The Cm Contracting System

I

I

THECM C NTRACTING SYSTEM Fundamentals and Practices

I(

II

C. ED WIN HALTENHOFF

The CM Contracting System: Fundamentals and Practices 1

j

j

C. Edw in Halt enhoff Con sulting Engineer Distinguished Lecturer Emeritus MichiganTechnological University

r

I r PRENTICE HALL UpperSaddle River, New Jersey 07458

Lib rary o(Co n\:luli Ca l . lul:in l;. i n . f' u1J li~..lio n 0 ;1111 H3 ltenhoff. C. Ed win. Th e eM contracting syste m : fun dame ntals an d pra dces l C. Ed .... in Hall<:nhofl- 1st ed.

p. em. Includes index ISBN o.lJ-7~ t I. Con struction ind u,>lry-:'-lJ nagc:ment.

H0'il715.A::!HJ2 62-!·.()6g-....dc21

I. Title.

I'19S 9M--!729

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ISBN 0- 13- 744400-1 Prenrice-HallIntemat ic na1tU K) Lrmued, Landon Prentice-Hail o f Austraha Pt}.limlled .S_vd/lty Prennce-Hal! Canllda Inc.. Toronto Prentice-Hall Hispano3mericana. 5.A.• .\Ia lco Pren tice -H all o f IndIo! Pnv a te Lcnucd . X.... D..lIIT

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To C A. Richa rdson. (he consummate Mentor

and Harriet. the consummate friend. spouse and Mothe r

Contents Fig u res . Ex am ples an d Lists Introd uction

Cha pte r 1

x iii

xix

The Fund a mental s of t he Root Form of e M CACM )

~i.1: ~c n lia Cl1IlC Elemen ts 1.1 1.2 .-:us i gu m ~ n L .of Re sponsibilities 2 1.3 Contracting Stru ctu res 3 1A Contracto rs and Constructo rs 4 1.5 A GC Project's Principal Participants 4 1.6 GC Part icipat ing Business Entities 5 1.7 A G C Building Projec t's Nine Phases 6 1.8 GC Tenure 7 1.9 Design- Build Con tracting 7 1.1 0 GC \IS. D-B Diffe rences 7 1.11 D-B Partic ipating Business E ntities 8 1.12 TIle ACM Contracting Structu re 10 1.13 AC M Part icipating B usiness En tities 11 1.14 e M Tenure 11 1.15 An ACM Project's Nine Phases 12 1.16 Prel iminary De finition s fo r the Th ree Syste ms 13 1.17 Definiti ons of a GC. D-B Cont ractor. and a eM 14 1.18 Acqu isition of Service Contracts 14

The Reason s for a Third System of Cont racting

Chap t er 2 2.1 2.2 2.3 2.4

17

O wne r Concerns 17 t.:)uestlonable Industry Pra ctices 20 GiGS YSlem Bid d ing Proce d ures 24 Owne Assessments of the G C System. 25

Cha pt er 3\

The Deve lop me nt of the eM Syst em

3. l ACM Syste m Developmen t 28 3.2 Keepin g tilt: Positive Att ributes 30 3.3 Elimina ting the GC Syste m Nega tives

27

31 v

vi

I

Conten ts

Cont ents

vii

,• I

3A Eliminatmg the D-B System Ncgauvcs 3-1 3.5 Eliminating the Common Negat ives 35 3.6 Ccntract u.g System Co mparisons .: 1 3.7 C~ l as a Com posite S Y$[ ~m 43

Cha p t er

4

·u

The Agency Fo rm of CM

44

-+.4 ~ .5

4.6 4.7

Cha p ter

5

J~

6.1 6.2 6.3 6..+

CM Syst e m For ms a nd Variations

88

Cha pter 8

The CM Or g an ization

100

8.1 Cfl.'1Starte r O rganiza tio n 101 8.2 Philoso phical Transfcrrnnric n 101 8.3 " Basic e M O rg.miza tio n 102 8.-1 Organizatio n Fundamentals 102 8.5 An O pt imum CM O rga nization 102 .8.6 Mar kcnng a nd Sales 106 8.7 Qu,lity of CM Pers onn el 107 8.8 Th e Functioning eM O rganiza tion 117 8.9 Schema tic and De sign Develo pme nt Phase Assign men ts 118 ~.1 0 Co nstr uctio n Documents Pha se Assignments 121 8.11 Bidd ing Pha se Ass ignme nts 12 1 8.12 Co nstruc tio n Phase Organ izat io ns 122 8.13 Constructio n Ph ase Assignm en ts (Op timal) 122 8.14 Construc tio n Phase Assignmen ts (Mo re Complex) l23 8.15 Office- Base d vs, Field-Based Pr ojects I~J 8.16 Cons truc tio n O rgan iza tions 111 Ret rospect 124 8.17 Special Co nsiderations 126 8.1~ Desi gnin g J Project Managemen t Stru ctu re 126

60

62

Const ruction Management Under Dual Service s Agreements 75 Concern lor the Owner 75 The C:\.tlOwner Rel a tion ship 76 Exte nded Ser vices (.\1 76 The Poten tial for Co nflict of Interest

7.1 Sta rting Se rvices 87 7.2 Bra inst or mi ng Sess ion

7.5 'TIle e M Project Manual 89 7.6 Management Plans 90 7.7 List of Management Plan Proced ures 97 7.8 The Importance o f CM Proced ures 99

5.1 Rev iewing Syste ms Inform ati on 62 5.2 Co mparat ive Definiti on s 63 5.3 CM Fo rms and Variations 66 S A The O wner Form of CM 68 5.5 c J\.r s Id entifying Fea ture 68 5.6 Main taining an O wner Orienta tion 7) 5.7 Othe r Fo rms and Varia tions of C ~l 71 5.8 Poten tial for Confli ct of Interest 72 5.9 Checks and Balances Revisi ted 73

Chapter 6

87

7

7.3 Organizational Meeting 88 7A CM Pa rt ne ring 89

-U~ C~I Services Personn el \ '4 4.9 The Project Team Structure 55 ·U O Team Decisions 5b

-u I Q uality o f Pe rfo rmance 56 ': .12 E~r1 y Resp on sibili ties 58 4.13 Checks and Balance s 59 ·U -l The AC:-'l Process In Bod 59 -u 5 What the ACM Form 01 C:-..t Is Designed to Do

