Module 1: Introduction to Construction Project Management &

Construction Organization

PROJECT
It is a unique set of co-ordinated activity with definite starting and finishing point, undertaken by
individual or by an organization to meet the specific objectives within defined time, schedule,
cost and performance.

PROJECT MANAGEMENT
Project management is the application of knowledge skills, tools and techniques to project
activities to meet project requirements. Project management is accomplished through the use of
the processes such as: initiating, planning, executing, controlling and closing. The project team
manages the work of the projects, and the work typically involves:

 Competing demands for: scope, time, cost, risk, and quality.

 Stakeholders with differing needs and expectations.
 Identified requirements.

NEED FOR MANAGEMENT OF BUILDING/ CONSTRUCTION PROJECTS

1. Creation of friendly environment to enable people to contribute productively, willingly and
voluntarily.
2. Good leadership (ability to turn vision into results).
3. Making effective decisions considering future needs, their impact, quality and acceptability
factors.
4. Responsibility for performance.
5. Extracting the abilities of the employees productively and eliminating irrelevant weakness.
6. Team building to achieve positive energy.
7. Deployment of human and capital resources to create and satisfy markets in the most
effective way.
8. Motivate people to get desired level of performance.
9. Balancing competing goals and setting priorities.
10. The set goals should be SMART model (specific, measurable, attainable, realistic, and track
able).

PRINCIPLES OF PROJECT MANAGEMENT

The principles of project management can be applied to any level or branch of a project.
1. Project Structure
2. Defination Phase
3. Clear Goals
4. Transperancy About Project Status
5. Risk Recognition
6. Managing Project Disturbances
7. Responsibility Of The Project Manager
8. Project Success

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1. Project Structure:
A project structure can usually be successfully created by considering:
a) Project Goal:
 “What has to be done” is usually a good starting point when setting a project goal. This will
lead to the project structure plan.
 This plan consists of work packages which represents work units that can be assigned to a
personnel resource.
 These work packages and their special relationship represent the project structure.
b) Project timeline and order:
 A flowchart is a powerful tool to visualize the starting point, ending point and the order of
work packages in a single chart.
c) Project milestones:
 It is defined as certain phase of your project where you can evaluate the corresponding costs
and results.
 Milestones represent influential step during the project.
 The series of work packages leads to the achievement of a sub- goal.

2. Defination Phase:
It is a phase where many of projects go wrong. This can happen when no clear definition or
when the definition is muddled due to the involvement of too many stakeholders.
“Successful definition must involve the entire team at every step to facilitate acceptance
and commitment to the project”

3. Clear Goals:
The project manger is responsible for the achievement of all project goals. These goals should
always be defined using the SMART model (specific, measurable, attainable, realistic, and track
able). The project manager should keep the daily goals well organized such that the work can be
decided before the project begins providing clear goal to all.

4. Transparency About Project Status:

The flowcharts, structure plan, and milestone plan are useful tools to track the project progress.
The project manager should prepare a brief report about the status of the project at each stage
and should be presented to stakeholder. This will help to give an overview about the cost, the
timeline and the achieved milestones.

5. Risk Recognition:
The project manager should evaluate the risks regularly. Every project comes with variety of
risks. The project is a unique venture with strict goals concerning costs, appointments, and
performance. Sooner the risk is identified, sooner we can nullify the negative developments.

6. Managing Project Disturbances:

It is very important to have enough capacity to identify every single risk that may occur. It is
necessary to develop strategies to avoid any big risk. When something goes wrong, we should
rely on skill set, knowledge and instinct to react quickly and productively.

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7. Responsibility Of The Project Manager:

The project manager develops the project plan with the team and manages the team’s
performance of project tasks. The project manager is also responsible for securing acceptance
and approval of deliverables from the Project sponsor and stakeholders. The project manager is
responsible for communication, including status reporting, risk management and resolving the
issues and ensuring the project is delivered within budget, on schedule and within scope.The
project managers of all projects must possess the following attributes along with the other project
related responsibilities:
 Knowledge of Technology.
 Understanding Management concepts.
 Interpersonal skills for clear communications.
 Ability to see the project as an open system and understand the external- internal interactions.

8. Project Success:
Some generally used success criteria include:
 Meeting key project objectives such as business objectives of the sponsoring organization,
owner or user.
 Eliciting satisfaction with the project management process, i.e., the deliverable is complete
up to standard, is on time and within budget.
 Reflecting general acceptance and satisfaction with projects deliverable.
OBJECTIVES OF PROJECT MANAGEMENT
Objectives are described what the project is trying to accomplish, or what business value the
project will achieve. Any project objectives can be described as follows:

 To ensure finishing and delivering the project on time.

 To ensure the delivery of the project within budget.
 To ensure reaching the required level of quality, through reducing errors, improving
effectiveness, and applying the appropriate control.

STUDY AREAS IN PROJECT MANAGEMENT

The Project Management Institute (PMI) has divided the large field of project management into
ten parts which is known as the Project Management Knowledge Areas. Project Management
Knowledge Areas coincide with the process groups, which are project initiation, project
planning, project execution, monitoring, controlling and project closing. These are the
chronological phases that every project goes through. The knowledge areas take place during
anyone of these process groups.

