Praise Consultancy

Construction Management Tsegay Okubu Civil Engineer and Planning Trainer

Enabling Success. www.praise.com.et PC 2011 Praise Consultancy 1

Outline
Part I: Introduction
Construction Projects Contractor Goals Construction Project Mangt Construction Works Mangt

Part II: Operational Functions

Construction Project Management

Part III: Management Functions

Part IV: Problem & Challenges

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Part I: Introduction
Construction Projects Contractors Goals Construction Project Management Const Works Management Part II: Operational Functions

Construction Project Management

Part III: Management Functions

Part IV: Contract Administration

5/4/2012

Introduction
Construction Projects Predetermined Objectives
Components of a certain business Often the first phase Time and Resources Constrained In processes, In financial sources, and In responsible bodies Accelerates economic growth of a nation Cost Intensive, and Slow and Low business in return on investment Involves large number high turnover short life time and highly cost intensive both to own and increase their life time

Constrained Too fragmented

Investment

Human Resources Construction Equipment Exhibits Financial and Engineering Reports difference during implementations

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Introduction Construction Projects Require

Managing Time and Progress; Cost and Cash Flow; Quality and Performance: and Organizational Behaviour With Organization Resources By Planning, Organizing, Coordinating, Monitoring and Controlling Resources Within Quality, Time, Cost and Environmental Constraints
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Introduction
Construction Projects
Involves Project Owners at different times whose interests are largely conflicting Project Doers such as Consultants and Contractors often oppositional in Relationships Project Sponsors whose interests are after different classified roles Project Regulators who watch the ethical practices and impact of construction projects on societies professionally, economically, environmentally, politically, socially, etc.
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Introduction
Construction Projects Requires
Six Parameters to look into Size, Complexity and Quality Relatively pre determined Productivity Often Estimated and Variable which require considerable monitoring and follow up but neglected and is the basis for determining Completion Time and Project Cost Quality though predetermined is dependent largely on the judgement of the supervisor on site than tolerances in the case for manufactured goods in factories
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Contractor Goals
State the two major goals of a contractor!!

Two Major Goals

Continuous Work / Build Reputation

Profitability

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Critical Success Factors

What are the critical success factors that ensure getting Continuous Work / build Reputation?
Continuous Work / Reputation

Competitiveness Market Promotion Eligibility Least Evaluated Bidder

Relationships
Effective Communication Rely on Principled Negotiation Ethical

Customer Focus Demand Driven Right Delivery Within Budget

Self Works Real Estate Diversification Construction Plants

Right Quality Equipment Rent

Facility Management

Sister Companies
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CSFs
Which of the critical success factors for getting Continuous Work / build Reputation are you best competent with / do you feel less competent with and at the same time most important?
Success Factor Competitiveness
Market Promotion Eligibility Least Evaluated Bidder

Best Competent

Least Competent

Relationships
Effective Communication Principled Negotiation Ethics

Customer Focus

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Demand Driven Right Delivery Within Budget Right Quality

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CSFs
Which of the critical success factors for getting Continuous Work / build Reputation are you best competent with / do you feel less competent with and at the same time most important?
Success Factor
Creation of Self Work
Real Estate

Best Competent

Least Competent

Business Diversification
Construction Plants Equipment Rental Facility Management Sister Companies

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CSFs
What are the critical success factors that ensure Profitability?
Profitability

Value for Money Offer & Contract Procurement Profit Margin

Productivity
Efficient Logistics Maximize Resources Utilizations

Performance Right Time Within Budget Right Quality

Positive Cash Flow Timely Payments

Diversify Financia Sources Timely Approval of Changes

Motivation

Relationships

Ethics
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Principled Negotiation

Effective Communication

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CSFs
Which of the critical success factors for Profitability are you best competent with / do you feel less competent with and at the same time most important?
Success Factor
Value for Money
Offer & Contract Procurement Profit Margin

Best Competent

Least Competent

Productivity
Efficient Logistics Maximize Resources Utilization Motivation / Incentives

