Construction Industry

Construction Industry is very important for the economy of any country as it contribute a considerable amount to the GDP. Generally, we can categorize construction work in to two types; (i) Building Construction (ii) Infrastructure Development

Construction Industry Cont.

Building Construction Building construction is the process of adding structure to real property. Building construction projects may be small renovations, such as addition of a room, renovation of a bathroom etc. or large construction work like skycrapers. Infrastructure Infrastructure development involves construction of Highways, Railways, Ports, Dams, massive earth work projects etc.

Construction Industry Cont.

At the end of any type of construction work, there will be end product that enhance the living conditions of people. All of the construction works that are carrying out will be projects. All the employees working in construction industry will have to work in project environment.

Project
What is a project ? A Guide to the Project Management Body of Knowledge (simply referred to as the PMBOK), defines a project as a temporary endeavor undertaken to create a unique product or service. Temporary means that the project, has an end date. Unique means that the projects end result is different than the results of other functions of the organization.

Project cont.
The most obvious characteristic of a project is that it has to achieve some particular purpose. For achieving this aim, project has a beginning and end. Every project you ever do is different than all the other projects you have done in the past. When the project is successfully completed it will have an impact on peoples lives, by changing their working patterns or by changing their environment. Projects can vary hugely both in their subject and in their size.

Project cont.
Main Characteristics of a Project; Has a specific aim Is an instrument of change Has a definite start and finish Results in something being delivered Is unique Involves cost, resources and time.

Typical Project phases

Initiation - Setting objectives, Agreeing budgets, Gaining project approval Specification Detailed requirements are determined Design Final deliverable will begin to shape, Technical experts will create a solution Build Something tangible is created. Implementation Final acceptance

Project Stakeholders
Stakeholders are those people and organizations who are actively involved in the project, or will be affected by its outcome. Stakeholders may like, love or hate the project. Identification and alignment of stakeholders and their expectations is very important in project management. Stakeholders can go by many different names; Clients, Consultants, Contractors, Sub Contractors, Financers, Manufacturers and Suppliers, Regulatory Agencies, Insurance Organizations, Plant and Equipment hirers, Communities, Citizens and more.

Key Project Stakeholders

Client/Employer Consultant/Engineer/Architect Contractor

Key Project Stakeholders Cont.

Client
Client authorizes the project. Client should ensure that the necessary funds are available for the project work. Public sector client organizations Government Departments ( Irrigation Department, Building Department etc.) Authorities and statutory Boards ( NWSDB,RDA,UDA,CEB etc.) Private sector Organizations Individuals Organizations ( Sole proprietors, Partnerships, Limited Liability Companies )

Key Project Stakeholders Cont.Client

Non Government Organizations UN UNDP UNOPS Sarvodaya

Key Project Stakeholders Cont.

Consultant / Engineer The person appointed by the client as the consultant for the purpose of contract; Consultant may be a Person or an Organization depending on the type and size of the project. Professionals involved may be - Architectures - Quantity Surveyors - Engineers - Planners

Key Project Stakeholders Cont.

Contractor Contractor is the person who provide the service under the contract. Contractor may be public or private and international or national. Contractor may be civil, mechanical, electrical or any other specialist services. The contractor should design ( to the extent specified in the contract), execute and complete the works in accordance with the contract and with the instructions of the Engineer and should remedy any defects.

Role of the Quantity Surveyor in construction Industry

Quantity surveyors are the cost managers of construction. They are initially involved with the capital expenditure phase of a building or facility, which is the feasibility, design and construction phases, but they can also be involved with the extension, refurbishment, maintenance and demolition of a facility. The construction industry is global and extends across all real estate and infrastructure markets. Quantity surveyors work in all sectors of the construction industry worldwide. In real estate this covers residential, commercial, industrial, leisure, agricultural and retail facilities.

Role of the Quantity Surveyor in construction Industry Cont.

In infrastructure it covers roads, railways, waterways, airports, sea ports, coastal defenses, power generation and utilities. Quantity surveyors may also work in process engineering, such as chemical engineering plants or oil rigs. They must understand all aspects of construction over the whole life of a building or facility. They must have the ability to manage cost effectively, equating quality and value with individual client needs.

Role of the Quantity Surveyor in construction Industry Cont.

