Procurement Strategies

Traditional Contract

Advantages:

  • Control over design process and quality
  • Cost certainty at point of appointing the Contractor
  • Client retains direct contractual relationship with Consultants and Main Contractor
  • Capable of obtaining the best contract price for the full scope of the Works
  • Client retains control over the Design Team and quality can be assured

Disadvantages:

  • Design must be fully developed before tender process
  • Longer timescale – It is not suitable for fast track projects
  • Low risk to Contractors
  • Client must have the resources and expertise to administer the contracts of the Design Team and Main Contractor

Traditional

Design and Build Procurement

Advantages:

  • Transfer risk to Contractor for construction delivery & design development
  • Cost certainty
  • Shorter programme – Suitable for fast track projects
  • Single point of responsibility for design & cost risks
  • Early Contractor involvements – assists with build-ability

Disadvantages:

  • Client has reduced control over design, quality and cost risks
  • Changes by Client are advisable – Heavy cost penalties
  • Clients requirements must be fully detailed before signing contract

Contractor-led Design and Build Procurement:

C

Client-led Design and Build Procurement:

CC

Management Contracting

Advantages:

  • Client retains full control of design
  • Shorter programme
  • Build-ability input is obtained pre-tender
  • Changes can be accommodated in unlet packages as long as there is no impact on time or costs

Disadvantages:

  • Management Contractor takes control of packages and interaction with subcontractors
  • No transfer of risk to Contractor
  • Client retains risk
  • Client must have the resources and expertise to deal with the design team and management contractor

MC

Construction Management

Advantages:

  • Client retains full control of design
  • Shorter Programme
  • Build-ability input pre-tender
  • Changes can be accommodated in unlet packages as long as there is no impact on time or costs

Disadvantages:

  • Construction Manager takes control of packages and interaction with subcontractors; but has no contractual role
  • Client has to manage the contractual agreements with each subcontractor
  • Client retains all risk
  • No cost certainty until final package let

CM

References:

Construction Planning, Programming and Control/Brian Cooke and Peter Williams. – 3rd. ed.2008

APUC Advanced Procurement for Universities and Colleges

Schedule Delay Analysis

TYPES OF CONSTRUCTION DELAY

Basic Distinctions:

  • Excusable and Non- Excusable
  • Compensable and Non-Compensable
  • Concurrent and Non-Concurrent
  • Critical versus Non-Critical

Excusable Delays:

” Excusable delays are caused by conditions that are reasonably unforeseeable and not within the contractor’s control” Note: Always check the particular construction contract documents for valid delay factors and limitations.

  • General labor strikes
  • Fires, floods and other natural disasters
  • Owner directed changes
  • Errors and omissions in the plans and specifications
  • Differing site conditions or concealed conditions
  • Lack of action by government bodies
  • Intervention by outside agencies

Non-Excusable Delays:

  • Late performance of subcontractors
  • Late performance by suppliers
  • Faulty workmanship by the contractor or subcontractors
  • A project specific labor strike caused by either the contractor’s unwillingness to negotiate or by unfair job practices.

Note: Verify the particular contract language  for definitions and limitations.

delays

Reference: McGOVERN & GREENE LLP, Jack A. Lazarczyk, CPA, CCC Senior Consultant

FIDIC Contracts – Dispute – Typical sequence of dispute events envisaged in Clause 20

FIDIC

FIDIC Forms as per the project types

  • FIDIC New Red Book – Can be used in any kind of Engineering Construction Contract
  • FIDIC New Yellow Book – Applies to the “lump sum contract project” where the Contractor takes participation in the design work.
  • FIDIC Silver Book – Applies to the “turnkey projects of infrastructure or large-scale factories” where the Contractor takes on more work and risk while the Employer’s participation is small (private financing or government financing), but it is strictly defined upon the investment and construction period.
  • FIDIC Green Book – Can be used in all kinds of small-scale projects.

Altogether these four Contract Conditions can be applied to nearly every kind of project, except for that of managing contracting or simply consulting or designing.

Reference: Anil Yadav, Ashok Pershad, Dhiraj Gaur Manoj and Mukul Verma

 

What Makes a Good Schedule?

Use the following list as a checklist to prepare a proper schedule for your construction projects.