Performance
Right Delivery Within Budget Right Quality
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CSFs
Which of the critical success factors for Profitability are you best competent with / do you feel less competent with and at the same time most important?
Success Factor Positive Cash Flow
Timely Payments Diversify Financial Sources Timely approval of Additional Works

Best Competent

Least Competent

Relationships
Effective Communication Negotiated Principle Ethics

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CPM Bok
How could Construction Project Management help you to achieve the first goal Continuous Work / Build Reputation?
Success Factor Competitiveness
Market Promotion Eligibility Least Evaluated Bidder Construction Projects Planning Organization Development Procurement Management -OM PM Behavioural Sciences OM Behavioural Sciences OM New Project Management Trend Time Management Cost Management Quality Management Head Office Level Largely Head Office Level Head Office Level Head Office Project Levels Head Office Project Levels Head Office Project Levels Head Office Project Levels Head Office Project Levels Head Office Project Levels Head Office Project Levels

Construction Project Management BoK

Intervention Level

Relationships
Effective Communication Principled Negotiation Ethics

Customer Focus
Demand Driven Right Delivery & Completion Within Budget Right Quality
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CPM BoK
How could Construction Project Management help you to achieve the first goal Continuous Work / Build Reputation?

Success Factor Creation of Self Work

Real Estate

Construction Project Management BoK

Procurement and Contract Delivery System (PCDS) Construction Technology Cost Management PCDS

Intervention Level
Head Office Level Head Office Project Levels Head Office Project Levels Head Office Project Levels

Diversification
Construction Plants Equipment Rental Facility Maintenances

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CPM BoK
How could Construction Project Management help you to achieve the second goal Profitability?
Success Factor Value for Money
Offer & Contract Procurement of Goods -Largely Maximize Profit Margin Procurement and Contract Management Procurement Management Cost Management Head Office - Project Levels Head Office Project Levels Head Office Project Levels Head Office Project Levels Project Level Largely Head Office Project Levels Head Office Project Levels Head Office Project Levels Project Levels - Largely

Construction Project Management BoK

Intervention Level

Productivity
Efficient Logistics Maximize Resources Utilization Motivation / Incentives
Construction Technology, Site Organization & Procurement

Cost, Material & HR Mangt Behavioural Science OM Time Management Cost Management Quality Management

Performance
Right Delivery & Completion Within Budget Right Quality
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CPM BoK
How could Construction Project Management help you to achieve the second goal Profitability?
Construction Project Management BoK
Project management & Contract Administration Cost Management Contract Administration

Success Factor Positive Cash Flow

Timely Payments Diversify Financial Sources Additions/Changes timely approval

Intervention Level
Project Levels Largely Head Office Project Levels Project Levels - Largely Head Office Project Levels Head Office Project Levels Head Office Project Levels

Relationships
Effective Communication Negotiated Principle Ethics PM
Behavioural Sciences OM Behavioural Sciences OM

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Construction Project Management

Construction Project Management

Basic Foundations
General Management Project Management Organization Management

Major Components
Process Management

Facilitating Components
Proc & Contract Management Performance Management OSHs Management

Integrating Components
Uncertainty & Change Management Portfolio Management Facility Management

Resources Management
Stakeholders Management

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Construction Works Management

Involves the following major operational and management functions

Operational Functions
Contract Document Study Site Investigation Mobilization Sub Structure Works Super Structure Works Utilities Works Finishing Works Landscaping Works

Management Functions
Construction Works, Resources, Time and Control Planning Construction Budgeting Construction Implementation Construction Monitoring & Evaluation Contract Administration

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Part I: Introduction

Part II: Operational Functions Purposes Problem & Challenges What If? Analysis

Construction Project Management

Part III: Management Functions

Part IV: Contract Administration

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Operational Functions: Purposes

To define the Scope of the Construction Works:
Product Definition Break Down Structures

To identify Critical Constraints of the projects:

Contract Price, Completion Time and Quality Requirements

To determine the construction methods used:

Process Mapping; Site Organization; Manufacturing & Assembly Vs Manufacturing on site; Labor Vs Equipment Intensive