E thics 77 DC:lling With Conflict of Interest 78 Team Act ions and Decisions 79 D ual Contract So lutio ns 79 The Credibili ty oi [he eMSystem 85 ACM Pro cedures

Chapter

TIle AC~ l Co n tract ing St ructu re 44 What A n A C~ 1 Is and Is Not 46 Th e AC:-'-I For m o f Cj-t 48 The CM's Place in the AC M Con tracti ng St ructure TI,e C M As A Team Me/"oer ~ 9 The Con struct ion :-'fJ n;lger"s Expert ise 50 Early SCI' ices 5..1 l-

-U ..U

6.5 6.6 6.7 6.8 6.9

The CM Bod y of Knowledge

128

9.1 Who Is the Cons tructio n Manager? 9.2 The C ~I Areas of Knowl ed ge 129 9.3 Acquiring eM Kno wledge 142

128

Chapte r 'J

77

..

l

viii

Contents

Contents

Chapter 10

Bud get Ma nagemen t

10.1 General

13.5 Communications 191 13.6 Corresponde nce 193 13.7 Fo rm al R ep orts and Re co rds 13.8 Co llate ra l Informa tio n 201

14 5

1-15

10.2 The Bu dget Manage m e n t A re a of Know le d ge

10.3 Project Bud gets

10.4 Co ntinge ncies

146

1-16

150

Chapte r 14

10.5 The Conceptual C on struction Budgt' t 151 10.6 Budgeting Ot he r Cost s 15 1 10.7 B udget Accurac y 152 1O.l'3 Contin uous Updati ng 152 10.9 Sc he m a tic Pha se 152 10.10 Design D ev e lopmen t 153 10_1 1 R;l1c.:d Es timati ng 15.1 10.12 Contract D ocument s 155 10.13 Work -Scope Estimate 155 10. 14 Constru cti on Budget Maintenance 156

or

10.15 Schedules Values 10.16 The Budge t Report

14.1 14.2 14.3 14,4

Chapte r 15

16-1

11.2 Con trac t P rov isio ns 164 11.3 Cont ract Docu ments 165 11.4 Conuacrablluy 165 11 .5 Contr ac ts and CU lltra ct Documen ts 166 11.6 M ul tip le Con tracti ng Implicatio ns 167 11.7 The: C ont ra ct Man agemen t Pla n 169 11.8 Contract M a na ge me nt in the Field 172 11.9 Con tract Comple tion 175

11.1 12.2 L!.3 12A

Decisio n Mana geme nt

Informat ion Ma nag e me nt

205

Owner-Furnished Equipment 206

Value Man agement

21 0

183

2 10

' roject Ma nagem e nt ) 235

16.1 Emphas izing Fund am en ta l Pract ices 235 16.2 The Pro ject M a na gement A re a of Know ledge 16.3 Brainstor ming Session 236 16.4 The Responsibili ty C ha rt M a tri x 238 16.5 The: Program Schedule 246 16.6 Managemen t Options 248 16.i TIle Pr oject M a nagem e nt Pla n 250 16.8 Tnc C ~ I Project Man ual 250 16.9 E xit Meetings 251 16.10 Othe r Me etings 252

180

D ecision M anag e m e n t A rea of Knowledge Decisions and Decision Making 183 The Decision-Making H ierarchy 18..: 12.5 Thl: Decision Managem ent Plan 187

Chapter 13

Chapte r 10

180

Stat ic and Dynamic De cisions

Th e M at e rial/Eq uipm e n t A re a of Kn owl e dge

The Val ue M a nagement A re a of Knowledg e Value Management D e cisio ns 211 The Flo w or vxi Decisions 212 The limi ng o f V :vI Dec isio ns 216 Valu e Enginee ring 217 Life- Cycle Costing 217 Budget and Cost-Co ntrol De cisio ns 220 15.8 The VM Op tion o f Fas t-Tr ack ing 223 15.9 C ~ l Y M Re so urces 228 15.10 Th e Valu e Ma nagem ent PI3n ::30 15. 11 V ~'I Time·Cost R el at io nsh ips 23 1

163

1 t.l The Contract M an age m e nt Are a of Knowledge

Chapt er 12

20 5

15. 1 15.2 15.3 15.... 15.5 15.6 15.7

161

Con tract Managem ent

Ma te ria lJEq uipme nt Ma nagement

O wne r-Pu rc hased M a te ria l/Equipm e nt 206 !vUE M anageme nt Plan 208 ) ~. 5 M ater ia l/Eq uip men t E xp e di ting 209 14.0 M/E Warran ty an d Guarante e Fel low -Up 2 10

157 161

10.17 Budget Responsibilit y Chapter 11

193

235

188

13.1 The Info rmatio n M a nage me nt P la n

Cha p te r 17

188

13.2 Th e Inform a tio n Managemen t Are a of Kno wle dge 13.3 The Kn o wle dge Circh: 190 13.4 ln format icn C re dibility 191

190

Quali ty Ma na gem en t

25 4

17. 1 The Quality M an agem e nt A rea of Know ledge 254 17.2 The Qual ity M a nagement Ne two r k 255 17.3 Majo r Qu ali ty M a n agem e nt Components 256

ix

x

,

Contents

Con tents

,

17.4 17.5 17.6 17.7 17.8 17.9 Cha pt er 18 18.1 18.2 18.3 18.4

Cha pt e r 19

Chapter 21

The Quality Standards 256 The Qua lity Design Plan 257 The Quality Value Pla n 258 The Quality Conformance Plan 260 The Contrac tor's Quality Plan 268 Co ntra ct Do cu men t Quality 272 Res o u rce Man a g em en t

277

The Resource Managemen t Area of Kno wledge Hu man Resou rces 277 Physical Re sources 285 Contracting Res ources 2SB Risk Managem en t

277

Cha pt er 2:'

289

19.1 The Risk Management Area o f Know ledge 289 19.2 Pr oject Delivery Risks 289 19.3 j\ taJor Risk-Managme nt Co mp one n ts 291 19A Identification of Dynamic Risks 292 19.5 Indennficati on of Stati c Risk s 293 19.6 Sure ty Bon ds and Insurance 294 19.7 Surety Bunds 29..; 19.8 Insu rance 297 19.9 Co n n ecte r Requi reme nts 301 19.10 Th e Risk M an age me nt Plan 305

Cha pt er 20

Sche du le Ma na gement

326

vlultiple Biddi ng a nd Contracting

22. \ 22.1 22.3 22.·.