1. Project Integration Management

This knowledge area contains the tasks that hold the overall project together and integrate it into
a unified whole.

a) Develop Project Charter. One of only two processes during the Initiation phase, the
development of a project charter initiates the project and authorizes the project manager.

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b) Develop Project Management Plan. This is the primary guiding document for the project
manager and end result of the planning phase. It is used to ensure a successful outcome to
the project. The project management plan is distributed and approved by relevant
stakeholders, particularly the project sponsor, and changes are tracked through the change
log.
c) Direct and Manage Project Work. This process encompasses the production of the
project’s deliverables.
d) Manage Project Knowledge. Most projects require the acquisition of additional
knowledge. This requires active management to ensure the project finishes on time and
budget.
e) Monitor and Control Project Work. This process contains the work necessary to monitor
the project, perform earned value analysis and project status reports, and identify potential
project changes.
f) Perform Integrated Change Control. In this process the change control is carried
out. Whether your project requires change request forms, project sponsor approvals, and
other administration or if it’s a basic change log, this process manages project changes.
g) Close Project or Phase. This process contains the tasks necessary to close the project, or
the project phases.

2. Project Scope Management

This knowledge area involves the project scope, that is, the work that is included within the
project. Since scope changes are one of the top causes of project changes and grief in general, it
is very important that the boundaries of the project be well defined from the outset and
monitored rigorously. It is very easy for people to insert unauthorized work into the project
when the project appears to be big enough to absorb it, but most projects are estimated with the
minimum cost.

When competing for (or obtaining) work, we are motivated towards the minimum scope. But
when the project has begun we are motivated towards the maximum.

a) Plan Scope Management. The Scope Management Plan is part of the project management
plan and can be a section within it rather than a standalone document.
b) Collect Requirements. At this stage the detailed requirements of the final product or service
are assembled and itemized.
c) Define Scope. A scope statement is created which can be in sentence form or bulleted. You
can’t delineate every project boundary, but the scope statement should be comprehensive
enough that it reduces some of the major risks to the project.
d) Create WBS. A Work Breakdown Structure (WBS) contains either a graphical or table-style
breakdown of the project work.
e) Validate Scope. During the project the deliverables are “validated” meaning they are
approved by the recipient. Note this appears during the Monitoring & Controlling process
group, and it refers to the formal acceptance of the deliverables after they have been
submitted, not the specifications for the deliverables during the planning phase.
f) Control Scope. The scope statement must be revisited regularly in light of the project work
that has been completed and current project status. If you are behind schedule, for example,

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you may wish to gravitate toward a minimum acceptable scope rather than all the bells and
whistles you wanted to produce in the beginning.

3. Project Schedule Management

This is usually the most time consuming of the knowledge areas. During planning, the project
manager must divide the project into tasks and create both a schedule (start and finish dates for
each task) and budget for each task. During the project, earned value management determines
the project status at regular status intervals. Because most project changes involve a change to
the schedule, it must be continuously re-baselined and the project management plan updated (and
approved by the project sponsor).

a) Plan Schedule Management. The Schedule Management Plan contains information such as
how the schedule will be created, who will be responsible for it, how aggressive it will be,
and under what circumstances it will be changed.
b) Define Activities. The project is divided into tasks. Note that according to the PMBOK this
process is different from Create WBS within the Scope Management knowledge area, but in
practice they are generally the same. A task list is produced which defines all of the project
(not most of it!).
c) Sequence Activities. The tasks are “sequenced” that is, they are ordered and the
relationships between them are established. These relationships take the form of Finish-to-
Start (FS), Finish-to-Finish (FF), Start-to-Start (SS) and Start-to-Finish (SF). For small
projects with simple schedules this is not necessary.
d) Estimate Activity Durations. Using its resource list, a duration is estimated for each task.
e) Develop Schedule. Firstly, a network diagram is produced which determines the critical
pathas well as floats for each task. Secondly, a graphical bar chart schedule is created with
each activity plotted on their early start dates. Lastly the resource usage is plotted and tasks
are moved along their floats to flatten the resource usage. This is called resource levelling.
f) Control Schedule. Earned value analysis is performed on regular project status intervals to
determine whether the project is ahead or behind schedule, and by how much, at that status
point.

4. Project Cost Management

The project budget is usually one of the most sensitive parts of a project. Wouldn’t it be nice to
have have project budgets that are comfortable and contain plenty of cushion, but very few
projects have this luxury. The budget must be established through rigorous estimating
techniques and monitored to ensure there are no unnecessary changes that make stakeholders
unhappy.

a) Plan Cost Management. The Cost Management Plan establishes things like the
methodologies with which the project budget will be established, the criteria for changes, and
control procedures.
b) Estimate Costs. The cost of each task is estimated, taking into account the resources, labor,
materials, equipment, and any other item of cost necessary to complete the task.
c) Determine Budget. The task budgets are rolled up into an overall project budget.

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d) Control Costs. Earned value analysis is performed on regular project status intervals to
determine the project status at that status point.

