Adama Science and Technology

University
School of Civil Engineering
and Architecture
Course Title: Construction Planning &
Manage
Program: Civil Engineering (regular)
Course Code : CEng 4308
Credit: 3
Lecture : 2 Hrs/Wk
Instructor: Heaven Yeshineh
CHAPTER THREE: CONSTRUCTION
PROJECT DEVELOPMENT
 CONTENTS
3.1 Stages in construction
Inception and feasibility study
3.2 Preparation of Term of Reference (TOR)
3.3 Procurement
3.4 Contract and contract document
3.5 Construction Project Closeout
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
3. 1 Stages in construction
 Inception and feasibility
 Planning and Design
 Tendering Stages
 Bid Evaluation
 Award of Contract
 Construction Stage
 Commissioning and Acceptance
• Provisional & Final Acceptance
 Closure and review
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
1. Inception and Feasibility
• At this stage the owner puts his visions and wishes and with this as the starting point, the
various groups (professionals) try to conceptualize the project and prepare a conceptual
design.
• Then cost/benefit analysis is carried out to ascertain feasibility.
• And also Environmental impact assessment should be properly carried out.
Steps:
• Carry out preliminary technical and non-technical investigations
• Select the most feasible alternative
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Owner will hire consultant to formally design and develop the concept into a practicable
project.
Selection and Evaluation of Consultants
Consultants are selected, basically, using one of the following methods:
Public announcement
Short listing
Direct negotiation
For all the three methods, the owner has to prepare the Terms of Reference (TOR) for the
consultancy service that is required to be performed and the evaluation criteria or guide line set.
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
General Guideline for Evaluation
The firm’s general experience in the field of assignment.
The qualification and competence of the personnel proposed for the assignment and
The adequacy of the proposed work plan and approach in responding to the TOR.
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
2. Planning and Design Stage
•Planning is a function of devising the cause for future with a vision, formulated for the future
state of the organization or project.
•Planning leads to organizing and staffing followed by directing, controlling and coordinating.
•Consultant plans and designs the project based on the owner’s requirement and the possible
constraints.
Steps:
• Finalize the selected alternative
• Carry out detailed technical investigations
• Prepare detailed designs
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
• Prepare working drawing and specifications
• Prepare final cost estimates(engineering estimate)
• Prepare construction schedule
• Get the project approved by regulatory bodies
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)

3. Tendering stage
Contractors are invited to offer their best technical and financial offers as per the conditions and
specifications depicted in the contract document.
Construction Tendering Procedures
•The methods of tendering can be made in three different forms:
a. Open tendering: this is a method where the construction work will be advertised, inviting all
eligible constructors to compete for winning the job.
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Advantages:
•Allows all interested contractors to participates
•Avoids bias
•Ensures good competition
•Prevents formation of rings by contractors
b. Short listing: in this case certain construction firms are invited to participate in the
tendering.
c. Negotiated contract: here a known contractor is identified and negotiation is conducted with
him.
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
4. Bid Evaluation /Evaluation of Tenders
The bids are evaluated based on:

 Compliance with the contractual terms and conditions

 Correction of bid prices
 Detailed analysis
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
 Generally, a good contractor for a project is an important factor contributing to its successful
completion.
 The client’s professional advisers may look for the following attributes when drawing up a
list suitable contractors from whom to invite bids:
• Contractor’s reputation in business:
• Contractor’s financial standing
• Contractor’s potential resources
• Contractor’s normal conduct of business
• Contractor’s attitude on contractual claims
• Non-economic factors
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
 Over the years the bid evaluation process has been updated and refined to reflect the
changing trend of the construction industry.
 In general it can be considered to have three components. Which are:
• General Contractual and Administrative Evaluation,
• Technical Evaluation,
• Financial Evaluation.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
5. Award of Contract
• After the negotiations have been successful, the contract will be awarded to the successful
contractor.
Steps:
• Write a letter of acceptance
• Write the letter to proceed with the works
• Performance bond: 10% a guarantee that he will do the job as per agreed
• There are different methods & types of construction contracts.
• The owner generally makes the selection.
• The type selected depends on the kind of work being performed and the conditions under
which it is being performed.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
6. Construction Stage
• Once the work is ready to start, the superintendent will call for a pre-construction meeting with all of
the subcontractors and major material vendors.
• This meeting essentially establishes the ground rules for working together.
• The superintendent also uses this opportunity to go over issues such as work sequencing, work hours,
material storage, quality control, site access and many other pertinent topics.
• These first meetings on-site help set the tone for the whole project. It is important to establish an
environment of trust and cooperation right up front.
• Starting out on the wrong foot by being overly demanding and rigid does not make for a pleasant
working relationship down the road. Remember, every construction project brings together a new
group of people, most of whom are working together for the first time.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Here is where the actual execution of the works takes place as per scheduled.
•Construction schedule comprises of:
•Performance schedule
•Equipment schedule
•Material delivery schedule
•Manpower schedule
•Financial schedule
At this stage there are several points to be considered from the start to the completion of the project &
most of construction project management body of knowledge will be implemented.
Some of the points are:
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Mobilization
Mobilization encompasses activities that take place between the award of the construction
contract and the beginning of construction work in the field.
The contractor may be required to make a number of arrangements for various kinds of ‘paper
work’ as part of the pre-construction mobilization.
Requirements vary from project to project and especially from country to country.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Programming and Scheduling
• With the contract in hand and the project mobilization phase underway, the contractor will
undertake to develop a more detailed plan and schedule for the project’s time dimensions.
• The result will be a document that will assist with deploying personnel and equipment,
procuring materials and supplies and planning cash flows.
• Equally as important, it will provide the basis for monitoring and controlling project progress
as the project proceeds.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Organizing the Work Site
An important activity as the contractor begins work in the field is to set up the site in a manner
that will allow the work to proceed efficiently and effectively.
 It encompasses the following issues:
• Temporary services and facilities
• Site layout plan and
• Buying out the job
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
1. Temporary Services and Facilities
The following are among the various temporary services and facilities that will likely be
needed. Such as:
Offices,
Workshops and indoor storage,
Temporary housing and food service,
Temporary utilities,
Sanitary facilities,
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Temporary Services and Facilities
Medical and first aid facilities,
Access and delivery,
Storage/lay down areas, and
Quarries and borrow areas.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
2. Site Layout Plan
All of the worksite organization considerations discussed above will converge in a plan that will be
described in writing and shown on a drawing or series of drawings.
The jobsite layout plan includes:
Jobsite space allocation,
Jobsite access,
Material handling,
Worker transportation,
Temporary facilities,
Jobsite security etc.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
3. Buying out the Job
The term buyout, in the context of construction project mobilization, refers to procuring the
materials and equipment that will be installed in the project and arranging subcontracts.
 It includes both selecting suppliers and subcontractors and finalizing their purchase orders
or subcontracts.
Project Staffing
To carry out the work in the field requires people and those people must be organized in an
effective relationship/structure.
This section considers the organization structure at the worksite and the sources of the
laborers
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Monitoring and Control
Monitoring and Controlling Process Group: Regularly measures and monitors progress to
identify variances from the project management plan so that corrective action can be taken
when necessary to meet project objectives.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Cost Control
Cost control is concerned with influencing factors that create change to the cost baseline, to
determining that the cost baseline has changed and managing the actual changes if they occur.
Cost control includes:
Monitoring cost performance to detect and understand variance from plan Ensuring that all
appropriate changes are recorded accurately
Preventing incorrect and inappropriate changes from being included in the cost baseline
Informing appropriate stakeholders of authorized changes
Acting to bring expected costs within acceptable limits
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Cost Control
Two related outcomes are expected from the periodic monitoring of costs:
Identification of any work items whose actual costs are exceeding their budgeted costs, with
subsequent actions to try to bring those costs into conformance with the budget; and
Estimating the total cost of the project at completion, based on the cost record so far and
expectations of the cost to complete unfinished items.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Project S-Curve
Owner requires contractor to provide an S-curve of estimated progress and costs. it shows a
Cumulative costs across the duration of the project; and it can be a graphical representation
of the outflow of money (both direct & indirect).
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Earned Value Management (EVM)
Several tools and techniques assist in project cost control.
Earned value management (EVM) is a project performance measurement technique that
integrates scope, time, and cost data.
This method measures project performance by comparing the amount of work planned with
actually accomplished, in order to determine if cost and schedule perform as planned.
You must enter actual information periodically to use EVM such as :
• Was a WBS item completed or approximately how much of the work was completed
• Actual start and end dates
• Actual cost
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Earned Value Management (EVM) Terms
• Estimated value of the planned work
The planned value (PV), formerly called the budgeted cost of work scheduled (BCWS), also called the
budget, is that portion of the approved total cost estimate planned to be spent on an activity during a
given period.
• What you paid
Actual cost (AC), formerly called actual cost of work performed (ACWP), is the total of direct and
indirect costs incurred in accomplishing work on an activity during a given period.
• Estimated value of work done
The earned value (EV), formerly called the budgeted cost of work performed (BCWP), is an estimate of
the value of the physical work actually completed.
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Rules of Thumb for Earned Value Numbers
• Negative numbers for cost and schedule variance indicate problems in those areas.
✓ If CV is negative it means that performing the work cost more than planned
✓ A negative SV means that it took longer than planned to perform the work
CPI =1:the planned and actual costs are the same; <1: over budget;
>1: under budget
SPI=1: on schedule; <1 behind schedule; >1 ahead of schedule
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
6. Commissioning and Acceptance
Commissioning:- is a process where by the contractor makes sure that all installed
mechanical or electrical parts are operational.