J.JO \....o rk -Sco pe BuJ Di ision o r Work- ccpe -Deecripnons Bic.ldin!!'8nd Bidd er1..J sts 345

22: '

~l ui.f p

340

PU:Io Bid Meetll'~s 353 22.5 Qn...5itc£oo rd rtmtlon 354 22.6 Gon tract Document 355

Chapter 23

nLr~cting

Economics

Ma rke ti ng a nd Sales

23. l Markeung an d Sales

355

35 9

359

23.2 Mar keting Pl:.I ns 360 2JJ Selling eM Se rvices 362 23.J Ne two rking/ Pros pec t R ecor ds 23.5 Salespe rso ns 367

30 7

20.1 The Schedu le Man agem ent Are a of Knowledge 20.2 Scheduli ng Backg ro und 308 20.3 The Practical Use of Scheduling 308 20.4 Th e Reasons for Scheduling 308 20.5 Additional Aspects o f Scheduling 30~ 20.6 The Five Basic Sche dules 309 20.7 The Program Schedule 310 20.8 De tailed Construction Schedule 312 20.9 Miles tone Schedule 315 20.10 Sho rt Term CAP 318 20.11 Comple tion Schedu le 32 1 20.12 Schedu le Comrnunica ucn 323 20.13 In Retrospect 324 20.14 Use or Schedul es 8yThc Ci\'l Firm 325

Sa f e ty Manageme nt

21.1 The Safety Manage ment Area of Knowledge 327 21.1. Co nseque nces 327 21.3 Safety LJwS and Regu lations 327 21A The Quanda ry 329 21.5 A pp roaches to Safety 329 21.6 Major Sa fety Ma nag eme nt Co mpo nen ts 332 ::! 1 .. TIll: rea m's Ap p roach to Safe ty 333 2 1.S Contrac t Safe ty Plan s 335 21.9 Contract A mendments 338 21.10 Safe ty Mana gement Ph ilosophy 338

367

307 Chapte r 2..

Acq uirin g

eM Services

370

C ~'I Firm Co nside ra tio ns 370 Wht:n to Hin: th e C~ 1 371 2";.3 Ccn rructs and Se rvices 371 24.": G uidel ines for Selecting a Co nstructio n Ma nage r 24.5 Ste ps in the Se lection Process 372 24 .6 Handling the C:-' I Fee 378 2.:1 .7 Qu est ioning the eM 378 24.8 lnt er vrcw De co rum 380 24.9 Mak ing the Decision 380 24.10 e M Ortice visita tio n JSO 24. 11 Agreemen t Nego tia tio ns 3~1

2";.1 24 .~

--

372

xi

xii

I

Contents

I

24.12 24.13 24.14 24.15 24.16 24.17 24.18 Appendices

CM Fee Structures 381 Agency CM Fee For ms 381 Extended Services and Guarant eed Maximum Price CM Fees Extended Se rvices CM Form s 384 GMPCM Fee Forms 385 Co mments o n the Interpretati o n of C~l Fees 386 The IRFP and RF P 386

384

Figures, Examples, and Lists

393

APPE NDIX A A Suggested Techn ical Knowledge Base for Cr-t Operating Personne l 394 APPE ND IX B A Model Prog ram fo r the Ce rtificat ion of Constructio n Managers 400 APPE ND IX C A n Exam ple of the Usc of Inno vative Contracting o n a Co mp lex Project 411 A PPEN D IX D So me Co nt rac t Provisions ( 0 Convert Single Prime to Mult iple Prime Co ntracts .116 AP PEN D IX E A.;ti " tic urmg.,P.ro;c::et.Deliver)"Pha se o r the G D-B, nd CM-Systems J:! A PPENDIX F Subcontracto r Survey Regarding GC Practices 445 Glossary of e M Terms Index

Cha pte r 1

List Fig. 1.1 Fig. 1.2 Fig. 1.3 Fig. 1.4 Fig. 1.5 Fig. 1.6 Fig. 1.7 Fig. 1.8 Fig. 1.9 Fig. 1.10 Fig. 1.11 Fig. 1.12 Fig. 1.13

450

463

Chap te r 2 Li s ~

Cha pte r 3 List List List List List

The Fundame nt a ls of th e Root Fo rm of CM (ACM) The Six Essen tial Elem ent s of Service for Project Delivery 1 Respo nsibility D istribution: ACM. G C a nd D-B Systems 3 The GC Co ntra cting Structure 3 Participa nts in the G C Co ntracting Structu re 5 The Nine Phases of a GC Building Project 6 The Ten ure of the GC and AlE on a GC Project 7 The D-B Co ntra cting Struc ture 8 Participants in the D-B Co ntr acting Structure 9 The E leven Phases of a D-B Project 9 A Co mpa rison of the Ten ure of a G C and D-B Co ntracto r to Th e ACM Co nt racting St ructure 11 Participants in the ACM Co ntra cting Struct ure 12 The Tenure of G C and D-B Cont racto rs and the CM 12 111e Nine Pha ses of an ACM Building Project 13 The Reasons fo r a Thi rd System of Co ntracti ng Eight Owner Con cern s with Co nstructionProjects in the ~ 19605 17 Th e Development of t he CM Syste m Positive A tt ribut es o f the G C System as Used in the Public Sector 28 Positive Att ribu tes of the D- B System as Used in the Private Secto r 29 Positive A ttrib utes Co mmo n to Both the GC an d D-B Systems 29 Negative Attribu tes of the GC System as Used in the Pub lic Sector 29 Negative A ttribu tes of the D-B System as Used in the Private Sector 29 ;xiii

J

..

xiv

Figures, Exam ples, and Lists

List

1, List

Relative Rati ng of the Three Syste ms U nde r Best-Use Condit ions 42

Chapte r 8 Chap ter 4

The Agency Form of CM

Chapter 5

Fig. 5.1 List

Fig. 5.2 Fig. 5.3 Fig. 5.4 Fig. 5.5

Fig. 5.6 Fig. 5.7 Fig. 5.8 Fig. 5.9 Fig. 5.10 Chapt er 6

Fig. 6.1 Fig. 6.2 Fig. 6.3 Chapter 7 List

Fig. 7.1 a Fig.7 .1b Fig.7 .1c

eM Sys tem

The CM Or g an ization

Th e Basic Departments in a CM firm 100 A CM Organization by Area and Fun ction 103 A CM Organization by Are a and Per sonnel 103