5. Project Quality Management

Quality is one of the triple constraints of Time, Cost, and Quality. As such, when you need
better quality you need to put in more time or cost. Because of this integral nature of
the quality of the project’s deliverables, the quality level should be established during project
planning and specified within the project management plan. Then when issues arise regarding
product specifications, there is a plan to deal with it.

a) Plan Quality Management. The Quality Management Plan can be a section of the project
management plan or a stand alone document, and it contains the quality specifications for the
product or service. There should be no doubt whether the product being produced is a
Mercedes-Benz or a Pinto.
b) Manage Quality. The processes that ensure the quality of the deliverables must be inspected
regularly to ensure they are working.
c) Control Quality. The deliverables themselves are inspected to ensure they conform to the
quality standards.

6. Project Resource Management

The project team is usually one of the most important factors in the success of a project. If you
have a good team, you will have a successful project. This knowledge area is concerned with
acquiring the right team, ensuring their satisfaction, and tracking their performance.

a) Plan Resource Management. The Human Resource Management Plan identifies the
roles/positions required by the project, the minimum requirements for those roles, and how
they fit into the overall project structure.
b) Estimate Activity Resources. To ensure the necessary resources are available, the quantity
of each resources needs to be estimated.
c) Acquire Resources. Once the required number of resources has been estimated, the
resources can be acquired.
d) Develop Team. The project team often requires training to develop the necessary
competencies to complete the project, but the development of the team environment and
interaction between team members is also actively managed.
e) Manage Team. The project team is actively managed to ensure their production is
maximized and they are satisfied.
f) Control Resources. The resources are monitored and their performance evaluated to ensure
maximum productivity.

7. Project Communications Management

Communication with stakeholders is often the key factor that allows stakeholders to be satisfied
even when unexpected changes happen. It is essential to develop a communications plan to keep

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all stakeholders “in the loop” throughout the project and communicate early and often when
unexpected issues occur.

a) Plan Communications Management. The Communications Management Plan identifies the

regular communication requirements of each stakeholder, such as investor circulars, progress
updates, and so forth. It also identifies any specific communications procedures for
unexpected issues or project changes.
b) Manage Communications. During project execution the communications plan is put into
practice and communications are actively managed.
c) Monitor Communications. During regular status points the project communications are
reviewed and revisions to the communications plan are initiated.

8. Project Risk Management

Managing project risk is one of the most underrated aspects of project management. Major risk
are very seldom identified up front and analyzed within the project management plan, but when
they are project stakeholders tend to forgive the unexpected issues much quicker. Not to
mention they hold the project manager in high regard for strong safeguarding of their
investments.

a) Plan Risk Management. The Risk Management Plan identifies how the risks will be
itemized, categorized, and prioritized.
b) Identify Risks. The major risks to the project are identified and placed into a risk
register (list of risks). Most projects have one or two risk that take significant precedence
over all others, and these should often get special attention.
c) Perform Qualitative Risk Analysis. Once the biggest risks are identified, they are classified
into categories of likelihood and impact, and then ranked according to priority.
d) Perform Quantitative Risk Analysis. Once the risks are ranked according to priority, the
biggest priority risks are numerically analyzed according to their impact to the project budget,
schedule, or any other part of the project.
e) Plan Risk Responses. For the most important risks, response plans are drafted such that all
parties are aware of how to respond to the occurrence of the risk.
f) Implement Risk Responses. The risk responses identified in the previous step are carried
out.
g) Monitor Risks. At regular status points the risk register is inspected and risks that have
expired are crossed off.

9. Project Procurement Management

Almost all projects have some form of outside procurement. Hiring subcontractors can get the
job done quicker or with better expertise but sacrifices the ability to control the quality, schedule,
or other factors. Also, the fine print often results in budget and schedule overruns that were not
envisioned.

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a) Plan Procurement Management. The Procurement Management Plan identifies the outside
procurement needs of the project and parameters under which the contractors will be
procured.
b) Conduct Procurements. The contractors are hired. This process involves producing the
statements of work, terms of reference, request for proposals, and such, as well as soliciting
the responses and choosing a vendor.
c) Control Procurements. During project execution the contractors must be managed and the
contracts monitored to provide early warning of project changes.

10. Project Stakeholder Management

There is nothing more important than the project’s stakeholders. You could, in theory, declare a
project a success if the stakeholders are satisfied but the project was a disaster (although I
wouldn’t recommend this line of thinking). The stakeholders should be actively managed and
addressed within the project management plan.

a) Identify Stakeholders. During the project initiation phase the major stakeholders
are identified and their concerns established.
b) Plan Stakeholder Engagement. The Stakeholder Management Plan lists each stakeholder
and prioritizes their concerns and potential impacts on the project.
c) Manage Stakeholder Engagement. During project execution the stakeholders must have
their needs addressed and communication lines must remain open.
d) Monitor Stakeholder Engagement. During status intervals each stakeholder must be
considered to determine if their needs and being addressed and if changes need to made to
ensure that they are.

TYPES OF CONSTRUCTION PROJECT

Construction involves a huge investment of money and manpower. Some of the most popular
kinds of construction projects include the following:

1. COMMERCIAL AND INSTITUTIONAL:

 Commercial and institutional construction involves building clinics, sports facilities, large
shopping centers, hospitals, universities, warehouses, retail chain stores, skyscrapers, schools
and other projects of various sizes and types.
 Specialty engineers and architects are usually hired to design buildings. This segment has
few competitors due to the complexity and high cost of commercial and institutional
buildings.