To determine Sub Contracting Works:

For mitigating financial shortages For complementing less comparative advantages
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Operational Functions: Purposes

To identify Potential Supplementary Works:
Excess in Quantities Additions / Omissions Potential Price Escalations

To give emphases to change likely to operational functions:

Sub Surface conditions Finishing Works

To determine potential but non contractual stakeholders

Utility Related Organizations Local Administrations Beneficiaries

To understand, respect and utilize the benefits of contract conditions

Remedial Rights (Securities, Liquidated Damage, Time Extension, Price Variation Adjustment System, Payment Delay Compensations, Dispute Resolutions and Insurances) Deductions: Advance Repayment, Retention, Rebate, Previous Payments Rights, Obligations and Risks Applicable Laws and Taxes
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Operational Functions: Problems and Challenges

OFs
Contract Document Site Study Investigation
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Problems & Challenges

Drawing and Specification Discrepancies Incomplete Contract Documents
Price Escalation Contract Condition Vs Practicability Professionals negligence and lack of competence and experience

What if? Analysis

What Governs? Likely Impacts Who should complete it? Likely Impacts Risk Allowances?? Controlling, Guidelines and Development

Contract document and Site discrepancies Right of Way Problems Tendering with out site visit / Inadequate Field investigations Access roads requirements

Who should solve it? Watch Delays & Idle Resources! Watch impacts!! Who should pay for it? Compensable Events Checking and Approval Comparative Advantages Use Other Sources Crush programs / Overtime

Late Handing Over of Site Poor Site Organization Central Vs Project Site Mobilization identification Advance Payment delayed Delay in mobilizing required manpower

Mobilization

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Operational Functions: Problems and Challenges

OFs Problems & Challenges
Incorrect Setting Out Different Sub Surface Conditions Unwillingness to propose solution in time Consultant reply delay Shuttering and Protection against neighboring structures and falling earth Basement works and Water tightening Coordination among stakeholders In time request Appropriate Slope for drainage Quality of Utility materials

What If? Analysis

Re Work! Use Experienced Professional Compensable Event Participate in Solution Effective Communication, Notify Likely Impact Important to check necessity

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Sub Structure
Utility Works

Close follow up & adhere to instructions Plan in time Request in time Experienced Occupational Customer Orientation

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Operational Functions: Problems and Challenges

OFs
Finishing Works
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Problems & Challenges

Lack of precision Largely aesthetical in behaviour Competence and experience workmen Quality of Finishing Materials of

What If? analysis

Re Work! Experience and Time Taking Participate Acceptance Team!! Important

Customer Orientation Experienced Workmen Acknowledge Important Important

Landscaping Works

Levels, Slopes and Drainages Aesthetical Considerations Appropriate Access Ecological Considerations

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Part I: Introduction

Part II: Operational Functions

Part III: Management Functions Purposes Planning Budgeting Implementation Monitoring & Evaluation

Part IV: Contract Administration

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Part I: Introduction

Part II: Operational Functions

Construction Project Management

Part III: Management Functions Purposes Tasks and Approaches Details

Part IV: Contract Administration

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 Planning (6Ps)
Prior Proper Planning Prevents Poor Performance. (Or, put another way, Prior Proper Planning Promotes Positive Performance)

Enabling Success. www.praise.com.et

PC 2010 Praise Consultancy

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Management Functions: Purposes

To define clearly Objectives, Roles and Responsibilities
Defining performance targets Defining tasks and their performers by when and if possible how

To develop appropriate organizational structure

Designing interfaces b/n head office and project coordination Defining job structures

To allocate, provide and monitor resources and their combined performances

Preparing resources delivery and specification requirements Developing appropriate crew and hence their productivities

To enhance effective communication

Providing Effective Leadership Team work, Good Relationship, Decision Making, Reporting

To respond to problems and challenges

What if? Analysis and Alternative Scenarios building
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Management Functions: Planning

MFs
Works Planning

Tasks
Identifying and Knowing what is to be done Identifying the activities involved (WBS) Identifying how the works can be done

