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Thoughts for the Day. A great leader comes along about once in a generation and great problems come along about three times a week Most people who succeed in the face of seemingly impossible conditions are people who simply don’t know how to quit. Robert Schuller.

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thoughts for the day
Thoughts for the Day
  • A great leader comes along about once in a generation and great problems come along about three times a week
  • Most people who succeed in the face of seemingly impossible conditions are people who simply don’t know how to quit.
    • Robert Schuller
con 371 project management and safety

Con 371 Project Management and Safety

Contracts, Bid, and Award

29 August, 2001

project execution
Project Execution
  • Type of Project Delivery helps determine contract approach
    • Amount of information
    • Type of Proposal
    • Type of Contract
  • Development of project documents
    • Design Drawings
    • Proposal
    • Contract
slide4
Fixed Price

Lump Sum

Bid

Negotiated

Multiple Fixed Price

Unit Price

Cost Type

Reimbursable

Cost Plus Percent

Cost Plus Fee

Guaranteed Maximum Price

Target Price

Contract Types

contracting strategy
Degree of Definition

Economic Conditions

Competitive Situation

Anticipated Changes to Scope

Schedule Importance

Total Cost Importance

Quality Importance

Contracting Strategy
contracting approach
General Contractor

Negotiated

Lump Sum/Fixed Price

Construction Manager

CM as Advisor

CM/GC

CM as Agent

Contracting Approach
general contractor
General Contractor
  • Usually self-performs work
  • Holds subcontracts
  • Assumes risk/reward of buyout
  • Performs minimal management services
general contractor8
General Contractor
  • Lump Sum - Fixed Price
    • holds subcontracts
    • assumes risk/reward of buyout
    • requires fully developed documents
  • Negotiated
    • holds subcontracts
    • owner usually assumes risk/reward of buyout
    • common for fast track
    • usually open-book
construction manager
Construction Manager
  • Performs Extensive Management Functions
  • May/may not hold subcontracts
  • Owner Assumes Risk/Reward of Buyout
  • Usually open book
  • May/may not self-perform (CM/GC)
construction manager10
Construction Manager

Usually Negotiated Contract

  • Guaranteed Maximum Price
  • Cost Plus Fixed Fee
  • Cost Plus Fee with a Target Price
project fee
Project Fee
  • Fee is the contractor’s return on his/her investment and his/her reward for assuming risk
  • Although attractive, low fees can endanger project success:
    • attract lower caliber firms
    • less contractor commitment to success of project
    • less experienced personnel assigned to project
project fee12
Project Fee
  • Most effective way to reduce fee is to reduce risk
  • Contingency built into all estimates based upon adequacy of documents
  • Often performance incentives based on project goals are used
contracting approach type of contract
Contracting ApproachType of Contract

Hard Bid - Fixed Price

  • Exposes contractor to most risk
  • Fee and contingency usually high
contracting approach type of contracts
Fee Basis

Percent of Cost

Fixed Fee

Risk - Fee Relationship

G M P

Cost Plus Fixed Fee

Cost + Fee +Target Price

Incentives

Contracting ApproachType of Contracts
fee basis
Fee Basis

Percent of Cost

      • fee is expressed as simple percent of total construction cost

Disadvantage:

  • fee varies directly with cost of the work = little incentive for contractor to control cost
fee basis16
Fee basis

Fixed Fee

      • fee is expressed as a fixed dollar amount

Disadvantage:

  • If final cost of work is substantially higher than the original it could be detrimental to the contractor
  • if substantially lower detrimental to the owner
slide17
GMP
  • Contractor prepares an estimate based on documents and issues a Guaranteed MaximumPrice for the project
  • Also known as Not To Exceed price
  • Exposes contractor to risk of exceeding GMP
cost plus fixed or percentage fee
Cost Plus Fixed or Percentage Fee
  • Contract based upon final cost of work as determined at completion plus fee
  • Contractor does not offer cost guarantee = reduced risk
cost fee target price
Cost + Fee +Target Price
  • Contractor fixes cost of project as in GMP and makes good faith effort to meet price
  • Works well when contractor and owner have existing relationship
  • Reduces risk to contractor = reduces fee
contract are used to assign risk