List

Fig. 8.1 Fig. 8.2 Fig. 8.3

Re spon sibilit y Dis tributic n.AfiM and GC Syste ms 45 FigA.1 The GC and ACM Contracting Str uctu res 45 Fig. 4.2 The Pr oje ct Tenure o f a GC and an ACM 45 FigA3 The Nine Phases o f a GC or an ACM Build ing Project 46 Fig. 4.4 /~ Th re e A C ~ 1 Mandat es 48 List Th e Twelve Areas of a Con stru ction Manage r's Expe rtise 51 List The Sta nda rd of Care Differ en ces Betw een CM Firms 57 List The Four CM Service Measuring Po int s During
An Optimized CM Organization

Examp le Exam ple Example Example

Example E xample Exa mple Example E xample

Fo rms and Variatio n s

Fig. 8.4 Fig. 8.5 Fig. 8.6 Fig. 8.7a Fig. 8.7b Fig. 8.8

The Three Basic Contracting System Structures 6-l ACM Di ffer ences Rest ated 65 Compara tive Ten ures of Serv ice 65 The Four Var iatio ns of Ext ended Services C~1 67 Th e Basic Sub· For m or G!'olPC M 67 The Th ree XCM Variat io ns o f G M PCM 6~ OeM Variat ion s 69 GC Compared to CCGMPCM 69 Design-XCM Compared to D-B 70 Rela tive Po tent ial Con flict of Inte rest in the Three Systems 73 Relative Po tenti al Conflict of Int erest in the C:-'1 System 73

List Chapt er 10

CM Und er Dua l Services Ag reeme nts

Fig. 10.1 Fig. 10.2

Optional Contract Structures for th e D-B System 80 Optio nal Con trac t Struc tur es for Design-XCM 81 Project Tea m Representa tion (Dcsign- XC M) 82

List

Fig. 10.3 Fig. 10.4

ACM Procedure s

Minimum Con ten ts o f a eM Manual 90 Exam ple Managem ent Plan (O wner R equ irem e nts) 92 E xam ple Managem ent Plan (Construction Serv ices) 93 Example Mana geme nt Plan (r--iateriaVEquipment) 94

Fig. 10.5 Fig. 10.6 Fig. 10.7

-

104

Levell Per son (E xecutive)- Jo b Descrip tion 107 Level 2 Per son (M anager)-Jo b Description lOS Le vel 2 Pers on's Responsibilities 109 CM Coordinator-Job De scrip tio n 110 CM Coord ina tor 's Responsib ilities 11 1 Level 3 Per so n (Field CM, Field Adm inist rator)-Job De scription 112 Level 3 Person 's (Fie ld eM) Responsibilities 113 Value Manage r-Job Descrip tion 115 Value Manage rs' Re sponsibilities 115 Schematic a nd Design Develo pmen t Phase Assignments 117 Co nstruc tio n Documents Pha se As signmen ts 118 Bidding Phase Assignments 118 Co ns truc tio n Phase Assignments (O p rimurn Pr oje ct) 119 Co nstructio n Phase Assignments [La rger/More Co mplex) 120 Modera te ly Large/Comp lex Co nstruction Phase

(O ffi ce-Based) Chapt er 9

xv

Example In-House eM Pr ocedure to Ensur e Bidding Co mpe titio n 96 A List of Ma nage ment Plan Proce dures 97

Fig. 7.2

Negative A ttr ibu tes Com mon to Both the G C and D- B

Systems 30 Fig. 3.1

Figurei, Examp les, and lists

125

The CM Body of Knowledg e The Twe lve A rea s o f CM Kno wled ge

129

Bud get Ma nageme nt Co ncept ual to Con struct ion Estimating f low Cha rt 147 Co nverting a Con ceptual Budge t to a Work-Scope Budget 148 Co nceptu al Budg et Line I te m Head ings 151 A n Exa mple of Rated Est imating 154 Spreadshee t Headin gs and Rel atio nships for Budget Maintenan ce 158 A Typical Co mprehens ive Sched ule o f Values 159 A Typical Schedule of Values 160 One Page of a Typical Budget Report Spreadsheet 162

xvl

Figures, Examples, an d lists

Figures. Exam ples. and Lists Cont rac t Manageme nt

Chapter 11

Re spons ibil ity Dist ributio n: CM, GC and D-B 163 A Typical Schedule of Values 171 Typical Co ntrac t M anagem ent Du ties of a Field eM 174 Th e O wne r's R igh t to d o R emaining Wo rk 176

Fig. 11.1 Fig. 11.2 Fig. 11.3 Fig. 11.4

C:-'l Adv ice and De cision s 181 Th e Team 's Decision-Mak ing Hier archy

List Fig. 12.1

Fig.l6.6b Fig. 16.7

De cision Ma na g emen t

Cha pt er 12

Fig. 16.3 Fig. 16.4 Fig. 16-5 Fig. 16.6a

249

Qua lity Management

Chapt er 17

185

Fina l Re spon sibil ity Ma tr ix For m 241 A Typical Re sponsibility Chart Act ivity Lis t 2-0 A Sample Lis t o f Action Wo rds 244 A n Exa mp le R esponsibility Chan (Design Ph ase Activities) 245 A n Exa mple Respo nsibility Chan ( Bidd ing/Award Activities) 245 A Re pr esenta tive List o f Program Sched ule Ac tivities

xvii

Th e Qu ality M an agement Flow Net wor k 255 The Major Qu al ity Man agem ent Compone nts 256 Fig. 17.2 Typical De sign an d Value Team Structu res 260 Fig. 17.3 A Typical De sig n and Value Sub-Tea m Struct ure 261 Fig.17.4a Precon struct ion Submi ttal Rcvievv' Proce du re (Reviewed O K/ As Noted) 263 Fig.17 .4b Prcco ns truction Sub mittal Review Proced ure

Fig. 17.1 Cha pter 13

Inform ation Manageme nt

Fig. 13.1 List

Fig. 13.2

List

The Lat eral and Vertical Flo w of Informat ion 190 Forma l Rep o rt s and Recor ds 193 Diagra m of a Typical Fina ncial Managemcn tl niormalion

System 196 Fig. 13.3

Fig. 13.4 Fig. 13.5 Fig. 13.6 Fig. 13.7 Fig. 13.8 Fig. 13.9 Chapt e r 14

Fig. H .l Fig. 14.2

A Typ ica l A pplication Summary 197 A Typica l Billing Summary 198 A Typical Budget Report