Approaches
Studying Contract Document, Standard Specifications Work Breakdown Structures Selecting Construction Methods

Time Planning (Scheduling)

Identifying When activities shall be done

Which activities can be done in parallel? Which activities shall be done before or after this activity? Trade off between time and cost

Network Analysis

Identifying which ones require at most attentions Identifying where to provide buffers

Critical Path / Critical Chain

Resources Planning
Controlling Planning

Assign Crew Designations Forecasting resources requirements

Develop Performance Targets Identify how such targets to be measured Identify how to transform trends into impacts Communicate Performances

Material, Manpower, Machinery and Money Breakdowns and Schedules

Gantt Chart with Milestones Schedule and Cost Variances Cost and Schedule Performance Index Reporting Formats
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Management Functions: Cost Planning

Be Cost Conscious
1. Determine Cost proportions such as Material Costs %; Labor Costs %; and Equipment Costs %; Site Overhead Cost %; and Head Office Overhead Cost % Sub Contracting % Front Loading or Back Loading Identify Major Cost Items Among Materials; Labors; Equipment Among Site Overheads; Head Office Overheads Recognize Monetary Value of Time Ensure Cash flows in in time as much as possible Develop two Financial Schedules: Cash in flows and Out flows

2.

3. 4.

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Management Functions: Budgeting

Developing Budget
Develop Strategy Develop Cost Components Accounting Vs Engineering Determine Income and Expenses Develop Cash Flow Prepare the Budget against schedule Carry out What If? Analysis Develop Alternatives Determine the Total Budget and Schedule accordingly Use these scenarios if and only if there are no other approaches to respect the Original Budget

Develop Alternative Scenarios

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Management Functions: Budgeting

Strategy Development at Head Office Level
CAAs = CLAs Contractor Position CAAs > CLAs Project Liquidity Consuming

CAAs > CLAs

Payment Delay

Project Liquidity Providing

Diversify Financial Sources Facilitate Processes Get approved variation soon Consider them Minimize them

Recurrent & Critical Problems

Idle Periods

Develop Alternative Scenarios

Carry out What if? Analysis

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Management Functions: Implementation

Maximize Incomes and Diversify Financial Sources
Get Payment as soon as Practicable Use Suppliers Credit potentials as much as possible Execute Major Cost Items as soon as practicable Use Sub contracting alternatives to leverage comparative advantages Maximize income generating means' Use Overdraft / loan as the last chance

Minimize, If possible Avoid, Cash Crunching

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Management Functions: Implementation

Alternative Scenarios using what if? Analysis
What if?
Payment is delayed? Unexpected rain comes? Material delivery is late? Equipment is broken down? Workmen in-available? Suppliers Credit Limit lapses? Variations had to be done?

Causes

Intervention

Impacts

Cost increase happened?

Head Office Financing delayed? Sub Contractor obligation failed? Employee Salary delayed?
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Management Functions: Monitoring & Controlling

Maximize Incomes and Diversify Financial Sources
Get Payment as soon as Practicable Use Suppliers Credit potentials as much as possible Execute Major Cost Items as soon as practicable Use Sub contracting alternatives to leverage comparative advantages Maximize income generating means' Use Overdraft / loan as the last chance

Minimize, If possible Avoid, Cash Crunching

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Management Functions: Monitoring & Controlling

Monitor the Project
Compare Actual to Contract Costs
Determine and Compare Budgeted Cost of Work Performed and Actual Cost of Work Performed Check Actual Versus Budgeted costs of Major Items Margin variance Indicator
Compare Completed, Uncompleted and All Works with Budgeted Costs of Works Compare non approved Variations to Contract Amount Compare not committed Price Escalation to Contract Amount

Non approved change order indicator

Committed cost indicator

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Liquidity Indicator: Liquidity Providing or Using

Compare CAAs to CLAs

Compare Ahead of Schedule to Behind Schedule Trades of Works
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Schedule Variance Indicator