• During commissioning, therefore all such parts are run in the presence of the client or his
representative as per the conditions agreed.

Acceptance:

•Acceptance has two stages:

 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
1. Provisional acceptance:

 The client accepts the completed works on provision basis for a one year period.
 During this period, all payments except retention are paid.
 The other option is to release the retention money and require for a bank or insurance
security.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
2. Final acceptance:

 At this stage the owner completely accepts the works executed and the retention money is
released to the contractor.

 But, if the client found out some construction default during this period, he can oblige the
contractor to work out that default or the client himself works it out from the retention
money.

 The contractor is assumed to have completed his contractual obligation from this time on.
 CONSTRUCTION PROJECT DEVELOPMENT

3. 2 Feasibility Study
- Feasibility study is related to analyze the viability of the identified project to support decision
making of investment.
- As its name implies, it is a study to decide whether the identified project is attractive enough
to go for implementation
- The study needs inputs from many professional disciplines for various areas of the study
CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Why Feasibility Study?
- To find if there is adequate demand for the project’s output.
- To find if there is availability of suitable technology and inputs
- To find the best options
- To answer if the project meets the environmental regulations and priority of the nations
- To examine the project’s financial and economic viability
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Areas of Analysis in Feasibility study
Demand/ Need and Market Analysis
Technical Analysis
Management Analysis
Financial Analysis
Economic Analysis
Environmental Analysis
Social Analysis
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Market and Demands analysis
Market and demand analysis look at the need of the project and help to estimate demand
 It is the key activity for determining the scope of an investment, the possible production
programs, the technology required and often the choice of location.
Example: Should government made six lane fast track road?
Should proposed cement factory plant be able to produce 100 metric ton of cement
per day?
How many rooms to build in Sheraton Hotel?
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
The analysis cover mainly:

 Aggregate demand for the product/service

 The share of unfulfilled demand

 Demand forecasting

 Market price of product/service

 Analysis of competitors, their strength & weakness

 Distribution mechanism
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Technical analysis
Every project must be technically feasible.
 Technical analysis is related to examine whether the project under study is technically
feasible to setup and operate to produce service/product.
 For example, in construction project of high rise buildings, types of building, location
selection, soil test, structural requirement in selected location, method of construction, variety
etc needs to be analyzed.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Technology:
 Choice of technological process and/ or appropriate technology,
 Is the technology proven or tested?
 Does the technology/ process/ equipment technically fit with the facility’s existing
technology/process/ equipment & machinery?
 Equipment capacity & whether it is as per requirement
 List of recommended equipment suppliers.
 Reputation of the suppliers and performance guarantees
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Investment cost and operational cost of different technology/process
 Environmental aspects of different technology
 Location aspects of the project and availability of infrastructural facilities with probable
alternative locations
 Inputs: Availability of electricity, water, fuel, raw materials
 Size and scale of operations: based on the demand, capital requirement, and technology,
inputs available
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Economic analysis
• Economic analysis estimate and analyze the project’s net contribution to the whole economy
of the region or country.
• It helps determine whether the project increases the net wealth of a region or country as a
whole or not.
• Estimation of Economic Costs of Projects.
• Estimation of Economic Benefits of Projects.
• Comparing Costs and Benefits.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Economic analysis
Calculation of Economic Net Present Value (ENPV), Economic Internal Rate of Return
(EIRR) and Economic Benefit Cost Ratio (EB/C Ratio)
Decision:
 If ENPV > 0, accept, if ENPV < 0, reject
 If EIRR > discount rate (cost of capital), accept project
 If EB/C ratio > 1 accept, < 1 reject project
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Environmental analysis
 A project may causes environmental impacts in many ways
 Environmental study/analysis incorporates
 Identification and analysis of adverse effects on the environment
 Identification of positive impacts
 Required Mitigation measures
 Designing environmental management plan
 Provision of fund for environment management plan
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Social analysis
 A project may causes social impacts in many ways
 Will the project have any adverse effects on the society?
 What are positive and negative impacts?
 Viable measures to address negative impacts
 Estimating cost for addressing social impacts
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Initiating the Feasibility Study
 Appointment of an experienced manager and Selection of study team members

 Scope of the study

 External Advisers to support study team

 Plan and Schedule the Study

 Starting study as per plan and schedule

 Controlling study to complete as per plan and schedule

 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
Completing the Feasibility study
 The feasibility study should act as a springboard for the next phase in the project life cycle
design and appraisal- ensuring that it is able to commence in a focused way.
The end product of Feasibility Study should therefore comprise a clear, concise report, called
Feasibility Study Report.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
3.3. Preparation of Term of Reference (ToR)
Term of Reference is a document prepared by the procuring agency, either public or private,
for the procurement of goods, services and works.
 It indicates what is expected from the procurement process and states the expected end result.
 Such a document shall be prepared with much care and expertise.
• Term of References can have different form.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
 The following term of reference is prepared for project proposal preparation.
1. Purpose
 A project proposal provides a description of the project and how it will be conducted and
thus serves as a planning tool of a project.
 The purpose of this document is to provide a framework and to give guidance on the
preparation and writing of the project proposal.
 TOR ensures proper project planning is carried out and less time is spent on writing a
proposal for a project.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
 It entails the core structure and technical information that are necessary and crucial when
preparing a proposal.
 However, this document is not meant to be a blueprint but it can rather be regarded as a
semi-standardized guide.
 It should therefore be adapted to suite a particular project needs when necessary.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
2. Scope
The scope of the work with any additional information shall be provided.
3. Structure of the proposal
 The core structure of the project proposal should at least reflect the following elements:
 Background
 Benefits, Beneficiaries and indicators
 Rationale for the study of the success of the study
 Aims and Objectives
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
 Project Team and Project
 Project principles and approach Management Committee
 Key issues/themes to be considered in the study
 Costs estimation
 Project activities and Milestones
 Methods of investigation
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
4. Additional elements of project proposal
 The project proposal elements that will be discussed in this section are applicable to outside
research consultants who will be requested to undertake a research study for the procuring
agency.
4.1 Ethics
This section entails the drafting of project protocols, and these will cover wide range of
ethical issues and concerns.
Protocols would clarify issues such as copyright, as well as anonymity of respondents.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
4.2 Infrastructure in the organization
This section deals with the organizational capacity to handle the proposed study.
It entails a brief overview of the infrastructure, the historical information, the mission and
the specific objectives of the organization.
Also state the strengths of the organization.
4.3 Track record of the research consultants
The research consultant here needs to briefly state
 His/her experience,
 Qualifications,
 Past achievements, including few publications related to the study.
 CONSTRUCTION PROJECT DEVELOPMENT(CONT…)
4.4 Appendices
In this section project proposal compilers can attach any other supporting documentation or
essential references.
4.5 Concluding note
In order for your project proposal to look good it should:
 be clearly and concisely presented;
 cover most of the essential elements discussed above; and
 Not be too technical and full of jargon.