An An An An

Examp le Exa mple Example E xam ple

(Reviewed NO) 264

199

Change O rder/Conungcncy Re po rt Disbursemen t Report 202 Schedule of Values Re por t 203 Purchase Order Report 204

200

Fig. 17.5 Fig. 17.6

Chapte r 18

Mate rial/ Equipm e nt Manag ement A n Alterna te Preconstruct ion Submi tta l Review Proced ur e 210 Typical Column Head ings fo r an Exped iting. Report

Warra n ty an d G ua rantee Types 271 The 4C Co n trac t Docu ment Requiremen ts 272 A Typica l Bidd ing Docu me nt Review Com me nt Form Examples o f Typ icill Bidd ing Document Review Commen ts 276

Lis t List

Resource Mana geme nt Descriptive Th ree-Ti e r Proje ct Team Nom encla ture O ptions for Pro viding Cra ne Serv ice 286

Fig. 18.1 Example

Fig. 15.1 Example Fig. 15.2 Fig. 15.3 Fig. 15.4 Fig. 15.5 Fig. 15.6 Chapter 16 List

Fig.16.1 Fig. 16.2

Value Ma nagem ent The Flo w o f Value Managemen t Decisio n Making 213 A Life-Cycle Cost Problem 221 Diagram o f th e Three Life -Cycle Alternatives 223 Com pariso n of Single Ph ase and Fast-Track Sched ules 228 Typical Value M anagem en t Reso urce Tea m Structure 230 A Typical Value Managemen t Log 231 The Cost of a Change vs, the Owner's Cost Return 233 Proj e ct Mana gement Th e Major Project Man agemen t Co mpo nen ts 236 A Typical Brainsto rming Session A genda 239 Prelimina rylFinal Responsibility Matrix Fo rm 241

280

211 Ris k Man agement

Cha pte r 19 Chapt er 15

275

List E xam ple

Example Fig. 19.1 Example List Chapter 20 List

Fig. 20.1 Fig. 20.2

Majo r Risk -M anagement Com pon ents 291 Risk Ma nagement O pp or tunities 293 Risk Manageme nt o n Mu ltiple Contract Projects 296 Insu ra nce Types. Form s and Co ver ages 298 Typical Ins ur ance Req uirements fo r an ACM Project 301 Co nve ntional Means o f Dispo sing o f Risk 305

Schedul e Management The Five Re ason s for Sched uling 308 Th e Inter act ion of {he Five Basic Sched ules 309 A Typical Ear ly-Star t.Team Respon sibility Sort . Program

Schedule Fig. 20.3

\

313

A Sample of Det ailed Co nstruct ion Schedu le Ac tivities

315

xviii

Figures. Examp les. and Lists Fig. 20..1

Fig.20.S Fig. 20.6 Fig.20.7

Chap ter 21 List Lis! List List List Example

Chapter 22 Fig.2:! .1 Fig.2:! .2 Fig.2:!.3

Fig. 22.4 Fig. 22.5 Fig. 22.6

Chapter 23 List List Chap ter 24 List

Fig. 24.l Fig. 24.2 Fig. 2-1.3 Fig. 24.-1 Fig. 2-1.5 Fig. 2-1.6

A Sample of Mileston e Schedule Activ ities 31S An Examp le of Sche dule Networks and Sub-Networks Typical Ac tivities for the Comple tion Schedule 322 A G raphic Ex planation of the Compiet ion Schedu le's Use 323

321

Introduct io n

Safety Management The Best Approach to In Accident- Free Project 329 Th e Approach Co mpo ne nts of a Safe ty Man agement Plan 332 Gener al Con di tion C~ l Safe ty ASSi gnm en ts 3~ The Head ings of the Su b-Pa ns of 29 CFR Pa rt 1926 336 An Exampl e of the Sub- Parts Con tractors Shou ld Addr ess 336 An Explicit Sta tement of a Contractor 's Safety Respon sibility 338 Multip le Bidd in g a nd Contracting A Typ ical Part ia l Wo rk-Scope or Division of Work List 343 Typical Work -Sco pe Descrip tions for Mult iple Co ntracts 344 A Typica l Prop osa l Fo rm for Agency-Clvl Multiple Co ntract Bidd ing 350 The Back of a Typical Pro posal Submi ttal Envel o pe 351 CM Contract Costs vs.Ge ne ral Co ntract Costs 356 Single G C Contract vs. M ultiple CM Co ntrac t COS t Model 358 Ma rke ti ng and Sales Typica l Sales Deci sion s 361 Areas of Oppo rt unit y fe r Selling eM Serv ices

362

Acq uiring eM Services A Selec tion Process fo r Select ing a eM 372 A Typica l A dvertisement for Co nstruc tion Manage men t Services 374 A Co mp rehensive Selection Process li me Sched ule 375 A Typical eM Firm Rati ng System for Resp on der s 377 A Sample Page of an Owm:r-AlE·CM Respo nsibility Chan 382 A Typical Initia l Req uest for Proposa l (lRFP) 3&+ A Typical Req uest for Prop osal (RFP) 388

111C e M cont racting system was developed in the 19705 in res ponse to o wner requests for improved con st ructi on indu str y performance. Proj ects comm on ly exceeded owne r budge ts and fell beh ind schedule: constructio n q uality a nd productivity declin ed; design se rvices fell short of expec tations: cont rac t d ispu tes were common: and o wners generally perc eived that they were no t receiv ing fair valu e for the money they spend on new facilities. Severa l factors precipitated negat ive concl usion s by co nstructio n users. Ther e \...'as a rapid increase in the number of bo th publ ic and private projects, new and innovative constructio n prod ucts innu nda tcd the rnur ke tplacc. fa rge r and more co mplex Iacilites were de mande d. tra de cont racting became mor e specia lized. mer it shop cont rac tors increased in number s. and marty ne w go vernment regula tions were promulgated. These eve nts furt her divided an alr eady fragmented construction ind ustry a nd frust rated its per formance . The contracting syste m pre do mina ntly used to sat isfy the needs of o wne rs was ge ne ra l cont rac ting . a sys tem that evolved d uring the pre vIOus ce ntury. The design- build system. Ol e heir a pparent to the must e r builder concept. was available at the time bu t no t widely used. The gene ral con tracting system. with its des ign-bid-build project-delivery seque nce. co nfor med to the legal bidding and co ntract ing requi rem ents of public ow ncrs and was thei r political cho ice. The design- b uild contrac ting system . wit h its bid-des ign-build seq uence. was contra ry to public co ntracting requirem ent s but successfully co mpeted with general contrac ting in the private sector. In the lat e 1960s. runny o wne rs vo iced displea sure with the gene ra l contracting syste m and stro ngly sugges ted change. Un fortun ately. the stru ct ure of gene ral contr ac ting and the att itude o f most gen eral cont ract ors w as too rigid to sa tisfacto rily acco mmodate th e needs of the ow ne rs. In o rde r to extra ct more from the new constru ction e niro nment and dispe l owne r conce rns. new procedures would have to he added and olde r o nes mod ified. An alterna tive contracting syste m-c-one that re tained the positive a ttributes of gen e ral contracting and included the positive fea tures of design-build con tracting but pro vided more cont racting flexibility- proved to be the answer. This alternat ive. deve loped by co incidental co nsen us of many construct ion ind ust ry pa rticipan ts. becam e kn ow n as Con st ructio n Man agem en t o r CM. Th e C ~ 1 system re taine d the design- bid- build seq ue nce and competitive biddi ng at tributes of general co ntract ing an d included se ve ra! o f the virtues of design- bu ild cont racti ng. xix