Management Functions: Monitoring & Controlling

Monitor the Project Performances
Monitor Cash flow
Negative or Positive Cash flow Weighted according to importance and Scored according to performance Identify skill gaps Identify recurrent problems and challenges Employee Turnover Project documentation Effective Communications

Scorecard Indicator (Qualitative Checks)

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Management Functions: Monitoring & Controlling

Monitoring
Revision on Site every month
Project Manager, Site Engineer, Office Engineer, Accountant GM, DGM Technical, Engineering Dept, Procurement Dept, Project Managers, FOs Board, GM, DGMs, FOs, Dept Managers, Project Managers

Revision at the Project Level every three month

Revision at the Head Office Level Every six month

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Management Functions: Implementation

Maximize Incomes and Diversify Financial Sources
Get Payment as soon as Practicable Use Suppliers Credit potentials as much as possible Execute Major Cost Items as soon as practicable

Use Sub contracting alternatives to leverage comparative advantages

Maximize income generating means' Use Overdraft / loan as the last chance

Minimize, If possible Avoid, Cash Crunching

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Part I: Introduction

Part II: Operational Functions

Construction Project Management

Part IV: Contract Administration Responsibility Matrix Payments Alterations Remedial Rights Documentation & Records

Part III: Management Functions

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Contract Administration: Responsibility Matrix

Client Responsibility
Contractor Responsibility Consultant Responsibility Joint Responsibility Others Responsibility

Contract Clause

Descriptions

Use single, broken, centre and double lines to indicate Client, Contractor, Consultant and Joint responsibilities in the descriptions respectively!

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Contract Administration: Payments

Above Contract Take off Sheet, when? Within Contract Additional How? Price Escalation

Require Measurement of Works

Adv. Payment

Interim Payments

Final Payment

Closing of Account

Additional Works Price Escalation Guaranty + Bond VOWPs + MoS? Provisional Acceptance Defect Liability Acceptance

Requirements for Payments

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Contract Administration: Alterations

Uncertainty Change & Planning - Implementation Interactions

Planning

Uncertainties

Implementation
Claims Management
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Changes
Claims Disputes

Other Motives

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Contract Administration: Alterations

Alterations = Additions Omissions Practices
1.

2.
3. 4. 5.

Consultant Give Orders Contractor Executes Contractor Present Breakdowns Consultant Checks and Fixes If Contractor Disagree Dispute Resolution

Legally Allowed and Should Be

Consultant Give Order 2. Contractor Present Breakdowns 3. Consultant Checks and Fixes 4. Agreement Reached 5. Contractors Execute NB: If Alteration impact is serious, Contractor may Present Breakdown & Execute at the same time
1.
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Contract Administration: Alterations

Alterations = Additions Omissions Alterations can be

Excess in Quantities Beyond 5 % of Initial Contract Prices and 25 % difference for a single item Negotiable for new rates except for Profit and Overhead Expenses Additional Works, Variation Negotiable for new rates except for Profit and Overhead Expenses Extra Works

Negotiable for new rates including for Profit and Overhead Expenses

Omissions Beyond 25 % is unlikely and Beyond 15 % has Overhead expense impact Supplementary Agreement Beyond 25 % of Initial Contract Price and Negotiable for new
rates except for Profit

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Contract Administration: Remedial Rights

Remedial Rights
Bonds and Guarantees
Performance Bond, Advance Payment Guarantee

Retentions Insurances Claim Administration

Compensable Events Time Delay Justification Vs Liquidated Damages Const Compensation due to Prolongation Cost Increase or Decrease

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Dispute Resolution
Preventive, Amicable, Judgmental

Termination due to Defaults Excepted Risks

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Contract Administration: Documentation and Records

Contemporaneous Records

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Tender and Contract Documentations Work Records Sheets Daily records of labor and plant staffs Material Received and Issued Drawing Register Correspondence and Minutes files Site Diaries Site Instructions Variation Orders Additional Works Registers Day Works Contract Program As-built Program Photographs

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Contract Administration: Documentation and Records

Contemporaneous Records
Agreed measurements of covered works Delay notifications Claim notifications Material orders and invoices Cost control Subcontractors records as above

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