  • ►   All construction activities have at least one appropriate predecessor and successor. Only “Start Project” and the “End Project” are open ended.
  • ►   Must use an appropriate WBS & Cost Coding Structure
  • ►   Must include detailing, spooling and prefabrication to support construction installation.
  • ►   The “As‐Planned” CPM network is based on conditions known on bid‐day.
  • ►   Must be able to indicate work flows (crew movement requirements) and work packages
  • ►   All work scopes are covered by at least one activity package. All necessary logic restraints are established within the schedule.
  • ►   Can occur without interruption from other activities. If the activity will need to stop so that another trades can work, then resume; the activity should further detailed.
  • ►   Can be measured (1000 LF of small conduit, or 400 LF of large cable, or 650 Light Fixtures, etc…).
  • ►   Construction activity durations do not exceed 15‐21 work days.
  • ►   Relationships are Finish‐to‐Start, or Start‐to‐Start AND Finish to Finish. SF relationships are not used.
  • ►   Negative lags (leads) are not used.
  • ►   Procurement, Submittals, Reviews, and material deliveries are identified.
  • ►   Relationship Lags do not exceed the Predecessor Duration.
  • ►   Weather sensitive work is properly assigned to a Weather sensitive calendar. Normal weather is programmed into the CPM network calendar.
  • ►   Contract milestones are calculated using a Finish On or Before constraint so that backward pass calculations are properly determined.
  • ►   Must include QA/QC activities as well as Testing and Commissioning.
  • ►   Each activity is assigned to a responsible foreman.
  • ►   Obtain input and gain formal commitment (buy‐in) from all project team members (foreman, superintendants, etc)

Reference: pmsite.com

 

Anket – Uluslararasi insaat projelerinde Turk firmalari ne kadar basarili?

Owner’s Project Cost Management Approach

By CEIM Reporter

For the project especially large-scale and complex project like underground oil storage cavern, the cost overrun shall occur due to three reasons such as: incomplete and inadequate drawings and specifications, the Owner’s change to project requirements and changes from Contractor. In spite of the efforts made by Owner, Owner’s Consultants and Contractors, there are considerable factors that made cost overrun inevitable and numbers of the factors are out of their responsibility and ability.

The followings are the Owner’s common factors that cause the problem in cost management of the project:
– Lack of management policy on report and control practices
– Improper estimating techniques and/or standards leading to impractical budget
– Fault sequence commencement and completion of activities and/or events
– Unexpected material cost escalation
– Poor scope of work definition or inadequate WBS (Work Breakdown Structure)
– Selecting Contractor with the lowest tender price
– Improper planning system resulting in ineffective action or cost
– Improper comparison of actual cost and planned cost
– Unexpected and unplanned technical issues
– Delays and disruption resulting prolongation cost

The conclusions for above mentioned problems shall be made as follows:

1. For Owner’s Cost management of pre-contract stage:
– The Owner normally selects Consultant or Contractor who proposes lowest bid regardless of experience, quality or expertise;
– Scope of work of Consultant or Contractor is poorly planned and defined;
– Low accuracy is inherent in the approved cost estimate;
– Tight approved budget is included in the overall scheme;
– Value engineering (VE) is not carried out during design phases especially in the initial phase of the project.

2. For Owner’s procurement strategies:
– Traditional method of procurement based on the clear separation of design and construction is deployed.
– Price-based, lump-sum and specification contract in which Contractor is required to estimate the quantities and subsequently to calculate tender sum based on the owner’s drawings and specifications is deployed.
– Risk access is not carried out for decision making especially in selection of project delivery system.

3. For Owner’s Cost management of post-contract stage:

Owner’s cost-management and monitoring procedure lacks the following characteristics:
– Cost is not forecasted before decision making
– Cost-recording system is not cost-effective to operate
– Actual cost is not subject to variance analysis
– Time and quality do not implicate in the cost

Change management – Valuing variations:
– The proper recording system for changes is not established and applied
– Traditional method of valuing variation which is based the valuation on the rates or prices specified in Bill of Quantity (BofQ) or schedule. Normally, those rates or prices were quoted at the time of tender.

Changes to the project arise due to:
– Inadequate briefing from the owner
– Inconsistent and late instruction from the Owners
– Incomplete design
– Lack of careful planning at design stage
– Lack of coordination of specialist design work
– Late clarification of complex details

Claim management:
– The delay claims on extension of time and cost of prolongation from Contractor is not solved effectively and in amicable way.

