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Unformatted text preview: Project Organization System and Project Management 1.040/1.401J Nathaniel Osgood Center for Construction and Research Education Department of Civil and Environmental Engineering Massachusetts Institute of Technology Project Organization and Contracting Major components of contract Project Delivery Method (Organizational relationships) Traditional (GC)? Design-build? Turnkey? Payment Scheme Lumpsum? Cost plus %/fixed fee? GMP? Award Mechanism Bidded? Negotiated? Relatively sparse space (high covariance) Project Organization Project Delivery Systems (most common) Traditional Pure Construction Management Construction Management at risk Design / Build Summary Broad Delivery Method Space Direct Financing Integrated Organization Segmented Organization Indirect Financing Most Common Delivery Methods TRADITIONAL DESIGN-BID-BUILD PURE OR AGENCY CONSTRUCTION MANAGEMENT Owner A/E General Contractor Subcontractor Subcontractor Subcontractor C/M Owner A/E Trade Contractor Trade Contractor Trade Contractor CONSTRUCTION MANAGEMENT AT RISK Owner Owner C/M A/E Construction Function Subcontractor D/B Entity Design Function Subcontractor Trade Contractor Trade Contractor Trade Contractor Subcontractor A Bit of History (Western World) Antiquity, Middle Ages: Design build 15th century 18th century: Century of engineering Before 1930s: mixture of methods Greater Distinction between architect & trades Greater attention to design General contractor in charge of trades, little subcontractors Most design-build, some with alternative financing (94%) Post WWII: Emergence of more specialized needs, subcontracting 1960s, 1970s: More complicated structures, emergence of CM, constructability needs Traditional Delivery Method How To: Traditional Hire a design professional in charge of the preparation of the design and contract documents Competitive bid or negotiation with contractors after design complete Contractor in charge of the delivery of the completed project (may decide to subcontract) The contractor is the only one responsible of the execution of the work Traditional Delivery Method Sequential Construction Process Collaborative Relationship between A/E (Chosen on Qualification Basis) and Owner Different Participants' Interests: Owner: Quality and Value Product, Delivery Schedule, Site Safety Contractor: Profit, Construction Time, Relationships, Reputation A/E: Profit, Aesthetics, Relationships, Quality, Recognition Lump Bids Commonly Adopted, Resulting in Adversarial Relationship between the Owner and the Contractor General Contractor Responsibilities Still responsible for a large fraction of jobs Particularly public jobs with bidding For larger job, GC doesn't do much of work (sometimes <10%) Sometimes verge up against CMs Division of responsibility for problems (Different teams) Owner must mediate fights between contractor, designer Contractor designs temporary structures Engineer needs to stamp (often not designer architect) Subcontractors GC manages most subcontractors Exceptions: Tenant subcontractors Overhead at each level Handles submittals Get bids from subcontractors (bid shopping a danger; no formal guarantee of award of contract) Bidding here typical (commodity) Can be large number of subcontractors (I15 200) Responsible for failure Shop drawings typically produced by subcontractors E.g. engineer consultants Signed off on by architect to say that meets design needs Problem: Things can fall through the cracks Subcontractors 2 Motivations No In-house ability GC overstretched GC lacks familiarity with local conditions Need to get warrantees Laws and regulations (assign subs to contractor) Due to specialization, more efficient, cheaper Sometimes GC provides equipment to subs Tensions (e.g. how quickly, many subs on site) Subcontractor management very important for productivity Sometime owners or GC put umbrella insurance over Required to have bonding by owner (so don't go after) Role of Architect/Engineer Typically negotiated contract Recruited on service rather than commodity basis Financial stability, other factors critical Sometimes have design competition Don't want to push too low: Poor design Poor personnel No time for double-check Contrast Price of design has small impact on overall price Quality of design has big impact on overall price Role of Architect/Engineer II Sometimes do own value engineering (dangerous) If estimates off, may be required to redo design at own expense Carry errors and omissions experience Limited participation in construction process Typically "observes" constructions Avoid official assumption of inspection guarantees Review shop drawings with disclaimers Avoids close communication with GC Do not want to direct construction methods May put suggestion in contract documents Advantages Well known method (courts, companies) Flexibility during design (vs. design-build) Cost defined early (when bidding) Good contractual protection for the owner Open bidding procedure very easy Owner not too involved in the construction process Fiduciary relationship between A/E & owner Good if uncertainty primarily in design Disadvantages Design not reviewed before construction Miss opportunities for major time/cost savings May yield changes due to constructability probs Sequential and linear process preventing from overlapping of tasks and money saving Few interactions among the participants Too rushed