2. BUILDING
 Building construction is all about adding structure to the actual property and is likely the
most popular kind of construction project.
 Small renovations and room additions are some of the most common projects done in this
market segment.
 New construction projects often include building sheltered additions with walk-in access for
housing supplies, equipment, people or machinery and installation of utilities.

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3. RESIDENTIAL
 Residential construction projects include building single unit homes, subdivisions, cottages,
apartments, townhouses and building complexes.
 Engineers and architects usually design the building. The construction is given to builders
who employ subcontractors for mechanical, structural and electrical work.
 Residential projects should comply with codes of practice and local building authority
regulations.
 A lot of new builders prefer residential construction projects due to its ease of entry in the
industry of real estate. As such, it is a highly competitive market with potentially high
rewards and risks.

4. HIGHWAY CONSTRUCTION
 Highway construction projects include repair, construction and alteration of roads, alleys,
parking areas, highways, runways and streets.
 This segment includes all related construction together with the highway construction
project.

5. HEAVY CONSTRUCTION
 Heavy construction involves projects that are not accurately categorized as highway or
building.
 Dams, sewage treatment plants, dredging projects, flood control projects, water treatment
plants and sewer line projects are some examples of heavy construction.

6. INDUSTRIAL
 Industrial construction may include a small segment of the construction industry, but it’s very
important.
 Such projects are usually owned by large, profit industrial companies like medicine, power
generation and manufacturing.

7. SPECIALIZED INDUSTRIAL CONSTRUCTION

 Specialized industrial construction projects involve large scale projects with a high level of
technological complexity like chemical processing plants, oil refineries, nuclear power plants
and steel mills.

LIFE CYCLE STAGES OF A PROJECT (CONSTRUCTION PROJECT)

A standard construction project, in general, has following five major life cycle phases:

1. Initiation
2. Planning
3. Execution
4. Performance and monitoring
5. Closure

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1. Initiation Phase of Construction Project

We have to create and evaluate the project in order to determine if it is feasible and if it should
be undertaken, at the beginning of the project. Here the project objective or need is identified;
this can be a business problem or opportunity.

A suitable response to the need is documented in a business case with recommended solution
options. A feasibility study is conducted to examine whether each option clearly identifies the
project objective and a final recommended solution is determined.

Many questions related to the issues of feasibility i.e. “can we do the project?” and justification
like “should we do the project?” are mentioned and faced.

When a solution is approved, a project is initiated to implement the approved solution. For this, a
project manager is appointed. At this stage, the major deliverables and the participating work
groups are identified. This is the time when the project team begins to take shape. Approval is
then required by the project manager to move onto the detailed planning phase.

2. Planning Phase of Construction Project

The planning phase involves further development of the project in detail to meet the project’s
objective. The team identifies all of the work to be done. The project’s tasks and resource
requirements are identified, along with the strategy for producing them.

In a broader sense identification of each activity as well as their resource allocation is also
carried out. A project plan outlining the activities, tasks, dependencies, and timeframes is
created.

The project manager is the one who coordinates the preparation of a project budget by providing
cost estimates for the labor, equipment, and materials costs. This is mainly carried out by project
scheduling software like MS project or PRIMAVERA. These scheduling charts would help us to
track the stages of our project as time passes. This is also referred to as “scope management.”
The budget of the project already estimated is used to monitor and control cost expenditures
during project implementation.
Finally, we require a document to show the quality plan, providing quality targets, assurance, and
control measures, along with an acceptance plan, listing the criteria to be met to gain customer
acceptance. At this point, the project would have been planned in detail and is ready to be
executed.

3. Execution Phase of Construction Project

This is the implementation phase, where the project plan is put into motion and the work of the
project is performed practically on site. It is essential to maintain control and communicate as
needed during each implementation stages.

Progress should be continuously monitored and appropriate adjustments are made and recorded
as variances from the original plan. A project manager is the one who spends most of the time in

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this step. Throughout the project implementation, people carry out the tasks, and progress
information is being reported through regular project team meetings.

The project manager uses this information to preserve control over the direction of the project by
comparing the progress reports with the project plan to measure the performance of the project
activities. If any deviation is found from the already defined plan corrective measures are made.

The first option of action should always be to bring the project back to the original plan. If that
cannot happen, the team should record variations from the original plan and record and publish
modifications to the plan. All through this step, project sponsors, and other key stakeholders are
kept informed about the project’s status as per the agreed rate and format of communication. The
plan should be updated and available on a regular basis.

Status reports should always highlight the probable end point in terms of cost, schedule, and
quality of deliverables. Each project deliverable produced should be reviewed for quality and
measured against the acceptance criteria.

When deliverables have been produced and the customer has agreed on the final solution, the
project is said to be ready for closure.

4. Performance and Monitoring Phase of Construction Project

This stage is all related to the measurement of progress and performance to make sure that items
are tracking with the project management scheduling. This phase regularly happens at the same
time as the execution phase.

