Principles of Construction

Management

Lecture no. 1 – Overview of the

Construction Industry
 Lecture no. 1 Topics:
•Construction Terminologies
•About Construction Industry
•Construction a Fragmented Industry
•Nature of the Construction Industry
•Professional Affiliations & Certifications
•Construction Professionals
•Management of Construction Projects
 Why do you think study of
“Principles of Construction Management”
is important to Filipino Engineers &
Architect?
• www.rsenga.com / roque@rsenga.com
What is the difference
between projects and
construction projects?
 Construction
Terminologies
What is Construction?
What is a project?
 What is Project
Management?

• The application of ________, ____ , and _________

to project activities to meet the project
requirements. (PMBoK)
• Projects bring about change and project
management is recognised as the most
_____________ way of managing such change.
(APMBoK)
What merits a project?
Simplified Project Management
Project Life Cycle
Process Plant Life Cycle
 Project Life Cycle
1. Conceptual;
2. Detailed engineering;
3. Procurement;
4. Construction; and
5. Commissioning & start up.
Typical Construction life Cycle
 About
Construction
Industry
 Construction Industry
• Transforms the aspirations and needs of people into reality
by physically implementing various construction
development projects.

• Undeniably essential to the growth of a nation and a key

sector in the nation’s economy.

• Its contributions are more than just economic;the products

of construction mentioned above contribute extensively
towards the creation of wealth and the quality of life of the
population.

• Big business (USD 3.9 trillion annually worldwide)

• Major contributor in other construction related industries

(e.g, steel, paint, concrete, etc.)
Construction Industry Structure
& Framework:
 Industry fragmentation & PM Practice

•Owners
•Available ASAP, Low Cost, Operates Well
•General Contractors
•High profit, Quick cash, No hassles
•Designer/Engineers
•Operates well, High fee, Referred work
•Subcontractors
•High profit, Quick cash, More work
Construction is a Type of Production
• Construction is production and it produces a one-
of- a-kind product, it is complex and undertaken
through cooperation by a temporary organization.
 Construction is a Contract-centered
Activity:
•Coordination is primarily controlled from a
central plan that establishes sequence and
determines when an activity will start.
•Cost reduction results from improving
productivity, and project duration is
shortened by accelerating activities, or by
changing logic to allow concurrent work.
•Waste, rework & extended activity duration
should be avoided on critical paths.
 Typical/Current practices in construction
industry are:

•Designs as per client(s) requirements, align

design to quality, schedule and budget limits.
•Manage by breaking into pieces, estimate
duration and resource requirement and then
put logically into critical path method and
project evaluation review technique.
•Contract for each piece, start notice, monitors.
Coordinate project by using master schedule
and daily, weekly and biweekly meetings.
 Typical/Current practices in construction
industry are:
•Reduce cost by increasing productivity.
Improve quality and safety by better and
enforced inspection.
•Inflexible to changes.
•Control begins with tracking cost and
schedule.
Nature of the Construction Industry:
 Nature of the Construction Industry
•The construction industry is notorious for its
inordinate fragmentation.
•The construction industry is comprised of a
cross section of many different participants.
•Each participant is both influenced by and
depend on each other in addition to "other
players" involved in the construction process.
(e.g, government regulations, vendors, labor
unions, etc.)
Nature of the Construction Industry

•Very dynamic and constantly changing in

response to current economic conditions
and development of technology.
•Frequent antagonistic (hostile)
relationships between owners,
contractors and other project
participants
 Typical Construction
Low-bid Selection Method:
Typical Best-value Selection Method:
 Professional Affiliations &
Certifications (US)
• American Institutes of Constructors (AIC)
• Certified Professional Constructor (CPC)
• Construction Management Association of America
(CMAA)
• Certified Construction Manager (CCM)
• Project Management Institute (PMI)
• Project Management Professional (PMP)
• Association for the Advancement of Cost Engineering
(AACE)
• Certified Cost Engineer/Consultant (CCE/CCC)
• The United States Green Building Council (USGBC)
• LEED AP Professionals
 Professional Affiliations &
Certifications (US)
• Associated General Contractors of America
(AGC)
• Company (general contractors) membership
• The Associated Builders and Contractors
(ABC)
• Company membership
• The Design-Build Institute of America (DBIA)
• Designated Design-Build Professionals (DBIA)
• The Lean Construction Institute (LCI)
• Not-for-profit Construction Research Organization
• The Construction Industry Institute (CII)
• Owners-Constructors Not-for-profit Organization
Professional Affiliations & Certifications
(UK/Europe)
• The Chartered Institute of Building
• Chartered Builder (MCIOB)
• The Association for Project Management
• Registered Project Professional (RPP)
• Certificated Project Manager (CPM/IPMA-B)
• The Royal Institute of Chartered Surveyors
• Chartered Surveyor (MRICS)
(Typical title: Project Manager, Construction Manager, General
Superintendent, Project Executive, Project Engineer)