Contract are used to assign risk

What kinds of risks are in a project?

slide21
Safety

Completion

Material acceptance

Labor Productivity

Weather

What are the project risks for the Washington Monument refacing?

areas of contract risk
Degree of project definition

Design changes

Escalation of labor and material costs

Labor productivity

Climatic conditions

Labor supply

Bids over estimate

Loss not covered by insurance

Natural disasters

Labor strikes

Who assumes the risk and how?

Areas of Contract Risk
risk fee relationship
Risk/Fee Relationship
  • Hard Bid
  • Guaranteed Maximum Price
  • Cost Plus Fee with a Target Price
  • Cost Plus Fixed Fee
  • Cost Plus Percent Fee
  • CM as Advisor
degree of risk in construction contracts

Owner

Contractor

Lump

Sum

Unit Price

Negotiated

Cost Plus

Fee

Guaranteed Maximum

Cost Plus

% Fee

Degree of Risk inConstruction Contracts

Assumes Most

Shared

Shared

Shared

Shared

Assumes Most

construction contracts elements
Construction ContractsElements
  • Offer
    • Invitation for Bid
    • Bid Forms
  • Acceptance
    • Notice of Award
    • Notice to Proceed
  • Consideration
    • Money
    • Time
project phases
Project Phases
  • Preconstruction
  • Contract Award
  • Contract Administration
preconstruction phase
Preconstruction Phase
  • Determine Price and Construction Methods
  • View Site for Information
    • Pre-bid Site Visits
  • Obtain Clarifications
    • Addendums
  • Verify Labor, Material, Equipment
    • Subcontractor Quotes
    • Vendor Quotes
construction proposals time contractor qualifications
Construction ProposalsTime Contractor Qualifications
  • Stated in Proposal
    • Calendar Days
    • Periods of Non-Work
  • Liquidated Damages
    • Administrative Costs
    • Actual Damages
  • Qualifications
    • Responsive
    • Responsible
construction contracts
Construction Contracts
  • Contract Technical Terms
  • Contract Commercial Terms
construction contracts technical terms
The scope of work

Scope

Price

Conditions of Contract

General

Site safety and security

Special

Plans

Construction drawings by design agents

Shop drawings by contractors

Specifications

Performance

Method

Responsibilities of Owner and Contractor

Guarantees/ Warranties

Performance

Equipment

Schedule

Engineering

Construction ContractsTechnical Terms
construction contracts commercial terms
Type of contract

Fee structure

Payment terms

Limits of liability

Project change notices

Cost-escalation clauses

Subcontracts

Suspension and termination of work

Force majeure

Insurance and risk management

Applicable law

Arbitration

Construction ContractsCommercial Terms
construction contracts contract bonds
Construction ContractsContract Bonds
  • During Bidding
    • Bid Bond
      • Contractor will provide Contract Bonds and do work
  • During Performance
    • Performance Bond
      • Completion of Project
    • Payment Bond
      • Payment of Subcontractors, Workers, Suppliers
contract administration
Contract Administration
  • Construction - accomplished by contract
    • Understand terms
    • Ensure compliance
  • Contract requirements
    • Notice to Proceed
    • Authority of project personnel
    • Submittal requirements
    • Progress schedules/payments
    • Change order procedures
    • Disputes
    • Quality control
slide34

Contract AdministrationProgress Payments

  • Unit Price
    • Quantities in place
    • Retention
  • Lump sum
    • Schedule of values
    • Percentage of work accomplished
    • Difficult to estimate accurately
  • Cost plus contracts
    • Accounting system to collect costs incurred
    • Submittal of payrolls, invoices, delivery tickets
contract administration changes claims
Contract AdministrationChanges/Claims
  • Changes
    • Formal request - owner initiated
    • Constructive changes
    • Differing site conditions
  • Claims
    • Delay
    • Acceleration
    • Performance quality
    • Contract related
thoughts for the day36
Thoughts for the Day
  • Present choices determine future consequences
  • You manage things: You lead people