As a quantity surveyor you may be working as a consultant in private practice, for a developer or in the development arm of a major organisation (eg retailer, manufacturer, utility company or airport), for a public sector body or for a loss adjuster. On the contracting side you could be working for a major national or international contractor, a local or regional general contractor, for a specialist contractor or sub-contractor, or for a management style contractor.

Role of the Quantity Surveyor in construction Industry Cont.

Quantity Surveyors work may include the following: preparing feasibility studies or development appraisals assessing capital and revenue expenditure over the whole life of a facility advising clients on ways of procuring the project advising on the setting of budgets monitoring design development against planned expenditure conducting value management and engineering exercises managing and analyzing risk

Role of the Quantity Surveyor in construction Industry Cont.

managing the tendering process preparing contractual documentation controlling cost during the construction process. managing the commercial success of a project for a contractor. valuing construction work for interim payments, valuing change, assessing or compiling claims for loss and expense and agreeing final accounts. negotiating with interested parties giving advice on the avoidance and settlement of disputes.

Pre-contract duties of the Quantity Surveyor

Pre-contract duties of the Quantity Surveyor Cont.

Pre-contract Cost Planning and Cost Management Pre-contract cost planning is the technique by which the budget is allocated to the various elements of an intended building project to provide the design team with a balanced cost framework within which to produce a successful design. It allows for the redistribution of the budget between elements as the design develops. Cost management is the total process which ensures that the contract sum is within the clients approved budget or cost limit. It is the process of helping the design team design to a cost rather than the quantity surveyor costing a design.

Pre-contract duties of the Quantity Surveyor Cont.

Design Stages Stage B: Feasibility Quantity Surveyor Prepare feasibility studies and determine the budget Stage C: Outline Proposals Consider with client and design team alternative strategies and prepare cost plan Stage D: Scheme Design Carry out cost checks and update cost plan if necessary Stage E: Detail Design Stage F: Production Information Carry out cost checks Stage H: Tender Action Prepare reconciliation statement

Procurement
What is procurement ? Procurement is a process by which the Goods, Works, Other Services, and Consultant Services are acquired appropriately. Goodsmeans commodities, raw materials, products, equipment and other physical objects of every description, whether in solid, liquid or gaseous form.

Procurement
Works means all activities associated with the construction, reconstruction, demolition, repair or renovation of a building, structure or associated activities, such as site preparation, excavation, erection, building, installation of equipment or materials, decoration and finishing. Services means services other than consultancy services. Eg-Services for building maintenance

Objectives of Procurement
The Procurement process should ensure: (a) maximizing economy, timeliness and quality in Procurement resulting in least cost together with the high quality; (b) adhering to prescribed standards, specifications, rules, regulations and good governance; (c) providing fair, equal and maximum opportunity for eligible interested parties to participate in Procurement; (d) expeditious execution of Works and delivery of Goods and Services; (e) compliance with local laws and regulations and international obligations; (f) ensuring transparency and consistency in the evaluation and selection procedure; and (g) retaining confidentiality of information provided by bidders.

Procurement systems
Traditional Methods Bill of Approximate Quantities Bill of firm quantities Schedule of rates Cost Reimbursement Drawings & Specifications Alternative Methods Design and Build Turnkey Contract Management Contracts Construction Management Project Management Private Investment

Traditional Methods
Bill of approximate Quantities Most common in the public sector for construction works Bidders are invited to quote unit rates for estimated quantities of different classes of work to be performed. The bid price comprises the summation of estimated quantities multiply by the respective unit rate for all the items of work. During the contract execution, quantities of work completed are measured as the basis of payment.

Traditional MethodsBill of Approximate Quantities

Advantages Construction work may begin earlier The extra expense of preparing bills of firm quantities is avoided. Disadvantages Re-measurement should be carried out at every valuation which may prove more costly Does not give a realistic total cost at tender stage

Traditional MethodsLump Sum contracts or contracts based on firm quantities Main characteristics are: Both the quantities and the unit rates in the BOQ form part of the contract. The design should be completed before signing the contract Being the quantities are firm, no need of remeasuring the work completed. The contractor is paid for the quantities given in the bills of quantities, unless there is a variation order, which will be dealt separately under variations.

Traditional Methods -Lump Sum contracts or

contracts based on firm quantities Cont.
Advantages Both parties to the contract have a clear picture of the extent of their respective commitments. The unit area in the bills provide a sound basis for valuations of variation to the design. Detailed breakdown of the tender sum is readily available. Disadvantages The length of time taken in the design of the projects and in the preparation of bills of quantities is greater. Problems may arise due to change in character of the balance work or the conditions as a result of the variations ordered by architect/Engineer.

