1. CE 366 PROJECT MANAGEMENT AND ECONOMICS Robert G. Batson, Ph.D., P.E. Professor of Construction Engineering The University of Alabama Rbatson@eng.ua.edu

2. Sears, Sears, & Clough Chapter 1 Construction Practices

3. The Construction Industry The largest production activity in the U.S. – about 10% of GDP One of the largest sectors by employment – about 5% of U.S. total As countries modernize, and their economics mature, construction projects provide the infrastructure required -civil structures -agricultural and industrial facilities -public and private sectors Carried out by contractors who build for an owner the approved design, under contract -prime (or general) contractor -specialty subcontractors 1.1

4. The Construction Project Phase system -Output of one phase input to the next -Specific “suppliers” and “customers” for each phase -Each phase may involve hundreds or thousands of identifiable activities The assembly process, in particular, has precedence relationships among activities, and time/resource requirements to complete each activity – this leads to the need for project graphical representations to document activity relationships and develop a realistic schedule for consumption of time and resources Construction projects are characterized by their -Complexity -Diversity -Non standardized production process (unlike manufacturing) 1.2

5. Project Phases A.Planning and Definition Requirements from each project stakeholder, including constraints Project characteristics Preliminary architectural or engineering designs B.Design Architectural and engineering design of the entire project To provide all necessary drawings and specifications for the item(s) to be constructed C.Procurement and Construction Ordering, delivering, and tracking equipment and materials Physically erecting the project and putting the materials and equipment in place Using construction manpower and equipment, appropriately managed 1.3

6. Key Project Stakeholders End users of the constructed item and installed equipment Owners may be : -public (e.g., a government entity) -Private (individual, partnerships, corporations) Architect-Engineer (“the design professional, or firm”) may be: -internal to owner -under contract with the owner -may be a branch of, or affiliated with, a construction contractor under “design-build” mode of construction Prime Contractor -single-contract system (single prime full-responsibility) -separate contracts for independent primes; managed by the owner, the architect-engineer, or a hired construction manager. 1.4

7. Award of Contract to Selected Bidder Competitive Bidding -Required by law on public construction projects -Estimated total cost to deliver the project, in the time stipulated, plus profit -Lowest responsible bidder wins, and is obligated to complete the work in exchange for the contract amount -For design or management services, the award of that work is often referred to as a fee-based bid. Negotiated Contracts -Owner handpicks a contractor -Contract terms and conditions are negotiated, typically cost-plus-fee type contract Combined Bidding and Negotiations 1.5

8. Subcontracting Degree of subcontracting varies Subcontracting used because -prime does not have experienced people needed -prime does not have equipment needed -prime is overburdened in the specialty area -specific licensing, bonding, and insurance requirements for the specialty Subcontractor has contract with prime, not the owner -prime remains responsible to owner for performance of the subcontractor -coordination of multiple, interfacing subcontractors is an important part of the prime’s overall project management 1.6

9. Project Delivery Systems Design-Bid-Construct (Design-Bid-Build) Construction Manager (CM) -Two contract types (for fee; at risk) -Timing of involvement (preconstruction services; construction services) Design-Construct (Design-Build) -45-50% of all projects today (vs. 3% in 1986) -Time advantages because fast-tracking naturally occurs -Accountability and coordination improve -Number and type of change orders are substantially reduced 9

10. Construction Contract Types Most Common 1.Fixed-sum (lump-sum or unit price) 2.Cost plus a fee 3.Cost plus a fee with guaranteed maximum price (GMP) 4.Construction manager 5.Design-build Less Common 1.Work-by-Force account 2.Turn-key 3.Build-operate-transfer (BOT) 4.Joint venture (national or international firm partners with local firm) 1.8

11. Construction Management Begins during design phase -Facility life cycle costs are estimated -Input to design professional on materials and methods to build the structure, both costs and delivery time -Input on operations and maintenance costs -Preliminary project schedules with attention to: long- lead items; key milestones that must be met; availability of site, equipment, materials, and labor Management of field construction -One party assumes responsibility -The project manager and supporting staff -Numerous organizational interfaces 1.9

12. The Project Manager What he/she does Organizes, plans, schedules, and controls field work To meet project time and cost promises Coordinate with both individuals and organizations Shares authority with field superintendent (site supervisor) Directs staff – local or central office Make decisions and directs actions, on behalf of his upper management Qualifications Practical construction experience, of increasing responsibility Access to staff who perform computerized planning, scheduling, and control Planning-oriented, shift from daily problems to foresight Leadership skills 1.10