to consider multiple alternatives Construction can't start until design is complete Disadvantages II Innovative financing difficulty Leads to very conservative design strategies Difficult for complex projects Changes Difficult Owner can be at contractor's mercy Role of on-call contractor Deseign Fixed after construction starts High pressure if have Bidded Lumpsum Sometimes contractors seek changes to make $ Project Organization Project Delivery Systems (most common) Traditional Pure Construction Management Construction Management at risk Design / Build Summary How To: Construction Management The Owner hires both a design firm and a construction management firm before the beginning of the construction of the project Typically CM selected based on quality Many variations are possible in the delivery method depending mostly on when the management team is hired and its skills General Characteristics Started in late 1960s World trade center Madison Square Garden May recommend A/E Check billings Specific CM firms tend to be quite sophisticated Warning: Many GCs claim CMs "design CM", "construction CM" "owner CM" Tasks Preconstruction Constructability, value eng, estimation, alternatives, schedule, financing, manage designer, early procurement Field supervision QA, Targets met, invoice checking, coordinate work of contractors, M&E, change orders, payments, claims, inspections for design requirements, sometimes safety CM General Advantages Involvement in design allows better Knowledge of price early own Eliminates risks in design before bids Constructability, value engineer. reasoning from start Working construction constraints into design plans Allows flexibility in the Schedule (Fast tracking ) Can select CM based on quality Really familiar with plans before price/get bids CM General Disadvantages Don't know total cost when start construction Potential conflicts with other parties Designer Subcontractors (Where applicable) GC Pure ("Agency") Construction Management Pure Construction Management Great Flexibility in the Schedule and for Changes Market Competition for subcontracts Fiduciary Relationship with the Contractor Small Financial Risks of PCM and High Risk of Loss of Reputation PCM Generally Paid a Fixed Fee (professional) Take over work of designer, GC, owner PCM as Facilitator/Mediator in Conflicts Advantages Pure CM Great Flexibility for Changes CM more objective, less partial Less conflict between owner and CM Small Financial Risks of PCM Have both Cost competition (for subcontractors) Often 5-8% savings for dealing directly with subs Fiduciary relationship with CM One common reference point: The CM Owner can get rid of particular subcontractor Lessens owner's responsibilities Disadvantages Pure CM Lower incentive for CM to reduce price, time Owner alone takes risk on cost of project No guarantee from CM! Participants must all be cooperative and well communicating High Risk of Loss of Reputation All parties must be committed from the beginning Lessens Owner's Responsibility E.g. Project control Job meetings Management meetings Reports (operational and annual) Administrative tasks Budgets Drawing approval Oversight Quality assurance Central Artery / Big Dig Most complex highway project in American history The project consist in building 161 lane miles of urban highway - about half underground in a 7.5-mile corridor Planning for the Central Artery/Tunnel Project began in 1982 Congress approved funding and the project's basic scope in April 1987 http://www.bigdig.com Central Artery / Big Dig For the Fort point channel: Notice to proceed was granted to Modern Continental on March 7 1997 Expected date of completion: March 13 2002 Estimated cost: 301,377,284.10 $ Modified estimated cost: 403,929,276$ Modified date to completion: December 2004 Engineers + consultants = 100 Workers on the site = 800 Priorities = schedule- cost- technical http://www.bigdig.com Project Organization Project Delivery Systems (most common) Traditional Pure Construction Management Construction Management at risk Design / Build Summary Construction Management at Risk Construction Management at Risk CM usually Guaranteeing Maximum Price: GMP to give the owner security that the project will be built within budget Often set at 95% of design This is a big difference from pure CM Fee typically 10-15% Reduced Owner Risk Risk-wise, between the DBB and the PCM System (VERY similar to GC hired early) Contractual Relationships betw. CM&subs Performance bonds typical Advantages CM at Risk Reduced Owner's Risk CM at risk usually goes with Guaranteed Maximum Price (GMP) Contractual Relationships between CM and Trade Contractors Disadvantages CM at Risk The GMP is a defined price for an undefined product Bad during design: Design pressure Tension CM hired early: more price risk CM hired late: less value during design CM is no longer impartial (may argue against changes b/c of own interest) Risk of adversarial relationship The contract can be hard to enforce Albert and Barrie Zesiger Sports and Fitness Center Groundbreaking : October 2000 Occupancy : 2002 Designed by the architectural firms of Roche & Dinkeloo and Sasaki Associates Construction: Turner Construction Co. Cost : $45 million Olympic-class 50-meter pool An 11,000-square-foot fitness center Project Organization Project Delivery Systems (most common) Traditional Pure Construction Management Construction Management at risk Design / Build Summary How To: Design / Build The Owner Develops 20-30% design Hires a design/build firm that will complete both design and construction This firm can be a design/build firm but also a joint-venture firm for this specific project Possibility for the design/build company to hire subcontractors Solicit work with RFP (honorarium, phased) Can be good for complex projects but need phased design to shield parties from risk Design-Build Design-Build One Contractual Team Responsible for Design and Construction Function Owners with more Emphasis on Schedule Despite Less Control and More Uncertainty of Cost Loss of Control Over Design and Flexibility in Changes Owner with Enough Knowledge about Design and Construction to Establish the Initial Parameters, Review Proposals and Monitor the Process Back to the Future... Dominant method early in US history Recent drivers Downsizing of US corporations (outsourcing design) Desire for single source of responsibility Time pressure Shortcomings of tightly defined architect role Constructability issues Limited design oversight Bridge Designer/Engineer Serves as bridge between Owner Design-build team Preliminary design before DB team hired Maybe up to 30% design Monitors development of design and construction Fiduciary with owner Advantages DB Allows Fast Tracking May be good for some complex projects Close coordination within team Institutional knowledge build up Single source of accountability Good interactions among participants Designer/contractor conflicts not exposed to owner Easier incorporation of changes caused by field conditions Disadvantages DB Lack of fiduciary relationship with designer Risk of sacrificing design quality to protect profit Pricing isn't possible at the beginning Can be bad for complicated projects Very important for owner to be closely involved to specify important aspects of design up-front Can lead to delay of construction steps for design completion Demands sophisticated owner (construction, quality, oversight of submittals, negotiation,...) Design-Build Disadvantages II Fewer checks and balances Changes in contract Problems may be hidden May take a direction that the owner does not really want Design-build firm can give high quote for changes Fast tracked: Change can require Rework Iteration Owner responsible for Quality assurance Package:Can't get rid of individual components of team Public Use Challenges Regulatory hurdles Federal use allowed Federal Acquisition Reform Act of 1996 allowed Many states still do not allow Major opposition from Architectural lobby Unions Pricing and Selection More comprehensive selection process typical Design/Price/Schedule/Team Design competitions undertaken Timing tension for when to recruit DB firm Earlier recruitment: Greater risk and Risk premium Later recruit: Less knowledge up front Uncertainty early Limit creativity (closer to GC) Often have segmented pricing (cost-plus design, fixed price or GMP build) Example Design-Build: I15 Originally slated as DBB, but made DB to fasttrack Hard deadline due to Salt Lake City Olympic Games US DOT as owner agency Bidded project (with rights to use unsuccessful) Unsuccessful bidders became subcontractors Reputation foremost 200 Subcontractors Few reviews Modified CM Design/Build: Design Subcontracted CM Oversight Design/Build Other Delivery Methods Multiple Primes Allows owner time to raise money Turnkey (Like DB but Contractor Financed) Very common in residential housing Design-Build-Operate-Transfer (BOT) Long-term financing (vs. DBO) Can compete on size, transfer time, etc. Have different guarantees needed to entice Owner/Agent (Owner does part of design) Project Organization Project Delivery Systems (most common) Traditional Pure Construction Management Construction Management at risk Design / Build Summary Type of Relationships Among Participants Advantages of the 3 Most Common Delivery Methods Construction Type of contracts Advantages Legal and contractual precedent Cost determined before contract commitment Fast-tracked construction allowed Minimum owner involvement Cost benefit from competition Negotiation with quality contractor for unique expertise Allow adjustment to new conditions without changing agreement Single firm control of design/construct process X X X X X X X X X X X X X Management Design Build Traditional Approach Gould and Joyce, 2002 Disadvantages of the 3 Most Common Delivery Methods Construction Type of contracts Disadvantages Design does not benefit from construction expertise Design construction time is the longest Adversarial relationship owner/designer vs contractor Contract agreement affected by changes Few checks and balances Cost control occurs late in project Contract amount may be complicated by continual contractor negotiations Contract agreement affected by unforeseen conditions X X X X X X X X Management Design Build Traditional Approach ~x ~x ~x ~x Modified from Gould and Joyce, 2002 Issues with Bids Low bidders can be unreliable Prequalify aggressively! To allow for fast-tracking may bid early (30%) Don't try to force delivery from low bid Growing Frequency: innovative bidding method Pressure for lowest bid canh create Cutting corners Low-quality personnel Bad feelings ...
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This note was uploaded on 10/29/2008 for the course PM 1040 taught by Professor Dr.nathanielosgood during the Spring '04 term at MIT.

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