5. Closure Phase of Construction Project

During the final closure, the importance is on providing the final deliverables to the customer,
that is:

 Handing over project documentation to the business

 Termination of supplier contracts

 Releasing project resources

 Communicate the closure of the project to all stakeholders

 Last and final is to conduct lessons-learned studies to examine what went well and what
didn’t.

This type of analysis would make the knowledge of experience to be transferred back to the
project organization, which will help future project teams.

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ORGANISATION

Organization is the process of identifying and grouping of the work to be

performed, defining and delegating responsibility and authority and establishing relationships for
the purpose of enabling people to work most effectively together in accomplishing objectives.”

TYPES OF CONSTRUCTION COMPANIES

Depending upon the job they perform, construction companies are classified into following
types,

1. Small Renovation Contractors

Small renovation contractors generally work on jobs requiring small amounts of capital and the
type of work that does not require much estimating or a large construction organisation.

They usually perform home alterations or small commercial and office work. Many small
renovation contractors have their offices in their homes and perform the ‘‘paper work’’ at night.

2. General Contractors
These companies often are experts in either new buildings or alteration work. Many building
contractors subcontract a major portion of their work, while alteration contractors generally
perform many of the trades with their own forces. Some general contractors specialise in public
works.

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3. Owner-Builder
The company that acts as an owner-builder is not a contractor in the strict sense of the word.
Such a company builds buildings only for its own ownership, either to sell on completion, or to
rent and operate.

Many owner-builders, on occasion, act in the capacity of general contractor or as construction

manager as a sideline to their main business of building for their own account.

4. Real Estate Developer

This is a type of owner-builder who, in addition to building for personal ownership, may also
build to sell before or after completion of the project. One- and two-family home builders are
included in this category.

5. Professional Construction Manager

A professional construction manager may be defined as a company, an individual, or a group of
individuals who perform the functions required in building a project as the agent of an owner,
but do so as if the job was being performed with the owner’s own employees.

The construction management organisation usually supplies all the personnel required. Such
personnel include construction superintendents, expediters, project managers, and accounting
personnel.

The manager sublets the various portions of the construction work in the name of the owner and
does all the necessary office administration, field supervision, requisitioning, paying of
subcontractors, payroll reports, and other work on the owner’s behalf, for a fee.

6. Program Manager
A general contractor or construction manager may expand services by undertaking program
management. Such services will include, demolition of existing buildings on the site, devising
and providing financial analyses of new buildings. The acquisition of a new site, hiring an
architect and other design professionals on behalf of the owner.

Supervising their services, performing pre construction services during the planning stage,
advertising for and receiving bids from contractors for the new work, consulting on financing
and methods of payment for the work, supervising the contractor, obtaining tenants, whether
commercial, residential, or industrial for the completed project, helping to administer and
manage the complete project.

Obviously, the comprehensive services outlined above will require that the general contractor or
construction manager augment his staff with trained architects, accountants, real estate
professionals, and management and leasing experts.

7. Package Builders
Such companies take on a contract for both design and construction of a building. Often these
services, in addition, include acquisition of land and financing of the project.
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Firms that engage in package building usually are able to show prospective clients prototypes of
similar buildings completed by them for previous owners.

Package builders often employ their own staff of architects and engineers, as well as construction
personnel. Some package builders subcontract the design portion to independent architects or
engineers.

It is important to note that, when a package builder undertakes design as part of the order for a
design-construction contract, the builder must possess the necessary professional license for
engineering or architecture, which is required in most states for those performing that function.

8. Sponsor-Builder
In the field of government-aided or subsidised building, particularly in the field of housing, a
sponsor-builder may be given the responsibility for planning design, construction, rental,
management, and maintenance.

A sponsor guides a project through the government processing and design stages. The sponsor
employs attorneys to deal with the various government agencies, financial institutions, and real
estate consultants, to provide the know-how in land acquisition and appraisal.

On signing the contract for construction of the building, the sponsor assumes the builder’s role
and in this sense functions very much as an owner-builder would in building for its own account.

TYPES OF ORGANIZATION

Based on the ownership the organisation is classified into 3 types

1. Sole proprietorship
2. Partnership
3. Company

1. SOLE PROPRIETORSHIP

This kind of organization is owned by a single person. The owner is licensed with the government.
This kind of organization is widely used in service industries. No formal charter of operation is
required in such arrangements. Such organizations do not have to pay corporate income taxes and
their earnings are subjected to personal income tax.

Since there is no separation between the owner and the business, the liability of the owner is also
unlimited. So, if the business is unable to meet its own liabilities, it will fall upon the proprietor to
pay them. All his personal assets (like his car, house, other properties etc) may have to be sold to
meet the liabilities of the business.