CONSTRUCTION PROFESSIONALS
 Construction Professionals
•Interpret plans and specifications and prepare
cost estimates and time schedule to meet the
requirements of the owners
•Determine and implement the best
construction practices, means and methods to
satisfy the owner’s requirements for time,
cost, and quality
•Oversee and manage all of the construction
operations into a single, safe coordinated
effort
 Four Major Components in
Management of Construction Projects:
1. Construction Engineering
2. Management of construction process
3. Human resource management
4. Financial Management
 Four Major Components in
Management of Construction Projects
1.Construction Engineering:
• Proper technique of assembling materials,
components, equipment and system, and
utilization of best construction technology to do
so.
2.Management of Construction Process:
• Establishing the most effective way to implement
the construction process, including proper
scheduling, coordination and control of flow of
labor, materials and equipment to the jobsite
 Four Major Components in
Management of Construction Projects
3.Human Resource Management:
• Since labor productivity and harmonious working
environment are essential elements of a successful
project, control over human resources becomes
important, more so than ever these days where
shortages of both skilled workers and experienced
managers exist.
4.Financial Management:
• Construction is a high risk business with historically
low profit margins. Control over costs, cash flow and
adequate funding is critical to the success of any
business endeavor, and construction is certainly no
exception.
Principles of Construction
Management

Lecture no. 2 – Overview of the

Construction Industry cont.
 Lecture no. 2 Topics:
•Challenges in Construction Industry
•Construction Project Delivery Systems
•Reasons Why Contractors Fail?
Challenges in Construction Industry
 Challenges in Construction
Industry
•Project managers lack strong
management skills and
experience.
•One of every three projects is
over budget or
• schedule.
•Many economically attractive
and proven practices are
receiving only very moderate
utilization.
•More sophisticated design
and as competition
intensified owners relies
more on specialty
subcontractors than
general contractor.
2
Challenges in Construction Industry
•Shift towards Lump Sum Contracting
•Significant level of litigation (court cases)
•Significant increase in foreign
competition
•Mistrust between contractors and
owners
Challenges in Construction Industry
•Operating units (plant) have lost
required expertise to execute
projects
•Project Managers handle greater
number of projects
•Average project size is smaller
•Industry losing young professionals
due to desire to be less mobile
Challenges in Construction Industry
•Operating units (plant) have lost
required expertise to execute
projects
•Project Managers handle greater
number of projects
•Average project size is smaller
•Industry losing young professionals
due to desire to be less mobile
Effects of Shortage of Skilled Workers &
Experienced Managers in Construction
Industry:
•Resulting high overheads to
contractors/owners.
•Decreased productivity
•Pressure to contractor to produce
better quality product/construction
Construction Project Delivery Systems

