Construction Procedures (2)

Project
o Definition of Project
Temporary endeavor with beginning of end that provides service, or
result
o Needs Manpower, materials, money, and machines
o 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)

Concept stage feasibility, (could take years), largest impact on cost

Design stage Conceptual, detailed design, project contract, and bids
Construction stage
Highest level of expenditure
o 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
o
o
o

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 bidders
o A/E acts as owner-rep
Advantages
o Price competition
o Total cost known b4 construction
Disadvantages
o Long time (design longer than construction, sometime
years)
o Conflict between owner/A/E and GC
o 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 RFIs and easier to solve
problems
Considered in complicated project (plant, refineries, etc)
Advantages
o Design and construction can be overlapped to reduce
time
o Easier to do changes a25%nd communication
o Min. owner involvement
Disadvantages
o Cost unknown until end
o High risk for contractor and expensive for owner
o Low quality to save cost
o 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
teamwork
o 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
construct
o Hires subcontractors and not SC
o Advantages
Use construction skills with no conflict

 Faster and use value engineering

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
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 risk
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 incentive
o Ability to make changes
o Allocation of risk
Types - Competitive Bidding Contracts
o 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 GCs 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 bonus
o 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. Price
o

GC ok as long as price doesnt 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 docsspecs, 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 doesnt 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 doesnt pay subs, surety pays GCs
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, resources
o Estimating/ schedule
Owner responsibilites
o In form bidders of any changes in dates/regs
Bid Evaluation
o Choose lowest responsible bidder
o Average bidder
o Weighted (weight each item)

Estimating

Intro
o Not exact science
o Estimating material costs is simple but lab and equipment is difficult due to
variation in production rates
Elements of Estimating
o Takeoff, pricing, bidding, etc
o 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 CDs, ability to read dwgs and specs, Math/computer skills
(excel/timberline), and communication skills
Tools
o Scales, excel (for small companies),
o timberline, vico office, winEst by using cost data base(for large companies
estimating)
o

Conceptual
Estimate
o Rough
order of magnitude w/ no
dwgs needed
o Owner decides if its worth it to pursue project (feasability profitable, worthwhile,
cost benefit analysis)
Preliminary Estimate
o A little more detailed but still many assumptions
o Purpose to compare different designs and get idea of construct budget
GCs detailed estimate
o Done by GC for purpose of bidding
o Accurate
o Specs, plan, price, productivity info needed
o Watch how Scope of Work is detailed in
contract
Cost Components
o Direct Cost (70-90% of total cost)
o Costs related to production
Indirect Costs
o If work item is deleted, indirect cost remains (insurance, taxes, electricity, etc)
Project Overhead (5-30%)
o Not directly charged to work element
o Cost of utility, site trailer, bonding, maintenance, etc
General Overhead (0-15%)
o Indirect overhead (taxes, overhead)
Markup (0-20%) GCs added fees
Profit (for GC) and Risk contingency (against uncertain circumstances like weather,
labor/soil problems, etc)
General Procedure

Estimating Formates

o
o
o
80/20
o

Uniformat- based off function

MasterFormat based off of what material type
Work Breakdown Structure (WBS) for heavy engineering
Rule
For many estimates, 80% of total cost is contained in 20% of cost items