Traditional MethodsSchedule of rates

All items which likely to arise in any construction project are listed under each trade with unit rates. Bidders are asked to tender percentage additions or deductions to the listed rates. Often usage of a particular standard schedule allow contractors to familiar with both item descriptions and the rates. Tender evaluation is somewhat difficult.

Traditional Methods
Cost Reimbursement Method Commonly termed as Cost Plus Provide for the reimbursement of the contractors prime costs for measurable inputs, such as labour, materials, equipment, insurance, spare parts, tools, fuel etc. together with a fee to cover his associated overheads and profits. Good for circumstances where time is more critical than cost. Payments based on invoices and resources consumed are checked with the invoices furnished by the contractor.

Traditional MethodsCost Reimbursement Method

The Fee may be Cost + fixed fee Cost + Percentage fee Cost + a variable fee, based on targets Advantages Construction work can start quickly No measurements of work Some times may be profitable due to time value of money Disadvantages Vast amount of investigation is needed over invoices. Cost of construction for client is normally greater than of other methods Computation and verification of total cost is a tedious process.

Traditional MethodsContracts based on Drawings and Specifications Tenderers are supplied only with a complete set of drawings and full specification. This is also a Lump Sum contract and in calculation of the tender sum , the contractors quantity surveyor has to prepare approximate bills of quantities from the drawings provided. This type of contracts are normally used for small contracts such as renovations and for sub contract works.

Traditional MethodsContracts based on Drawings and Specifications Advantages Both parties have a clear picture of the extent of their respective commitments. Lesser time to prepare tender documents as the time consuming for preparing bills of quantities is eliminated. Disadvantages No detailed breakdown of the tender sum is readily available. Problems arise when valuing variations as no unit rates are available. Every bidder has to prepare a tender and tendering takes more time.

Alternative MethodsDesign and Build Cont.

The contractor is responsible for the design, planning, organization and control of the construction and generally satisfying the clients requirements and offers his services for an inclusive sum. The procedure is initiated by the client (or an architect on his behalf ) preparing his requirements in as much or as little detail as he thinks fit. The contractor prepares his proposals on design, time and cost, and submits together with an analysis of tender sum.

Alternative MethodsDesign and Build Cont.

The client after having satisfied on a particular proposal, accept the same and enter in to a contract with the successful tenderer. The contractor then develop design proposal, carry out and complete the work. The client may use the services of an independent architect and quantity surveyor to advice on the contractors proposals as to the design and construction methods and the financial aspects as well. The client may also appoint an agent to supervise the works and to act generally on his behalf to ensure that the contractors proposals are compiled with.

Alternative MethodsDesign and Build Cont.

Client - Briefing: Terms of user requirements as to space and facilities. Acceptability criteria as to standard of confort and quality (or outline performance specifications).

Contractor - Proposal - to satisfy clients requirements: Drawings. Specification of material and workmanship standard. Price and payment schedule.

Alternative MethodsDesign and Build Cont

Client Architect Contractor Engineering Consultant

Quantity Surveyor

In-house Design Engineers

In-house architects

In-house Quantity surveyor

Sub Contractors
Indicates lines of communication

Indicates possible lines of communication

Alternative MethodsDesign and Build Cont.

Advantages Single point responsibility is provided, i.e. the contractor is solely responsible for failure in the design and/or the construction. The client has only one person to deal with, the contractor The client is aware of the total commitment Close intercommunication between the contractors design and construction teams promotes cooperation in achieving smoother running of the contract and prompt resolution of site problems.

Alternative MethodsDesign and Build Cont.

Disadvantages Variations from the original design are discouraged by the contractor whenever it is expensive. The client has no means of knowing whether he is getting value for money unless he employs his own independent advisors, which adds to his cost. If the contractors organization is relatively small, he is unlikely to be as expert on design as he is on construction, and the resulting building may be aesthetically less acceptable.

Alternative Methods- Package/Turnkey

Contract
Both "design-build" and turnkey" contracts involve the Contractor's total liability for design. In turnkey contracts, the Employer's requirements usually include provision of a fully equipped facility, ready for operation (at the turn of the "key"). Turnkey contracts typically include design, construction, fixtures, fittings and equipment, the scope of which would be defined.