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Advantages

 A proprietor will have complete control of the entire business, this will facilitate quick
decisions and freedom to do business according to their wishes

 The owner derives maximum incentive from the business. He does not have to share any of his
profits. So the work he puts into the business is completely reciprocated in incentives

 Being your own boss is a great sense of satisfaction and achievement. You are answerable
only to yourself and it is a great boost to your self-worth as well

Disadvantages
 One of the biggest limitations of a sole proprietorship is the unlimited liability of the owner. If
the business fails it can wipe out the personal wealth of the owner as well and affect his future
business prospects too
 Another problem is the limited capital a sole proprietor has access to. His own personal
savings and money he can borrow may not be enough to expand the business.
 The life cycle of a sole proprietorship is undecided and attached to its owner. If the owner is
incapacitated in any way it has a negative effect on the business, and it may even lead to the
closure of the business. A sole proprietorship cannot carry on without its proprietor.
 A sole proprietor also has limited managerial ability. He cannot be an expert in all the fields
of the business. And limited resources may mean that he cannot even hire competent people to
help him out. This may lead to the business suffering from mismanagement and poor
decisions.

2. PARTNERSHIP

When two or more persons associate to conduct business, a partnership is said to exist. This
ranges from informal oral understandings to a formal agreement filed with the respective
ministry/body. This is important because it establishes the terms of the partnership and can help
you avoid disputes later. Hiring a lawyer or other legal professional to help you draw up a
partnership agreement will save you time and protect your interests.
Financial resources are combined with those of your business partner(s), and put into the
business. You and your partner(s) would then share in the profits of the business per any legal
agreement you have drawn up. In case of dissolution due to disputes, the distribution of assets
can be made based on the agreement formulated while forming the partnership organization. In
this type of organization each partner is jointly liable for the debts.

Advantages:
 Start-up costs are shared equally with you and your partner(s)
 Equal share in the management, profits and assets
 Tax advantage — if income from the partnership is low or loses money (you and your
partner(s) include your shares of the partnership in your individual tax returns)

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Disadvantages:

 Unlimited liability. General partners are individually responsible for the obligations of the
business, creating personal risk.
 Can be difficult to find a suitable partner
 Possible development of conflict between you and your partner(s)
 You are held financially responsible for business decisions made by your partner(s); for
example, contracts that are broken
 There is a real possibility of disputes or conflicts between partners which could lead to
dissolving the partnership. This scenario enforces the need of a partnership agreement.
 Limited life. A partnership may end upon the withdrawal or death of a partner.

3. COMPANY
A company, abbreviated as co., is a legal entity made up of an association of people, be
they natural, legal, or a mixture of both, for carrying on a commercial or industrial enterprise.
Company members share a common purpose, and unite to focus their various talents and
organize their collectively available skills or resources to achieve specific, declared goals.

a. Private company: It is a type of incorporated that offers limited liability to its shareholders
but which places certain restrictions on its ownership. These restrictions are spelled out in the
firm's articles of association or bylaws, and are meant to prevent any hostile takeover
attempt. The major restrictions are:
 Stockholders (shareholders) cannot sell or transfer their share without offering them first
to the other stockholders (shareholders) for purchase

 Stockholder holders cannot offer their shares or debentures to the general public over a
stock exchange.

 The number of stockholders cannot exceed a fixed figure (commonly 50)

b. Public company “A public company which is not a Private Company”, If we explain the
definition in regard to the public company, we note the following :
 The articles do not restrict the transfer of shares of the company
 It imposes no restriction no restriction on the maximum number of the members on the
company.
 It invites the general public to purchase the shares and debentures of the companies
c. Government Companies.
A Company of which not less than 51% of the paid up capital is held by the Central
Government of by State Government or Government singly or jointly is known as a
Government Company. It includes a company subsidiary to a government company. The
share capital of a government company may be wholly or partly owned by the government,
but it would not make it the agent of the government.

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ORGANISATION STRUCTURE

Organizational structure helps a company assign a hierarchy that defines roles, responsibility,
and supervision. It’s the plan that outlines who reports to whom and who is responsible for what.
It’s usually recorded and shared as an organizational chart that includes job titles and the
reporting structure. The organizational structure also determines how information flows from
level to level within the company .Organizational structures are normally illustrated in some sort
of chart or diagram

An organisation structure is more or less permanent arrangement of the parts of a whole,

permanent arrangement of its horizontal and vertical parts. The horizontal parts are made of
different departments and the vertical departments are made of a number of levels from top to
bottom. Authority flows downward along these higher levels. Higher the levels, greater the
authority and vice versa.

Organizational chart for a construction company

Organization chart for a large project driven construction company is shown in figure below. It is
a matrix form of organization. Each project manger derives his authority from general manager.
He has total responsibility for the project and is accountable for its success on the project.
Functional managers ensure unified technical expertise. Matrix management shown in figure
below is a collaborative function and decision making rests with the team instead of project
manager alone. Manager will have two bosses—one functional boss who is permanent and
project manager who is a temporary boss for the duration of the project only. Thus, there is
shared responsibility between functional and project authorities.

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Organizational chart for a large project driven construction company

ROLE OF VARIOUS MEMBERS IN CONSTRUCTION INDUSTRY

Human resource for a construction industry are divided into following groups
1. Key players: client, consultant and contractor
2. Subsidiary players: vendors, and sub contractors.
3. Managerial staff and workforce supervisory staff, skilled, semi-skilled, and unskilled labour.
4. Regulatory authorities.
5. Service providers: water supply and waste water disposal undertakings, electricity
undertakings, telephones, lift inspectorate, municipal waste disposal agencies-city
corporation/municipality (town).