xx

Introd uction

1!

Intr od uction

xxi

/

I

CM en hanced th.:: primary design and contracti ng components of the projectdelivery process and facilitate d increased owne r involvement in both design and construction. This was acco mplished by adding an adviso r/ma nager (3 construc tion manager, or CM) into the cont racting structure and elimina ting the traditional managcmen t role of the gener al contrac tor . The basic form of CM cont racting became commonly known as Agency eM or ACM, a descriptor that specifically iden tifies the role of the CM as a fiduciary agen t of the owner. In the ACM syste m, the CM. A/E, and owner op erate <.IS a tea m from the start of design until the end of constructio n and share a com mon aoal: the sat isfaction of the owne r. Other form s an d variati ons of CM deve loped ove r the years, but ACM stand s as the roo t syste m, the one which must be understood by pro viders and use rs of all Clvl forms and variations if the y are to understan d Cr-,.,t at all. ACM unequi vocally meets the overt, fair, competitive, a nd legal requirement s on public projects, and when emu lated in the private secto r, provides the same positi ve results. While the GC contracting system evolved ove r a perio d of a ce ntury or more. CM contracting was basically for mulated and instituted within approxi mately fifteen years, The C:VI syste m dev eloped independently but simultaneously in many part s of the count ry without guidance from a coo rdinating group and with little communication between pio nee r CM prac titio ners. Re markably. many of the C~ I procedures deve loped in the ea rly 1970s a rc in use toda y without even mino r modifications. confirming the fact that eM development was ideo logically consistent whe rever it occured. Perhaps just as remark able is that mJ ny collat e ral benefits which emerged du ring CM's early practice were quickly incorpo ra ted into the Ct-,'f menu of services. They have significantly increase d the efficiency of the eM system and added substa ntial credibility to eM services. Curre ntly it is difficult to de term ine which benefits provide the most va lue-those that wer e originally built into the CM contracting system or those tha t surfaced dur ing CM's early use and beca me pa rt of CM Services ove r the years -but all are important to owners. Th e CM syste m did not develop without controve rsy. It must be re membe red tha t the construction industry, prior to the ad vent of CM. was primarily the domain of gener al cont racto rs. Th ey formulated the GC con tracting str ucture , instituted its operating procedures. and established the image of the const ruction indus try. At first, gene ral cont rac tors conside red CM an int ruder, a miscrea nt system . a fad. a buzzword that would soon fade away. C~ t proved otherwise and. although gene ral contractors and their ad vocates con tinue to sea rch for ways to compete with the positive attrib ues of CM , many general con tractors have added CM to the ir contracnng services. Several construction industry associatio ns or socie ties have made move s to establish themse lves as the consensus C~l authorit y. Unfortunately, prov incial ism and market sha re have been the motivation . not concern fo r the prob lems and well-being of the cons truc tio n indu stry or the needs of owners. None have uneq uivocally earned the respect of the constru ction indus try and its users or moved

CM prac tice significantly closer to a professional practice on par with architecture and enginee ring. On e group, the Construc tion Mana geme nt Associat ion of America (CMAA) , was formed in 1981 to provide 3 hom e exclusively for CM practi tione rs. Other grou ps recognized CM as an adjun ct to the prima ry purpose of their group. The CMAA postured itself as an ind ustry associati on. with a st ructure similar to the Associuted Gen eral Contractors of A me rica, Inc. (AGC) . In recent year s. however, the CMAA has altered its dire ct ion and is lea ning towa rd improv ing CM technical skills an d att aining professiona l status for eM practi tioners. If sustained , this shift in dip rection should event ually position the CMAA as the recognized CM authority. Cl\fs tenure, popularity, and quiet divisivene ss has crea ted a need for documen tation and discussion. CM is no longe r in search of an ide ntity Or definition; it has clearl y defined itself th rough use over the years. Ho wever. to the author's knowI· edge, this is the first book-length pu blication devot ed to eMfundamenta ls and practices 10 da te. If the system is to reta in its position as a practical alte rna tive 10 ge neral contracting and design-build, its prac tice and level of practice will ha ve to improve. ye t the re arc signs that CM practices ar c actua lly waning. Ser vices arc be ing diluted and sunde red by the willingness of Cr-,'1 practitioners to engage in price-based selection cornpeut ion rath er tha n fostering qualification -based selection. Th rough a lack of any influences to the contra ry,owne rs have for med the opi nion that CM services are mo re akin to indepe nde nt contractor se rvices than to professional se rvices, Thi s book is written within the context of CM's self-de finition fro m its beginning to curre nt practices. It does not favor the provincial opinions of any one organizat ion, association . or societv It was writte n on the basis of what the auth or has learned as a CM pionee r and thirty years of experiences, learn ing what docs and doe s not wor k in actua l CM practice, Th e purpose of the following chap ters is to explain the eM syste m as completely as possible; to pro vide insight [0 its philosophy; to explain its fundamen tals. pract ices and procedures; an d to pr ovid e a be nchma rk for unde rstand ing C ~1 as it is. has been , and can be practiced. Small- 10 mediu m-lar ge-size projects for public secto r owners below the federal level provide the prime con tex t for this boo k. Small- to medium-large projects in the private sector tha t e mulate pu blic sector contracting requ iremen ts qualify as well. (This is not to say that large projec ts. fede ral le vel owne rs. and private sector projects that do not emula te publ ic secto r cont racting requ iremen ts will not ben efit from the informat ion provided} Howe ver , the heart of o ur nation 's construct ion indu stry should be located whe re most of the project s occur. Conseque ntly, this book re lates [0 the large num be r of construction indu stry pa rticipant s who are engage d in the small- to medium-large-project marke t in both [he pu blic and private sectors. Earl y chapte rs concent ra te on Age ncy CM. the accepted roor form of the CM system . and describe othe r eM forms and variations. Late r chapte rs cover CM knowlege requ ire ments and CM fundamen ta ls and pract ices.

