Construction Procedures (2)

Projecto Definition of Project

Temporary endeavor with beginning of end that provides service, or resulto Needs – Manpower, materials, money, and machineso Constraints – Time, cost, scope, quality, risk, customer satisfaction and avoiding conflict

Life cycle of project – Commisioning, make sure punch list items are okay. Plan longer items first in schedule (like elevator)

o Concept stage – feasibility, (could take years), largest impact on costo Design stage – Conceptual, detailed design, project contract, and bidso Construction stage

Highest level of expenditureo Operation and maintenance

Turnover, commissioning, and training Project Contract Strategy – selecting organizational and contractual policies for project

o Setting objectives and constrains Cost – may be longer to keep cost low Performance – can keep quality with low cost (good option)

o Choosing project delivery method (how are you going to overlap) Traditional – (Cost) (like residential building)

Familiar project (can expect what will happen) with design complete Time is not objective Contractor guarantees price

Design-bid build(Hard Bid) (used a lot in govt projects) 60% Design must be done before construction Common in CE projects Forces= Owner/GC

o GC selected from competition of bidderso A/E acts as owner-rep

Advantageso Price competitiono Total cost known b4 construction

Disadvantageso Long time (design longer than construction, sometime years)o Conflict between owner/A/E and GCo Design does not benefit from construction experience

Design-Build 15% One company or joint venture does everything for better communication

because of a lot of RFI’s and easier to solve problems Considered in complicated project (plant, refineries, etc) Advantages

o Design and construction can be overlapped to reduce timeo Easier to do changes a25%nd communicationo Min. owner involvement

Disadvantageso Cost unknown until endo High risk for contractor and expensive for ownero Low quality to save costo Owner may not be satisfied due to min. involvement

Turnkey –Time = objective Similar to design build but organization is responsible for design, construction,

and project financing Owner payment is made at completion when key is handed over

PCM – Time/flexibility/insufficient resources or experiences = objective (Professional Construction Management) or CM

Owner appoints PCM to manage and coordinate project using teamworko Types

CM Not at risk CM serves many functions of GC and using several SC Owner should be knowledgeable about project

CM at risk Must deliver project within a cost and schedule

o GC and CM roles are one especially in constructo Hires subcontractors and not SC

o Advantages

Use construction skills with no conflict Faster and use value engineering

o Disadvantages High owner involvement and resmonsibility High CM fees

BOTBuild Operate Transfer Business is responsible for design construction, financing, and temp. ops Used in large infrastructure projects (like highway tolls)

<1% Integrated Project Delivery (like BIM Spreads risk and responsibility of project

o Choosing design/construct interaction scheme Can separate design and construction completely, overlap phases but not within the

phase or overlap within phase and amongst phases creating higher risko Choosing contract form/type (how risk will be shared)

Contract – Promissory agreement btwn 2+ parties creates/destroys legal obligation and agreement enforceable by law (Should always be written)

Offer and acceptance and consideration (money/service) Criteria to select

o Need to provide incentiveo Ability to make changeso Allocation of risk

Types - Competitive Bidding Contractso Lump sum – Most common (high risk for GC)

Know final price in beginning Increases cost much if owner makes changes Difficult to have fast track project

o Unit Price Contract (estimates by many GC’s and one chosen by owner) Good for heavy civil, repetitive work Owner must go to site to make estimates

o Negotiated Cost-Plus Contracts – Reimbursable contract Final cost may be less than fixed price contract because

contractors do not need to inflate cost to cover risk Criteria – Unclear scope, fast track, complex (power plant) and

high risk to contractor (working below ground) Types

Cost + Fixed Percentage – Fixed cost and GC gets bonuso No incentive for GC to save time and money

Cost+Fixed Fee – Job may finish fast but no GC incentive Cost+Fixed Fee+Profit Sharing

o GC gets share of any cost sharing (incentive for GC to save time and cost)

Actual Cost+Guaranteed Max. Priceo GC ok as long as price doesn’t go above Max.

price Cost+Sliding Fee – GC gets bonus if finishes faster or

cheaper

o Contract admin practices Contractual relationships, choosing project forces Contract docs–specs, working dwgs, bills, signed agrmnt, liquidated damages conditions

Announcement Subject/scope of work, location, type of project Dates, bid submission/opening Bid Bond – if GC doesn’t follow contract owner can collect value of bond or

require surety to pay difference of next lowest bid Performance bond – surety completes project up to bond amount if GC defaults Payment Bond – When GC doesn’t pay subs, surety pays GC’s debts to avoid lien

o Surety – bonding company (indep. 3rd party) Price and conditions for acceptance/rejection

Competittve Bidding Process Gc responsibilities

o Buys bid package from owner w. (dwgs, specs, BOQ (Bid of Quantity), bid propasal form, and soil report in it)

o Inspect site, weather, resourceso Estimating/ schedule

Owner responsibiliteso In form bidders of any changes in dates/regs

Bid Evaluationo Choose lowest responsible biddero Average biddero Weighted (weight each item)

Estimating

Introo Not exact science o Estimating material costs is simple but lab and equipment is difficult due to variation in production rates

Elements of Estimatingo Takeoff, pricing, bidding, etco Calculate values and categorize cost between (direct (materials labor equipment)and Indirect cost

(general requirements, overhead costs)) Estimators

o Understanding of means and methods, materials ,labor, equipment, project delivery methods, bidding CD’s, ability to read dwgs and specs, Math/computer skills (excel/timberline), and communication skills

Toolso Scales, excel (for small companies),o timberline, vico office, winEst by using cost data base(for large companies estimating)o

Conceptual Estimateo Rough order of magnitude w/ no dwgs neededo Owner decides if its worth it to pursue project (feasability profitable, worthwhile, cost benefit analysis)

Preliminary Estimateo A little more detailed but still many assumptionso Purpose – to compare different designs and get idea of construct budget

GC’s detailed estimateo Done by GC for purpose of biddingo Accurateo Specs, plan, price, productivity info neededo Watch how Scope of Work is detailed in contract

Cost Componentso Direct Cost (70-90% of total cost)o Costs related to production

Indirect Costso If work item is deleted, indirect cost remains (insurance, taxes, electricity, etc)

Project Overhead (5-30%)o Not directly charged to work elemento Cost of utility, site trailer, bonding, maintenance, etc

General Overhead (0-15%)o Indirect overhead (taxes, overhead)

Markup (0-20%) – GC’s added fees Profit (for GC) and Risk contingency (against uncertain circumstances like weather, labor/soil problems, etc) General Procedure

Estimating Formateso Uniformat- based off functiono MasterFormat – based off of what material typeo Work Breakdown Structure (WBS) for heavy engineering

80/20 Ruleo For many estimates, 80% of total cost is contained in 20% of cost items