1. Key Players
a) Role of client:
 The client should arrange required funds for the work to match with its progress.
 He should handover the clear site free from encumbrances, such as old structures, service
lines and trees.
 He should plan well in advance for materials promised to be issued to contractor under
terms of agreement.
 He should ensure timely release of construction drawings.
 He, save in exceptional circumstances; should not make significant changes in the scope
of work in post contract phase. However, he can exercise his option to define scope of
work and cause required changes before tendering.
 Evaluation of claims and approval of rates for variations on the recommendation of
consultant.
 Timely release of payments, prompt decisions and obtaining statutory approvals for the
proposal are all part of client's responsibilities.

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b) Role of consultant:
Many of the Government departments and some of the engineering organizations in private
sector executing building works on a continual basis have their own planning and design
units. They render in house consultancy for their construction works. Even in such cases
resorting to outside consultants would be desirable since in house unit may not have expertise
in all disciplines, Besides, in house unit is prone to plan and design based on restrictions and
limited outlook. This is in contrast to outside consultants who look beyond the periphery of
Governmental approach and they may not hesitate to introduce new building materials, and
new technology. For organizations in private or government who do not possess a full
fledged engineering and architectural unit, they have no choice except to identify a consultant
to plan, design, and oversee execution of works.

There can be one prime consultant and he may co-opt several co-consultants for each
discipline of work. There may be consultants exclusively to render architectural services, and
others for structural works, services-electrical, environmental (water supply and waste water
disposal), air conditioning, land scaping and interior design, etc. The prime consultant
ensures coordination among various consultants to maintain integrity of the project and to
ensure harmony in approach and in designs.
Consultant's role should not be limited to planning and design of project works. He and his
team should be actively involved in overseeing implementation phase, construction
supervision and quality control. Schedule control and cost control are to be made a part of his
responsibility. Consultant should verify, certify periodic payments to be made to the
contractor as per terms of works agreement. Though project manager ensures close
monitoring, consultant should also be concerned about progress targeted as well as that
achieved and discover causes for variance. He should suggest remedial quality measures to
compensate overrun8, overcome deficiencies and contain cost overruns to the extent
possible. The consultants should function efficiently, act impartially and professionally and
promote congenial relationship between client and the contractor.
He should not take sides and act judiciously when interpreting contract clauses and giving
decision in case of disputes or disagreements. The consultant should be selected by
advertisement with prequalification’s, and functional criteria. Selection of consultant should
not be based on least cost option. His reputation, commitment, intellectual rigour and
performance in other consultancy works undertaken by him in the recent past can be some of
the factors to be considered before his selection.

c) Role of contractors: Among the key players, contractor's role is critical since successful
completion of a project primarily depends of responsibilities. He is required to mobilize
adequate number of skilled workers, and essential construction machinery. Besides, he
should set up a site organization to manage the work and should have his own circles to
ensure adherence and conformity to the quality standards. Though the owner extends
financial support in the form of advances, the contractor should have at least 20 to 30% of the
value of work as his capital for the contracting business. His assumptions and calculations
made while tendering for the work may vary during execution of work. There can be steep
escalation in prices of building materials. Reimbursement under escalation clause may not be
fully compensated for the price rise. Owner caused delays are likely to have an adverse effect

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on his performance. Schedule slippage whether it is on account of client, consultant,

regulatory authority force majeure, will affect his profitability.
A contractor is a key player in the construction industry. Hence, he himself should be duly
qualified, should engage skilled and qualified staff to optimise the use of human, material,
cost and time resources.

2. Subsidiary Players
a) Role of vendors: Verndors play an important role in timely completion of works even
though they are not contractually bound in works agreement. In some cases they are bound
informally to supply materials by exchange of letters. In these letters, quantity, rate, period
for the supply are committed. No elaborate agreement like works agreement is drawn with
the Vendor. If a Vendor defaults, work gets delayed and contractor or owner, as the case
may be, is affected. In case of default, it is not expedient to take recourse to legal action.
Generally each contractor is tied up with one or two vendors and it is a practice to maintain
cordial relations with them. It is not advisable to depend on one Vendor only. An alternative
vendor must be in place for getting uninterrupted supplies in case the identified vendor fails
to supply required materials on schedule.
b) Role of sub-contractors: Sub-contractors are identified to execute specialized subheads of
work such as anti termite treatment, pile foundations, some special item of work such as
structural glazing, alcobond work water proofing and special treatment work necessary
for elevation etc. Only in some cases, sub-contractors are bound by a formal agreement. In
other cases, prime contractor negotiates rates with them for the given scope of work and
stipulated quality. Sub contractors play an active part in supporting prime contractor for
execution of their parts of the work. They should get a fair deal from the prime contractor.
All the sub contractors shall be duly approved by the architect/engineer or consultant and
their work shall be duly certified to be satisfactory only by the architect/consultant. The
owner on the advice of architect/consultant can appoint a sub contractor for specific job
independently with separate terms and conditions.

3. Role of managerial staff and workforce.

Managerial staff, viz. resident architect/engineer, is responsible for successful completion of
work within stipulated time and with acceptable quality. Quality of work depends on
standard of workmanship of skilled workers and materials used in the work. The main
drawback is lack of training facilities in the construction industry to upgrade their skills.
Several new substitute and cost effective building materials are introduced in the market.
The skilled workers are to be trained by manufacturers or industry for proper usage to
ensure quality and optimal benefits to the clients.