Alternative MethodsManagement contracting

A method where overall design is the responsibility of the clients consultants, and the contractor is responsible both for defining packages of work and then for managing the carrying out of this work through separate trades or works contracts. The management contractor does none of the construction work himself but divided up in to working packages which are sublet to sub contractors. The management contractor is normally either nominated by the client on the basis of previous experience of management contracting or selected by competition based up on tenders for ( a) The management fees and ( b) prices for any additional services to be provided before or during construction period.

Alternative MethodsManagement contracting Cont.

Each sub contractor will enter in to an agreement with management contractor. Role of the management contractor is to provide contract management service on a fee basis as part of the clients management team. His main duties are organizing, coordinating, supervising and managing the construction works in co-operation with the clients other professional consultants. As part of his service, he may provide and maintains all the necessary site facilities such as offices, storage and mess huts, power supplies and other services etc. With management contracts, administrative matters relating to valuations and payments are in the hands of the clients consultants.

Alternative MethodsManagement contracting Cont.

Client

Architect Engineering Consultant

Management Contractor

Quantity Surveyor

WC 1

WC 2

WC 3

Indicates lines of communication

WC Works Contractor

Alternative MethodsManagement contracting Cont.

Advantages Work can begin on site as soon as the first one or two works packages have been designed. Overlapping of design and construction can significantly reduce the time requirement, resulting in an earlier return on the clients investment. The contractors practical knowledge and management expertise are available to assist the design team. Where the nature and extent of the work may be uncertain, the design of later work packages may be delayed until more information becomes available as the work progresses, without extending the contract period.

Alternative MethodsManagement contracting Cont.

Disadvantages Uncertainty as to the final cost of the project until the last works contract has been signed. The number of variations and the amount of remeasurement required may be greater than on traditional contracts because of the greater opportunity to make changes in design during the construction period, because of problems connected with the interface between packages.

Construction Management
Construction management is a type of management procurement where the client appoints a design team and enters into an agreement with the construction manager or appoints an in-house manager. The construction manager does not directly undertake any of the construction work, which is broken down into packages and carried out by trade contractors. These trade contractors are appointed by the client, and are directly and contractually responsible to him. The client therefore assumes a major role in directing the project, whilst leaving the management of it to the construction manager. The construction management appointment will be for the services as defined in that document. Although the trades contracts are arranged and administered by the construction manager, contractually they are the clients risk.

Alternative MethodsProject Management

Project Management is not a procurement system in itself, in that it does not include the site construction process but only its general supervision. It has been defined as the overall planning, control and coordination of a project from inception to completion aimed at meeting a clients requirements and ensuring completion on time, within cost and to required quality standards.

Alternative MethodsProject Management

The Project Manager, becomes the clients representative, with authority to supervise and control the entire planning and building operation from acquisition of the site to completion of the project and settlement of the accounts. Quantity Surveyors, by their training and experience in financial and contractual matters, coupled with a detailed knowledge of construction processes, are well qualified to offer a project management service.

Alternative Methods -Private Investments

Infrastructure projects which are not identified to be financed under the Consolidated Fund, may be identified to be financed/developed by private investors. Projects financed by the private sector will be considered on a Build, Own and Operate, Build, Own and Transfer, Build, Own, Operate and Transfer (BOO/BOT/BOOT) and other variants would be built, owned and operated by the investor or transferred or leased to the public sector after a concession period.

Alternative Methods -Private Investments

Infrastructure Projects Infrastructure Development Projects managed by the Private Sector on Build- Own-Operate (BOO), Build-Own-Transfer (BOT) or other variant basis, which will be wholly or partly implemented by the private sector include, but are not limited to: - power plants - highways - ports - airports - telecommunications - railways - transport systems - industrial parks - solid waste management - water supply and drainage - warehouses, housing, markets etc. - Land reclamation - Other economic infrastructure

Procurement Procedure- Related Institutions

Institutions related to procurement and their functions: Secretaries to the Line Ministries The responsibility of Procurement Actions shall be vested with the Secretaries of the respective Line Ministries, who are deemed to be the Chief Accounting Officers of such Ministries. Procurement Entity means a Government ministry, provincial council, Government department, statutory authority, government corporation, government owned company, local authority or any subdivision thereof or any other body wholly or partly owned by the Government of Sri Lanka or where the Government of Sri Lanka has effective control of such body, that engages in Procurement.