Grace Murray Hopper

Admiral, U.S. Navy (retired)

con 371 project management and safety37
CON 371 - Project Management and Safety

Project Organization

29 August 2001

project organization
Project Organization
  • The function of creating in advance of execution the basic conditions that are required for successful achievement of the project objectives.
    • Objectives - project goals
project organization concept
Project Organization Concept
  • Define Project Organization Principles
    • Establish the proper relationship among the work to be done, the people doing the work, and the workplace
  • Present the Complex Issues
    • Elements that impact the size and nature of the organization
traditional project delivery
Traditional Project Delivery

Life Cycle Steps in the project:

  • Owner contracts with Architect
  • Architect hires Engineering Consultants
  • Construction Drawings Completed
  • Architect sends out for bid on behalf of Owner
  • Architect receives bids and assists Owner in selection of Contractor.
  • Contractor Contracts with Owner.
  • Construction.
  • Contractor turns over to Owner
  • Owner hires his Operations staff.
project responsibilities
Planning and Scheduling

Estimating

Engineering

Change Orders

Administration

Materials

Procurement

Cost Control

Safety

Supervision

Labor

Quality Control

Accounting

Payroll

Security

Subcontractors

Project Responsibilities
traditional project structure

Owner

Designer

Constructor

designer

builder

$

Project

Construction

Construction

Bids

Definition

Documents

Traditional Project Structure

Contract Strategy

Major Players

Scope of Work Task

& Financial Timing

What types of organizational designs are used to support the project?

functional organization

Accounting

Equipment

Estimating

Project

Management

Project

Superintendent

Project

Superintendent

Functional Organization

President

Owner

functional organization44
Advantages

Stability

Excellent Corporate Memory

Latest Technology

Understanding of tasks

Tight Control

Disadvantages

Low adaptability

Minimum appreciation of project objectives

rigid operating rules

resistance to change

Functional Organization
task force organization

President

Owner

Heavy and

Highway

Staff

Vertical

Construction

Project

Manager

Project

Manager

Project

Manager

Project

Manager

Estimator

Estimator

Estimator

Estimator

Accounting

Accounting

Accounting

Accounting

Equipment

Equipment

Equipment

Equipment

Task Force Organization
task force organization46
Advantages

Team Spirit

Responsive to new ideas and methods

Self sufficient

High adaptability

Understanding of task

Disadvantages

Poor stability

No corporate memory

No functional checks and balances

Reinventing the wheel

Task Force Organization
matrix organization

Accounts

Estimating

Equipment

Personnel

Project

Manager

Project

Manager

Project

Manager

Matrix Organization
matrix organization48
Advantages

Strengths of functional team

Strengths of project-oriented team

Access to corporate memory

Control of project objectives

Disadvantages

Defining accountability to functional and project managers

Who’s the boss?

Matrix Organization
thoughts on organizational design
Thoughts on Organizational Design
  • Vertical vs Horizontal
    • How many communication layers?
  • Span of Control
    • How many people can one supervise?
  • Line and Staff Functions
    • At what level do we want the functions to exist?
  • Corporate Organizational Structure
    • How does the Corporate Organization look?
the players and their corporate organizations

Owner

Owner Executive

Operations

Constructor

Designer

Proj. Manager

Architect

General

Mech.

Elect. Subs

Civil

Mech.

Elect.

Superintendent

Foreman

Jobsite Labor

The “Players” and their Corporate Organizations
complexities to project organization

Complexities to Project Organization

How will the complexity of the project impact the size and nature of the organization?

a list of complexities
Project Work Tasks

Project Delivery Method

Contract Strategy

Owner’s Resources

Local Labor Market

Governmental Authorities

Scope Areas:

Technical Level

Quality

Project cost

Functional Expectations

Project Schedule

Size of Project

A List of Complexities