xxii

Introdu ctio n

C H APTE R

BEFORE STA RTIN G CHAPTER 1

1

To gain the mos t from th is book, it is suggested tha t tne reader:

The Fundam ent als of the Root Form of CM (ACM)

1. suppress all prec onceived idea s a bo ut the const ruction indus try an d its curre nt practices 2. agree that "co nst ruction managrne nt " and "the manage me nt of construction" are not synonymous 3. understand tha i c~rs development was fueled by owners who wanted a more equitable return o n const ruction investmen ts 4. rea lize tha t eM has beco me competi tive to a point where no t nil Cfl. 1soffer the same le vel. ra nge. or qu ality o f services. and S. und erst and that ma cro -planning and macro -man aging plays o nly <1 minor role in a CM's performance: the suc cess of eM is vested in th e eM firm's ability :0 micro-plan arid micro-man:Jgt: every ac ti..'ity,

The eM system o f con tracting (eM) uses the sa me construcuon industry resources as the o ther contractin g systems, and requires the same serv ices to co mp le te a pr ojec t. Th e differences bet wee n the sys tems are the con tra ctual ties ami responsibilities o f the pa rties invol ved. The esse ntial differences are det ermined by the respon sibilitie s of each party. the co ntracts with in the syste m. and the legal performan ce requi reme nts of ea ch party, Th e fundament al for m o i eM is Agen cy eM o r ACM; it is the roo t fonn of all o ther forms and variations of the eM system . U nde rsta nding ACM is essent ial for understandin g all for ms o f eM co nseq ue ntly it is presented first. Th e o the r form s and thei r variat ion s of Cxt are cove red in Chapt er 5, eM System For ms and Variat ions.

Aft er diges ting the co ntent of the book. a n owner. practitioner, u r st ude nt may con clude tha t-it is impossible to provide CM services to the extent and degree described. O thers will feel compelled to add se rvices and procedures 10 make them more effective and co mplete. Whatever the reactio n. this book will have ac hieved its purpose; readers will kno w mor e about eM than they knew before . . . Finall y, the reader ca n be assur ed that all p rac tices and pr oced ures I? t ~~s boo k ha ve bee n used by construct ion managers o n actual projec ts, None are fictitio us o r pu rely academic.

1.1

THE SIX ESS ENTIAL SERVICE ELEMENTS

Eve ry projec t, with o ut exception. req uires the sa me six service clements for its co mple te execut io n:

1. Proje ct Manage ment 2. Desig n 3. Co n tracting -1. Co nst ructi on 5. Co nt rac t Administr ation 6. Co nstructio n Coo rd inuuo n. The identification of the six esse ntial el ements of service and the co ntrac ting structure that allocates Ihe respon sibility for pro viding the elements, clearly defines eac h system and es tablishes the d iffer enc es be twee n eM contracting. genera l co ntrac ting. an d desig n-build co ntrac ting. Th e six esse ntia l clem en ts a re defi ned as follows: Project Managcmen!: G uidance o f projec t-related activities from design and const ructio n to occ upancy. Design: Th e sol ution to the owner 's project needs in the form o f co ntrac t doc umen ts from which cost esti ma tes from co n tractors ca n be obtai ned and the project constructed.

'-

1

2

Chapter 1

The Fundamentals o f the Root Fo rm of

eM (ACM)

Contracting: A rranging for o r the holding o f contracts tor the services required

11

Constru ctio n: Th e hands -on work o f cons truc to rs; the per form ing co ntractors who build the proj ec t with wor kers on the ir own payroll. Cont ract Administratio n: Th e se rvicing of con tract s for co nstruction be tween the

owner and constructors. Construc tion Coordination: The o rchestrating of co nstructo r act ivities du ring the building o f the project.

Cu n l ra~ l i n g S)' s l "' lII

Do:sign

Ge neral Contracting D-B Contracling Agency eM ( ACM )

AE DB AE

Project Manage ment

Co ntr acting

AE DBiO

GC DB

AElCf\1

0

e M ; Cumt f\lCUOfl "bnagct

0 : Owner

AE: ArchllC:cVEn&inccr

C: Contr.l('1on

FIGURE 1.1

1.2

3

Proje<:l Delivery [ Iemenl

1

to produce the project.

Contracting Structures

Sectio n 1.3

Construc tion

Construction Coo rdination

GC DB C

GC DB CM

Constructio n

Adrninistranc n

AE DBiO AElC~1

GC; Genera.l Conua,:u)l' DB: Oe~gn--Blli ld Cont r:lC'tor

Responsib ility Distribution:

AC~t.

GC and D-B systems.

ASSIGNMENT OF RESPONSIBILITIES

Responsibility for the performance of the sixelements must be contractuallyassigned

1.3 CONTRACTING STRUCTURES

to one o r mo re o f the pa rties includ ed in the co ntrac ting struc tu re. Th e co ntracting structu re of the three syste ms is the seco nd distin guish ing cha racte ristic, and Figure 1.2 depicts the co ntrac t structure for the traditi onal G C syste m of contracting. It shows the co nt rac tual rel a tionships of the owne r, Ai E and G C ( no te that the N E and GC have no dir ect contractu al ties) and the seve ral co ntracting tiers o r levels, It also differe nt iates be tween co ntrac tors and cons tructors or pe rfo rm ing contractors and the type of co n tra ct that exists be tween each party.

For exa mple , when using the Genenu1Con tracting (0 ) sys tem.

1

e Architecufingineer ('A1E rrs assigned responsi bility for Project M anagem ent. nfnfet . dministrarro . and D sign; the Ge neral Con tractor (GC) is assigned resp onsibility fo r Co ntracting (with trade cont ractors) . Co ns tructi on. and Construction Coordination; the Owner retains responsibility fo r Contracting (with the GC and the assistance of AlE) .