4
 Functions and Responsibilities in
Project Delivery Systems:
1. Owner:
• Initiates the construction project
• Responsible for obtaining financial resources
• Provides land and authorize access on it
• Have the right to start/stop the work
2. Designer (Architects/Engineers):
• Licensed to design the project
• Creates design that meets owner’s needs and can be
built successfully
• Responsible for the clear interpretation of the
plans, drawings and specs by the constructor
 Functions and Responsibilities in
Project Delivery Systems:
3. Constructor:
• Transform the plans, drawings and specs into a
physical structures
• Accepts responsibility for completing the project
based on agreement with the owner
• Responsible to provide all resources needed to execute
the project as per agreement with the owner
4. Professional Construction Manager:
•Depending on contractual relationship with the
owner he can function as owner’s agent or general
contractor/integrator if he accepts the project risks.
 Functions and
Responsibilities in
Project Delivery
Systems:
Functions and Responsibilities in Project
Delivery Systems:
Traditional Design-Bid-Build
Features Advantages Limitations
• Separation of • Certainty of price • No opportunity
Design & • Clarity of roles for phased
Construction • No coordination risks construction
• Completion of to owners • Fixed price
design prior to • Easy to accomplish established late in
selection of • Changes during design process
contractor • Owner administers
all design and
construction
contracts
• No contractor
input during
design
Functions and Responsibilities in Project
Delivery Systems:
Professional Construction Manager

Features Advantages Limitations

• Construction Manager to advise • Construction expertise • Increased overhead

owner and designer on available during design costs
construction aspects phase • Owner may take on
• May be agency type or at-risk • CM provides advise to greater risks under
type owner during construction agency type
phase • Owner relinquishes
• Under at-risk, some risk is some control
removed from owner
Functions and Responsibilities in Project
Delivery Systems:
Joint Venture
Features Advantages Limitations

• Two contractors (or • Takes advantage of • Coordination

more) in a strengths of each challenges
temporary co- venturer • Requires very
partnership to build • Allows combined clear agreement
a single project expertise to build between co-
large projects venturer
• Allows each contractor
to gain experience in
new area or with new
type of work
Functions and Responsibilities in Project
Delivery Systems:
Design-Build
Features Advantages Limitations

• Single • Single point • Difficulty of

organization of formulating price
responsible for responsibili prior to design
the design and ty • Lack of
construction • Constructability oversight by
inputs during design designer
• Fixed price early • Costly tendering
in process process
• Opportunity for • Less control by
phased construction owner
Comparing CM at Risk, Design-Build &
Design-Bid-Build (CCI Research 133-1)
 Cost Growth
•the lack of early planning participation by the
contractor, particularly with regard to
constructability reviews.
•the lack of previous working relations of the
architect/engineer and the contractor.
•the contractors’ recognition of engineering errors
during the bidding process, but with no
intercommunication. Often the errors found turned
into compensable scope changes.
 Schedule Growth
•Many projects are driven by a tight schedule.
•Many project scopes are in continuous
adjustment because of production needs,
revised technology, changes in consumer
demand, constant reengineering of the
system or others.
 High Needs in Construction
Industry
•Increased information sharing between Owner
& Contractor
•Increased emphasis on preconstruction
planning
•To find ways to improve performance in all
areas
Reasons Why
Contractors
Fail?
 Why Contractors Fail?
1. Unrealistic growth or change in the scope of
business
• Change in the type of work performed
• Change in the location of work performed
• Significant increase in size of individual projects
• Rapid expansion
2. Performance Issues
• Inexperience with the new type of work
• Personnel do not have adequate training or experience
• Insufficient personnel
 Why Contractors Fail?
3. Character/management/personal issues
• Contractor retires, company is sold, changes in leadership or focus
• No ownership or management transition plant to exists to ensure
continuity of operations in the event of principle’s death or
disability
• Key staff leaves the company
• Staff inadequately trained on company policy and operations

4.Accounting issues/financial management problems

• Inadequate cost and project management systems
• Estimating and procurement problems
• Lack of adequate insurance
• Improper accounting practices
 Why Contractors Fail?
5.Other factors (which also seem to point to management
problems)
• Economic downturn and/or high inflation
• Weather delays
• Poor site conditions and/or building plans
• Labor difficulties (lack of skilled labor)
• Material and equipment shortages
• Owner’s inability to pay
• Onerous (burdensome/time-consuming) contract terms
 Contractor’s Fence
(Guard Your Position!)
• Unreasonable Delays: • Denial of Work Access
• Request for information
• Ambiguous Specifications
• Conducting Inspections
• Change Orders
• Issuing change orders
• Inadequate Design
• Document
reviews/approval • Interruptions of
• Decisions Contractor’s Production Flow
• Payments • Conflicting Instructions
No Gold Plating