, Retirement Homes, Assisted Living, Condominiums
Any structure that houses people is a residential structure. It may be in a mixed-use building, it may be large, it may be small.

8. Residential Buildings
Modern Residential Design Has Few Limits

9. Non-Residential Buildings
Institutional, Educational, Commercial (Hotels, Restaurants, Bars, etc), Religious, Agricultural, Recreational, Medical

10. Non-Residential Buildings
Institutional, Educational, Commercial (Hotels, Restaurants, Bars, Theaters….), Religious, Agricultural, Recreational, Medical
Non-Residential buildings serve the public, or private owners. They are distinct from residential buildings, they are non-industrial, and they are not infrastructure projects.

11. Non-Residential Buildings
Institutional, Educational, Commercial (Hotels, Restaurants, Bars, etc), Religious, Agricultural, Recreational, Medical

12. Engineering Facilities
Infrastructure (Dams, Tunnels, Bridges, Highways, Canals), Utilities, Treatment Plants, Marine Structures

13. Engineering Facilities
Infrastructure (Dams, Tunnels, Bridges, Highways, Canals), Utilities, Treatment Plants, Marine Structures

14. Industrial Facilities
Heavy Industry. Refineries, Chemical Plants, Power Generation Plants, Transmission Lines, Oil Rigs, Smelters

15. The Variables in Construction
Scope of Work
Cost
Quality of the Construction
Time to Complete
These variables are all interrelated. Any adjustment to one of these variables will necessarily impact at least one of the others. For example, an increase in the scope of work will increase the cost, it may impact the time to complete. A reduction available funds may reduce the quality of a project. A contractor may reduce the cost of a particular task if they are granted additional time to complete the task at their convenience. The Cost of the project will go up if the time allowed to complete the project is too short, or is reduced, requiring acceleration, and the associated overtime or additional workers associated with that acceleration.

16. The Variables in Construction
Scope of Work
How big is your project?
Does the size of your project increase once on site?
Who is responsible for increasing the size of the project?
Where is the scope of work documented?

17. The Variables in Construction
Cost
What is the Contract Sum?
What factors can impact Cost?
Who is responsible for increasing the cost of the project? Containing cost?
What is a Change Order?

18. The Variables in Construction
Quality
Do Drawings and Specifications indicate level of quality?
What factors can impact Quality?
Who is responsible for maintaining project quality?
Who sets expectations for quality, and what happens if there is a disagreement about the quality of the work?

19. The Variables in Construction
Schedule
Does the contract stipulate a completion date?
What factors can impact Schedule?
Who prepares the project schedule?
Who is responsible for maintaining the schedule and meeting the completion date?
What about Change Orders?

20. Schedule
Unlike Cost, Scope and Quality, the Contractor may not be able to fully manage and control the project schedule.
Why?
The contractor is dependent upon suppliers and sub-contactors who may not meet their commitments. Cost is predetermined, and quality can be assessed as work progresses. Late deliveries, and bankrupt subs, are harder to control.

21. The schedule breaks the work down into individual tasks, and assigns a duration of time for each task. Critical Tasks, those that must be completed before other work can commence, fall on the Critical Path

22. The Three Major Elements
Engineering
Construction
Project Management
Leibing breaks the work done on a project into three distinct categories. The Engineering category addresses the up front design, planning and documentation that lead to bidding.
The construction category covers all those involved in the assemblage of the parts to build the building.
The project management category covers the people involved in overseeing the physical work.

23. The Three Major Elements
Engineering
Includes: Architectural Services, Engineering Services including Structural, Mechanical, Civil, Geotechnical.
All Design and Documentation and Specifications

24. The Three Major Elements
Construction
Includes: General Contractor, Sub-Contractors such as Plumbers, Electricians, Framers, Concrete, Masons, HVAC installers, Flooring, Tile, Cabinetry, Drywall, Insulation.
All Construction and Installation, Hands-On work

25. The Three Major Elements
Project Management
Includes: Project Manager, Contract Administrator (Architect), Construction Manager, Owner.
All non-construction and non-design based construction administration work, including planning in the beginning, bidding, permitting, approvals, correspondence, change orders, rfi’s, payment certif., etc.

26. Education – 3 Different Tracks
How do people enter the construction industry. Here are three major paths.
Professional Schools – Architects and Engineers
Technical / Professional Education – Project Management / Construction Specialist
Hands-on Training / Apprenticeship – Union and Non-Union on the job training
Workers enter the construction industry from a variety of avenues. Some pick up a broom or a hammer and start working, with a relative, a friend, or on an entry level job, and work their way up. Others join an apprenticeship program, and work their way up through a trade union. Some attend a community college for training. Engineers and Architects attend colleges and universities, as do many others who work in management positions for contractors, suppliers, fabrication companies, etc.
Construction is still one of the few industries with upward mobility for the hard worker.

27. Team Work vs. My Work “A chain is only as strong as its weakest link”
Interaction with others on the team is crucial to success. Adversarial relationships are becoming a thing of the past.
Everyone must be a member of the team
Cost vs. Benefit analysis dictates that we work together. Today the costs are just too high to do otherwise. Of course, exceptions exist.

28. Is There A Productivity Problem?
Leibing states that the construction industry has consistently had low productivity when compared to other business sectors. He cites the Business Roundtable studies.
What Improves Productivity?
Why Does Productivity Matter?
How is the Construction Industry different from the automobile industry?
One off custom made product with a new team on a new site every time. That may contribute to the productivity issue.

