Chapter 3
Chapter 3
Chapter 3
Early in a project, the owner must select a process for design and construction. There
are many choices of processes, each with advantages and disadvantages. The process
selected affects financing, selection of team members, and the project cost, quality, and
schedule.
Design and construction projects progress through three phases: project definition,
design, and construction. This book focuses on the design and construction of projects.
Projects can generally be classified into three sectors: buildings, infrastructures, and
process. Design development defines the functional use and systems in the project in
order to produce the contract documents, the plans and specifications for constructing
the project.
Infrastructure-sector projects include transportation systems, such as city streets,
county roads, state and federal highways, airports, or navigational waterways.
Process-sector projects include chemical plants, oil refining, pharmaceuticals, pulp and
paper, and electrical generating. Engineers are the prime designers of process-sector
projects. The preliminary engineering produces the major processes and major
equipment required in the project. The contract documents are the final drawings and
specifications for constructing the project.
In the current practice of competitive-bid projects, contractors bid the project after the
contract documents are completed. After accepting the bid, the contractor must develop
shop drawings to build the project. The shop drawings show the detailed fabrication and
installation that will be used during construction.
For non-competitive-bid projects, the owner negotiates a contract with a firm to provide
engineering and/or construction services. The agreement also specifies how the
engineering design will be integrated with the construction process.
CONTRACTUAL ARRANGEMENTS
Project management requires teamwork among the three principal contracting parties.
The designers team must develop a set of contract documents that meets the owners
needs, budget, required level of quality, and schedule. The contractors team must
efficiently manage the physical work required to build the project in accordance with the
contract documents.
Here are numerous combinations of contract arrangements for handling a project. A
design/bid/build contract is commonly used for projects that have no unusual features
and a well-defined scope. This method involves three steps: a complete design is
prepared, followed by solicitation of competitive bids from contractors, and the award of
a contract to a construction contractor to build the project. Two separate contracts are
awarded, one to the designer and one to the contractor.
A design/build contract is often used to shorten the time required to complete a
construction. A construction management contract can be assigned to a CM firm to
coordinate the project for the owner. The basic CM concept is that the owner assigns a
contract to a firm that is knowledgeable and capable of coordinating all aspects of the
project to meet the intended use of the project by the owner. The CM method of
contracting is discussed further in Chapter 11.
There are two general types of owners: single-builder owners and multiple-builder
owners. Single-builder owners are organizations that do not have a need for projects on
a repetitive basis, normally have a continual need for projects, and generally have a
staff assigned to project work. An owner can select a variety of ways to handle a project.
PHASES OF A PROJECT
OWNERS STUDY
A project starts as a need by the owner for the design and construction of a facility to
produce or service. Generally one or more persons within the owners organization are
assigned to perform a needs assessment to study the merits of pursuing the project.
The first requirement of the owner is objective setting. The owners objectives must be
clearly communicated and understood by all parties and serve as a benchmark for the
numerous decisions that are made throughout the duration of the project.
The owners study must conclude with a well-defined set of project objectives and
needs, the minimum requirements of quality and performance, and approved maximum
budget and a required project completion date. Failure to provide any of the above
items starts a project in the wrong direction and leads to future problems.
The thoroughness and completeness of the owners study has a significant impact on
total project cost. An incomplete scope leads to costly change orders and, frequently, to
claims and disputed which lead to major cost overruns, delays, and other problems.
A realistic budget and schedule cannot be determined for a project without a welldefined scope of work. It is the responsibility of all project managers to keep all work
within the approved scope, and all costs and schedule within the approved limits.
There are times when an owner may become excited about the merits of a project and
anxious to begin work as soon as possible. The project manager must thoroughly
review the project scope and be certain that it is sufficiently well defined before starting
work on the project.
PROJECT STRATEGY
In the early stages of project development the owner must develop the project strategy,
a plan to carry out tasks in a timely manner.
Contract strategy identifies the overall organizational structure and the allocation of risk
among the contracting parties.
Although a large organization may have the in-house capability, it may not be able to
schedule the work when it is needed due to prior commitments.
The type of contract chosen defines the allocation of responsibilities and risks for each
party and influences the project schedule. Government projects of an emergency nature
are sometimes handled in this manner. If there is ample time to complete the entire
design, a traditional design/build/bid approach with a lump-sum contract may be
desirable.
The project strategy includes a schedule for the timing of design, procurement, and
construction tasks. Any change in the project schedule should be approved by all
parties.
sector projects, owners can simply choose their preferred designer or they may desire
to obtain proposals from several design organizations that they have used in the past.
For public-sector projects, selection of the designer depends on the policies and
restrictions of the owners organization. Generally, designers are selected from a list of
prequalified firms.
After the owner has studied the proposed project and its need for design services, a list
of prospective design organizations is identified. Generally the list consists of at least
three design firms that appear to be best qualified for the particular project. Each design
firm is sent a letter that briefly describes the proposed project and inquires about its
interest in the project.
Typically after all interview are conducted, the owner lists the design firms in the order of
their desirability, taking into account their location, reputation, size, experience, financial
stability, available personnel, quality of references, work load, and other factors related
to the proposed project.
If the design is 100% complete, the owner may issue requests for bids to construction
contractors. For most private-sector projects the documents generally state that
selection of the construction contractor will be based on the lowest and best bid.
Sometimes the owner may desire to start construction before design is completed.
When the owner desires to start construction before design is complete, selection of the
construction contractor cannot be made on price alone because the design documents
are not completed.
PARTNERING
The competitive environment and the rigid requirements of contracts have attires,
caused adverse relationships in the construction industry. Traditionally, contractors and
vendors have been selected on a competitive-bid basis to provide construction services,
under formal contracts, to meet the requirements specified in the drawings and
specifications.
A relatively new concept called partnering is an approach that focuses on making longterm commitments, with mutual goals for all parties involved to achieve mutual success.
Partnering is a business strategy that offers many advantages to the parties involved;
however, its success depends on the conduct of the parties and their ability to overcome
barriers related to doing business differently than in the past. Partnering is not to be
construed as a legal partnership with the associated joint liabilities.
The first known partnering relationship in the construction industry was between an oil
company and a contractor. The owner approached the contractor and proposed that
some of the existing engineering blanket work be accomplished using a new set of
relationships and accountabilities.
From a contractual point of view, this first partnering relationship differed from traditional
contracts because the bureaucratic procedures were removed and all issues were open
for negotiations. The parties agreed to set performance evaluation criteria for major
areas that were important to the projects. Contractor incentives to employees included
both monetary and non-monetary incentives.
A cultural change is required by all parties in a partnering relationship. The three key
elements of any successful partnering relationship are trust, long-term commitment, and
shared vision. As these three elements are developed, other sub-elements are achieved
and the benefits to all parties are maximized. Both customer and supplier can profit from
reduced overhead and work load stability. Shared vision can expand to open sharing
and mutual development of business objectives.
The CII publication discusses applications of partnering to small business and projects,
guidelines on selecting partners, and guidelines for implementing a partnering
relationship.