The Contractor often submits the claims due to the main following reasons :
– Inadequate time and planning before project commencement
– Inviting the tender on incomplete drawings
– Introducing extensive changes to the project
– Inadequate site investigation – deep basement; pilling, earthwork, tunneling or unforeseen ground condition
– Extensive changes to contract standard form
– Owner’s inference with the timing and sequence of construction

Recommendation for management improvement

For the project with the similar condition as one in the case study, the recommendation shall be made as follows:

1. Value-for-money mechanism should be in place to evaluate quality and price of the bid.

2. For any contract, the scope of work should be clearly defined.

3. Proper methods with the different degree of accuracy for each stage of the project shall be used.

4. The budget should be used positively to ensure that the design stays within the scope of the original scheme.

5. The factors to be considered during cost estimate shall be:
a. Land acquisition including legal fees
b. Owner’s organization cost allocated to the project
c . Site investigation
d. Insurances
e. Consultant’s fees including engineering
f. Equipment procurement and installation
g. Construction cost
h. Taxes
i. Contingencies and risks
j. Financing and legal cost

6. Comprehensive value management (VM) should be in place all the time.

7. Design and Build shall be deployed.

8. Price-based bill of quantity (BofQ) with milestone payments is applied.

9. Some risk management procedures should be in place all the time to access the risks so that unacceptable risks could be transferred to relevant Contractor or Insurer by contractual commitment. Who-life costing technique could be used where possible.

10. Costs should be forecasted before decisions are made to allow consideration of all possible actions

11. Cost-recording system should be simple and cost-effective to operate

12. Actual costs should be subject to variance analysis to determine the reasons for any deviation leading to cost overrun

13. The costs implication of time and quality should be incorporated into the decision making process

14. Parties should keep comprehensive and detail records of the factors relevant to the variation

15. Change consequences shall be mitigated by:
a. Setting up clear project objectives
b. Timely change instructions
c. Practically-completed design
d. Adequate planning at design stage
e. Adequate coordination of specialist design work
f. Timely clarification of complex details

16. The variation valuation procedure in which the parties need to have skilled negotiation and be prepared to adopt a give-and-take attitude in order to bring a satisfactory claim settlement.

17. Parties should keep comprehensive and detail records of the factors relevant to the variation.

18. The variation valuation procedure in which the parties need to have skilled negotiation and be prepared to adopt a give-and-take attitude in order to bring a satisfactory claim settlement.

19. Owner’s project management team should be equipped with knowledge of construction technology, construction law, term and conditions of the contract, contract administration, project-planning system and negotiation skill.

20. The following actions shall be required to avoid the claims:

a. Adequate plan made by competent Owner’s engineer and/or Consultant

b. Availability of verified and completed drawings and specifications prior to bid

c. Minimize and eliminate the unnecessary changes to the project;

d. Application of Value Engineering and/or Whole-life Costing and/or Risk Access techniques to analysis the changes to project;

e. Comprehensive site investigation in which the scope of site investigation shall be given by Consultant or Engineer who use site investigation data for engineering works;

f. Usage of relevant contract standard form set forth by recognized organization such as FIDIC, ICI, etc.

g. Relevant Coordination procedure between Owner and Contractor.

Factors Causing Delay In Construction Projects

The cause of delay in construction stage arises from countless factors. The problem cannot be solved thoroughly, if these factors are not identified and restricted or eliminated. However, the restriction of time and finance doesn’t allow project manager to solve all influencing factors, so it is necessary to identify the critical factors.

This study developed the framework which is very practical to find out the critical factors causing the serious delay problems in construction building stage. The impact level of these factors on construction duration can be different from this project to another project, but the method to evaluate them is similar. So this approach can be applied to almost construction building.

Case study is analyzed to illustrate the systematic method to investigate and identify the delay problems and their causes in SECC, a project concerned with international contractors, consultant.

The investigation result of delay problems in SECC showed that there were many factors leading to the delay of the SECC. The severities of these elements are arranged in order of priority. Below is the table of top critical factors:

1

 

Basically, the results of the investigation showed that most fundamental source of the top critical factors was derived from the following basic elements:

– The Government’s legal regulation in importing has been inefficient and not clear.

– PM in SECC has shortcomings and weaknesses especially in risk evaluation or project planning and human management.

– Contractor’s construction organization is not really efficient and effective.

– The shortage of engineers and workers having experience and highly professional, is contractors’ inextricable questions, especially the contractors for the project which has scale and high technology specification such as SECC.

– Legal regulation in construction industry is not really strict, so the collusion among parties likely to be existent, it makes contractor collection process unfair. So some contractors having financial competence were chosen.