4. Role of regulatory authorities

Their main role is to ensure minimum acceptable standards of quality of life for the citizens
as per planning standards and protection of environment, prevent undue benefit or
exploitation by one section of society by enforcing building bye-laws and other constraints.
Unless the key participants adhere to regulations laid down, the benefits of regulation
cannot be realised by the society. They should enforce laws strictly but not blindly. They
should be able to realise limitations of any law either due to lack of clarity/interpretation, or
obsolescence or, need for new laws due to new needs and ensure inclusion or deletion
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during any revision of laws/guidelines to check anything adversely affecting the

environmental quality.

5. Role of service providers

A facility cannot be commissioned even after completion of building component only
unless all services are in place. Service providers should ensure that their services are made
available to the clients in time for occupation of the buildings or for sale/lease of buildings
to the public.
They should ensure adherence to guidelines laid down which may ultimately affect safety,
e.g. loosely hanging wires, use of substandard material, illegal connections, lack of
observance in fire safety measures, etc. Accessibility and accountability to public are
important in all these organisations. Adoption of innovative practices, e.g. two line water
supply system, i.e. one for drinking purposes and another for flushing cleaning etc. or
availability of new equipment and techniques to fight fires in very tall buildings are
necessary to optimise on efficiency of the service and manpower.
These days some of these services are being privatised, e.g. water supply, electricity
transmission etc. to rationalize cost and delivery of service with value added
elements. Hence management of the particular service as resource optimally is significant
to a construction manager.

QUALITIES OF AN IDEAL CONSTRUCTION ORGANIZATION

1. Structured Organizational Chart –An organization should have a structured organizational

chart clearly describing the accountabilities and responsibilities for each position in the
company. Every employee should know exactly what they're responsible for and is fully
accountable to make it happen.
2. Strong Risk Management- Risk management is one of the most important elements of good
construction. It helps protect clients from serious financial harm if there is an accident,
injury, or lawsuit. It is crucial to select a construction company that is financially stable and
fully bonded
3. Experience and Success- Another strong quality to seek in a construction company is a
proven track record of success and a depth of industry-related experience.
4. A Skilled Team- Successful construction requires a very diverse team of highly skilled
professionals. For example most projects will call for project managers, estimators,
surveyors, safety inspectors, QA/QC inspectors, crew foremen, administrative assistants,
mechanics, machinery operators, truck drivers, and potentially even architects. It is important
for the construction company handling the project to either have these professionals on staff
or have ready access to such personnel through other means.
5. Modern Equipment and Technology- This could include everything from state-of-the-art
equipment and machinery to advanced modelling software and other tech innovations. By
embracing modern technology the construction company shows that it is ready to help clients
move into the future with their new projects.
6. An Unwavering Commitment to Safety- All construction projects involve the use of
extremely heavy machinery and materials and construction jobs are consistently ranked

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among the most dangerous in the nation. This makes a commitment to safety a fundamental
quality for any construction company.

ETHICS IN CONSTRUCTION INDUSTRY

Ethics is defined as “a system of moral principles, by which human actions and proposals may be
judged good or bad, or right or wrong”. Simply put, professional ethics, are a set of principles,
ideas and attitudes on “what is right or wrong” that we use to control the way the profession is
practiced.
A company is judged by its reputation which is a result of its integrity to the business world and
its employees. The ethics of both the company’s leaders and employees make up how that
company is perceived and whether they are ethical or not.
Ethics is used in determining what is right in each situation and then following through with
actions to implement what is right. There are three primary ethical directives: loyalty, honesty
and responsibility.
In any given day, an employee will face numerous ethical dilemmas. In the construction business
they will come in the fields of procurement, estimating, management, accounting, financial,
customer relations, subcontractors, vendors and suppliers and more. A company’s reputation for
unethical behavior will affect its ability to draw top notch employees. Ethics is treating everyone
in a “fair” and “reasonable” manner. Unethical policies can damage the image of the company
and destroy the morale of its employees usually starting a downhill slide to the eventual
destruction of the company. Most major construction companies have their own written code for
their employees usually called “A Statement of Values or Code of Conduct.

In 2003, the Society for Construction Law considered the question of ethics in the construction
industry. They published a report which highlighted that organisations should comply with the
following ethical principles:

 Honesty: Acting honestly and avoiding conduct likely to result, directly or indirectly, in the
deception of others.
 Fairness: Not seeking to obtain a benefit which arises directly or indirectly from the unfair
treatment of others.
 Fair reward: Avoidance of acts likely to deprive another party of a fair reward for work.
 Reliability: Only provide services and skills within areas of competence.
 Integrity: Regard for the public interest.
 Objectivity: Identify potential conflicts of interest and disclose this to the party who would be
adversely affected by it.
 Accountability: Provide appropriate information so effective action can be taken where
necessary.

In December 2016, International Ethics Standards (IES) Coalition published the first set
of ethics principles for professionals in land, property, construction, infrastructure and related
professions.

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