29. Importance of Relationships
Construction Companies of all shapes and sizes
Vast majority are small, owner-operated, often family run businesses
Working with good reliable people reduces costs and increases competitiveness
Reputation leads to new work, or to less work
Design professionals prefer to work with contractors they know and trust
Contractors prefer to work with Design professionals they are familiar with

30. What is Value Engineering?
Architect and Constructor review the drawings and discuss the ‘Best’ methods, and materials, to achieve the Architect’s intent while keeping an eye on Constructability and Cost
VE is not cost cutting. VE is not scope reduction. VE is finding the best solution on the market that fits the design approved design criteria
Many people in the industry think VE is just cost cutting. Wrong. Reducing Scope, and Cost Reduction, are Scope and Cost Reduction. Call them what they are. VE is adding value without taking away from the documented design intent and performance specification. Apples for Apples Value Enhancement.

31. What is Value Engineering?

32. Why Value Engineer? Cost and Schedule Containment.
Ease of Construction
Warrantee Improvement / Defects Avoidance
Design Functionality Credibility

33. Project Delivery Systems

34. Project Delivery Systems
Traditional
Alternative
The delivery system is the type of contract that will be signed between the Contractor and the Owner. There are several ways the Owner can engage in a contract for construction services. Each offers distinct advantages and disadvantages to the parties of the contract.

35. The Traditional Delivery System
Design / Bid / Build
For nearly 100 years, the vast majority of projects utilized this model. The architect drew up the plans, the contractor bid the job, and the low bidder was awarded the job.
An old time architect working at an old time drafting board, drafting an old time building.
Times have changed.

36. Design / Bid / Build Architect / Owner agree on Program
The stages of the Design / Bid / Build project delivery system, or contract
Architect / Owner agree on Program
Architect Designs and Documents Project
Submit Documents to Contractors for Bid Prices
Selection of Contractor (usually lowest bidder)
Contractor Builds based upon bid set
Architect oversees work is done according to the drawings and specification
Changes are documented and priced as Change Orders

37. Pros / Cons of Design / Bid / Build
Architect maintains total control over the project from inception to completion
Time consuming
Inefficient to design in a vacuum, bid, then revise design based upon builder input

38. NST: Negotiated Select
Contractor is Selected by the Owner, without a competitive bidding process
Design Team and the Select Construction Team review the design details and value engineer to agree on details and a contract price
Highest satisfaction ratings from all parties involved.

39. Pros / Cons of Negotiated Select
Architect maintains total control over the project from inception to completion, BUT
Works with Builder early to discover potential problems
Owner Needs a Builder that the Owner can trust
No Competitive Pricing

40. Alternative Delivery Systems

41. Alternative Delivery Systems
Design / Build
In the 1970’s and early 1980’s, the cost of construction was skyrocketing. Inflation was out of control, and interest rates reached all time highs.
16-18% interest on a construction loan.
Owners needed to reduce the cost of construction. How?
Reduce time for design and documentation
Reduce bidding time, or eliminate it
Reduce the size of construction to be built
Select cheaper materials

42. Diagrams comparing two systems, prepared by someone who prefers the Design/Build Model

43. Design / Build
The Design/Build model eliminates the competitive bidding phase, like Negotiated Select, but goes further: Merge Design and Construction services under one contract, streamlining, building in value engineering.
Design Team and Construction Team work for the same company, OR, have formed a joint venture partnership between a design firm and a construction company
Bid Phase is replaced with continual evaluation of cost throughout the design and documentation process
Owner is contractually related to the Design/Build Team

44. Design / Build

45. Design / Build

46. Pros / Cons of Design Build
Accelerates the process, by eliminating bidding
Owner no longer has the Architect as an independent commentator on the construction work
Design services are usually inferior
Economic viability of the merged company was often difficult
No competitive bid, although pricing is typically transparent

47. Construction Management
Construction Manager is introduced as an alternative to traditional systems and Design/Build.
Construction Manager is hired to represent the interests of the owner
CM bridges between the Design Team and the Constructors to identify efficiencies
Owner may or may not be contractually related to the Design Team and the Construction Team
Construction Manager supervises work, reducing the services provided by the architect.

48. Types of Construction Management
Construction Management services primarily began as a Fee based service. However, Owners found this lacking because the CM had no skin in the game to keep a project schedule, or to control cost. The result was the development of the At Risk model. With At Risk, the CM fee is based upon a percentage of the construction cost, but a GMP is attached, as is a completion date.
Construction Manager- For Fee
CM is paid a percentage of the construction cost for management services
Construction Manager- At Risk
CM is paid a percentage of cost, but also, Guarantees Final Maximum Price (GMP).
CM/GC
Today’s term for CM at Risk. Selected on qualifications, and possibly a ballpark price.

49. Pros / Cons of CM For Fee
CM works directly with the Owner, representing their interests
Intended to reduce supervisory requirement of Architect
CM For Fee did not link CM to cost and time
CM supervises work to the letter of the agreement. Architect would have supervised to the spirit of the agreement. Less rigorous oversight, but also less cost overall

50. Pros / Cons of CMGC
Contractor on project based upon qualifications increases quality and completion performance
Link to Cost and Schedule performance that does not exist in CM for Fee
Contractor on board to evaluate design alternatives and improve constructability and reduce cost
Design benefits from input by contractors and installers, including benefits to consultant work
No competitive bids. Competitive pricing comparison can be provided by independent cost estimate (ICE)

51. CMGC
Basic Organizational Diagram

52. CMGC
Contractor Selection Diagram

53. Integrated Project Delivery
Architect and Constructor review the project goals BEFORE the drawings are produced, working together with the consultants and discuss the ‘Best’ methods, and materials, to achieve the Owner’s requirements, Architect’s intent while keeping an eye on Constructability, Cost, Energy Efficiency and Sustainability

54. Why Integrated Project Delivery?

55. Integrated Project Delivery