Procurement Procedure- Related Institutions Cont.

Responsibilities of PE The officer-in-charge of a Procurement Action, such as Heads of Department and Project Directors, together with the assistance of the Procurement Specialists, Consultants and other staff shall be responsible for the following: (a) Maintenance of necessary communication with all stake holders of the Procurement process; (b) preparation of invitation for pre-qualification and its submission to the Technical Evaluation Committees (TEC) for review and approval; (c) preparation of the draft bidding documents including the specifications and the submission of same to the TECs for review and approval; (d) preparation of data and information prior to the evaluation report; (e) issuance of invitations and facilitating the meetings of TECs and PCs; (f) circulation of the minutes of the meetings of TECs and PCs; and (g) provision of any requisite assistance to TECs and PCs on any request made by them to facilitate the Procurement process and all other matters incidental thereto.

Procurement Procedure- Related Institutions Cont. A Procurement Committee (PC) and Technical Evaluation Committee ( TEC ) will be appointed in order to carry out entire procurement process. TEC will help PC to carryout procurement process by handling technical matters. PC may be Cabinet appointed ( CAPC), Ministry Procurement Committee (MPC), Department Procurement Committee (DPC), Project Procurement Committee (PPC ) or Regional Procurement Committee (RPC )

Procurement Procedure- International Competitive Bidding

International Competitive Bidding (ICB) The purpose of ICB is to give all prospective and qualified bidders adequate and timely notifications of PEs requirements and to give them equal access and a fair opportunity to compete for contracts for required goods and services. Bidding opportunities must therefore be advertised internationally and all eligible bidders given reasonable possibilities to participate. These notification requirements distinguish ICB from other methods of procurement.

Procurement Procedure- International Competitive Bidding Cont.

International Competitive Bidding ICB may be the most suited method of Procurement, for large contracts, under following circumstances: (a) when the capacity of the domestic contractors, suppliers and service providers are limited; (b) for Foreign Funded Projects, when the Foreign Funding Agency agreement requires the PE to resort to ICB procedures;

However, in the case of Works contracts in view of the development of domestic construction industry, the possibility of slicing the contract and following slice and package approach to suit domestic contractors may be considered.

Procurement Procedure- International Competitive Bidding Cont.

The PE is required to give worldwide publicity to the tender notice in various media to ensure maximum competition. PE is required to: Advertise at least in one widely circulated national newspaper. Relevant websites Internationally such as in UNDB Transmit such invitations to embassies and trade representatives of countries from where suppliers and contractors are likely to participate, and post them in relevant websites. ICB for Works contract with prequalification may needs 16-20 months procurement lead time and Works contracts without prequalification may needs: 8-12 months

Procurement Procedure- International Competitive Bidding Cont.

When ICB is used, domestic preference criteria shall be used. For contracts for works to be awarded on the basis of ICB, a margin of preference of 7.5 percent can be granted to domestic contractors. The bidding documents shall clearly indicate the preference and the method that will be followed in the evaluation and comparison of bids to give effect to such preference.

Procurement Procedure- National Competitive Bidding

National Competitive Bidding ( NCB ) NCB is the competitive Bidding procedure that shall be applicable for most GOSL funded projects when the Goods or Works are available within Sri Lanka at prices significantly below those in the international markets. When NCB is used: The invitation to bid should be advertised at least in one widely circulated national newspaper and in relevant websites where possible; Any supplier, service provider or contractor who desires to obtain the Bidding document should be allowed to purchase same, provided the Bidder is prepared to pay any specified fees; The contractors/suppliers/service providers should be allowed to purchase the Bidding document up to a day prior to the Bid closing date;

Procurement Procedure- National Competitive Bidding Cont.

NCB in Foreign Funded Project may be used: With the agreement of the Foreign Funding Agency; and By allowing foreign contractors or suppliers to Bid on same terms with the domestic contractors or suppliers; By not giving preference to domestic bidders NCB contract may needs: 6 months of lead time.

Contract Documents
As per the FIDIC (1999 );
The documents forming the Contract are to be taken as mutually explanatory of one another. For the purposes of interpretation, the priority of the documents shall be in accordance with the following sequence: (a) the Contract Agreement (if any), (b) the Letter of Acceptance, (c) the Letter of Tender, (d) the Particular Conditions, (e) these General Conditions, (f) the Specification, (g) the Drawings, and (h) the Schedules and any other documents forming part of the Contract.