– Collaboration between investors and designers in the design phase plays an important role in reducing the design changes during construction.

 

Crashing of Project

Proje suresini kisaltmanin farkli yontemleri vardir; hepimizin bildigi gibi aktivite surelerini kisaltmak icin aktivite kaynaklarini artirmak, mesai saatlerini degistirmek… bunun yaninda schedule daki aktivitelerimiz arasindaki baglantilarla oynamak, lag/leads degisiklikleri yapmak, paralel (es zamanli) aktiviteler olusturmak gibi…

It is a project Schedule Compression, which is performed for the purpose of decreasing total Period of the project. Different Methods of Crashing of the Activities:

• First Crash Activities on the Critical (Longest) path.
• Change the Relationships : FS to SS
• Change the lags between activities
• Reduce the Duration of activities
• Increase the Resources
• Change the Working time : 5 day workweek to 6/7 day workweek

Ref: Project Baseline Consultants

Float Ownership – What does total float mean?

What does total float mean?

Float is a vital attribute of each activity in a network or programme. There are few types of float but generally speaking the Total Float is the most used one and is the focus of this article. When activity is said to have a float (total float) of certain amount, it means the activity can be delayed by that amount without affecting the project completion, if the entire float amount was consumed (the delay period equals the total float amount), the activity becomes a zero float activity. In a free flowing network, i.e. no constraints, an activity with zero float (either initially or after its float was consumed) is critical to project completion, and any delay to such activity means the project is in risk of being delayed by the same amount unless recovery measures were taken, i.e. acceleration and/or re-sequencing of the remaining activities.

Background of the arguments

The significance of the argument about who owns the float has two folds, first its ability to directly or indirectly influence the construction methodology and/or sequence once the project execution has started, and secondly, the potential entitlement of extension of time (EoT) and the application of liquidated damages (LDs). There are mainly three views of the matter which are presented hereinafter.

The ‘contractor owns the float’ argument

This is the traditional view and still has its appeal among many practitioners. This view implies that the contractor is entitled to utilise float for his own risk events and recovery rescheduling. The argument is mainly based on the fact that the contractor was the party who developed the programme and the float is a characteristic or attribute to the activities in that programme. While developing the programme, the contractor had exclusive ability to influence the float of the activities and decide on the sequence which directly causes activities to be critical or not. In doing so, the contractor developed the programme so the float will be his own contingency for any unforeseeable events. In extreme cases, they argue that even if a non-critical activity was delayed, this increases the riskiness of the project and the contractor should be given an extension of time to maintain the same level of contingency before the owner’s risk event occurred. Not so far ago, a survey in the United Kingdom suggested that 80% of the respondents assumed that the contractor owns the float; not surprisingly, the majority of those respondents were contractors.

The ‘client owns the float’ argument

This is just the opposite of the view above, the proponents of this view argue that the client has paid for the project and the programme is one of the tools to manage the project and monitor progress, therefore, the client should be able to control the float to reduce costs and control progress, especially when the programme is a contractual requirement in which the contractor has developed it for the client’s benefit. They also counter the contractor’s argument in relation to delaying the non-critical activity by saying that the only effect in this instance is reduction of float, without affecting the project completion, therefore, it is not fair or reasonable to grant the contractor an extension of time while the contractor did not, in fact, suffer any delays to project completion.

The ‘project owns the float’ argument

This view basically says float is owned by neither the contractor nor the owner. The project owns the float which means “float is not for the exclusive use of any of the parties and it serves whoever needs it first” as long as it is used in good faith. Many modern forms of contracts, especially internationally, indirectly take this view by building the clauses to regulate the float utilisation rights as discussed later in this article.

Thanks to  Walied Ali Abdeladyem, PMP, ACIArb.

References
Harris, R. A., & Scott, S. (2001). UK practice in dealing with claims for delay. Engineering, Construction and
Architectural Management, 317–324.
Householder, J., & Rutland, H. (1990). Who owns float? Journal of Construction Engineering and Management, 116(1),
130–133.
Project Management Institute (PMI). (2008). A guide to the project management body of knowledge (PMBOK® Guide)—
Fourth edition. Newtown Square, PA: Author.
Wickwire, J., Driscoll, T., Hurlbut, S., & Hillman, S. (2003). Construction scheduling: Preparation, liability, and claims.
New York, USA: Aspen Publishers, Inc.