I

When using the Design-Build contracting (D-B ) system. the D-B co nt ractor is assigned responsibility for Projec t Ma nagement (in part ). Design. Co nt racti ng (with tr ade cont rac to rs). Con str uction. Co n tract A rnin istration (in pan). and Co nst ru ction Coord ination; .h~ Owner ret ains esponsihility for Projec Management (in part}, Conuacs dministration in part), and ntracting (with the D- B co ntractor). We will see tha I when using the Ag ency Con st ruct ion i\bn:Jgcmen l (ACM) system: ili

IE is assigned responsibility: fOF Design

r ject-Ma nage ea t ( in part). and

CoolracL~dminisl ration (in pan); the £ M · assigned responsi iliu fo je anagemen (in part). (!on U3C dmims ration (in part) , and Goo. nucnoc Cccrdinauon: h Contractors are-assigned-respcnstbihry for'" " tnl etlnrr. an d ure Owne ereinaresponsibirit j or C nt r3etin with h h Ip itt M::mdAJ~ .

1.2. 1

1.3.1

Agents and Ind ependent Contractors Figure 1.2 sh ows how the AlE has an agency agr eemen t @ with the owne r and the GC has an indepe nde nt contract ® with the ow ner.

(A gency Agreement)

0

0 - Clndcpc nuen t Co nt r:lCI)

*8---------[Second Tier Cont ractors)

*

[ Firs t Tie r Cc mractc rs)

( Perfo r mi n ~

Contractors:

C\ ,"~ l r UC I{';~ )

Shared Responsib il ities

Res po nsibilities fo r providi ng some of the clemen ts art: shared between two part ies. When this is the case, each contract must clearly define the sha red respons ibilities. This co uld lead to more wo rdy contracts. som eth ing the construction industry can well do without. Chapter 16. Proje ct Man agement. offers a contract managem ent device called a responsibility cha rt wh ich pro vides sol utions to the pr ob lem of co ntrac tually assigning co-r espo nsibilities. Figure 1.1 sho ws the d istribu tio n o f responsibilities in matrix form.

( Performing Con tractors:

Const ructors } (Second . Th ird and Fourth Tier Contr actors)

FIGURE 1.2

* NuIC: There is no direct agreement be twee n A lE a nd Gc. There is a G en er al Co nditions documc nl prescn bing intera cucns.

The GC conlr3 cting structure.

4

Chapter 1

The Fundamenta ls of t he Root Fo rm of CM (ACM}

Sect ion 1.6

It is impo rta nt to realize the diffe rence in pe rforma nce responsibilities between an inde pe nden t contracto r and en agent. Our lega l system sets differ ent performan ce standards for each and the ir unique sta tus significantly affects the way co nt racting syste ms work . When provid ing se rvices to an owner. an agent is bound by law to make all decisions affecting the owner to the benefit of the owner. An age nt is essentially an extension Af the owne r-a repre sentative who can act in behalf of the owner to the extent stated in their contract. If the owne r perceives an error in judgemen t on the agent's part , the degree of the agent's negligen ce. if any. would be measur ed against the stand a rd of care tha t agen ts are expect ed to provide . If it can be shown that other agen ts. unde r the same cond itions and circumstances. wou ld ha ve acted differentl y. a charge of negligence against rhc agcnt by the owner might be a ppropria te. The opposi te is true of independent contractors.Inde pende nt co ntractors ore not only pe rmitted but expec ted to make decisions 10 their own benefit . so long as their decisions are consistent with the term s of the ir contract with [he owner. If a disput e is taken to court. a judge will turn to the word ing of the cont rac t to determine iC a breac h occurred. This single differe nce betwee n on inde pende nt co ntractor and an age nt is signiricant when comparing, from the pe rspective of a n owner. the three bas ic contra cting systems.

GC Part icipat ing Business Ent ities

A general contractor is the prime contractor. the business entity that holds a contract directly with the owner. and is referr ed to as a First TIer Contractor in the GC contract structure. Trad e cenrractors are business entiti es that specia lize in per forming specific portions of the work on a project. Trade con trac tors a re constructors hired 3S subcont ractors or sub-subco nt rac tors. Subcontra ctors are bus iness entities tha t have a con tract with a prime contractor or First TIer contracto r. and ar e conside red Second TIer Contractors in the G C con tract structure. Trade contracto rs hired by GCs a re subcontrac tors. SUb-SUIH:OlltT:Il,:lOrs are business entities that have con tracts with subcontractors or Second T ie r contracto rs. and are considered Third Tier Contractors in the GC contract structure,Trade co ntractors beco me sub-subcon tractors when they are hired by a subcontracto r. Suppliers ar e ma nufacturers, wholesale rs a nd re tailers who sell raw, processed. fab ricated and finished mat erial and eq uipment to contracto rs at
1.6

GC PARTICIPATING BUSINESS ENTITIES

In add ition to the pri ncipa l participan ts. all co ntrac ting systems are supported by business entities mat make the syste ms work. In fact. it would be imposs ible to have a functioning cons truction industry witho ut these supporting participa nts. Figure 1.3 shows how the principa l and [he support ing business ent ities fit into the GC system. Note that the diagra m includes an associate AlE firm and a GC joint venture par tne r. Although the involvemen t of these entities a re not always necessary. they provide on importan t serv ice on projects that ca n use [he ir involvement.

1.4 CONTRACTORS AND CONSTRUCTORS

To understand the workings o f a co ntracting system th rough its structure and to 3 CCU rarely comp are contracting systems. It is necessa ry to use precise descript ive ter minology.To this end, the following defin itions are used th roughout this book . The term contract or is reserved for 0 business entity thut. typically. subco ntracts all of the work Cor which it is responsible to ot her cont racto rs and with few exceptions. does not pe rform work with emp loyees. A general con tractor who subcon tracts 100% of the work for which he is responsible fits this definition and is often referred to as a "broker general contractor." Th e ter m construct or is rese rved for a business en tity/indivrduul that, with very few exceptions, does all the work for which it is responsible with empl oyees, and with few exceptions. does not subcontract wor k to othe rs. A constructor is also referr ed to as a pe rform ing cont rac tor. Trade con tracto rs. subcont ractors and sub-subco ntractors usually fit the defin ition of co nstructo rs or pe rforming co ntractors, The term contr actor/co nstructo r is reser ved for a business en tity that subccn tracts work to othe rs but also doc s wor k with its own employees. A G C who docs not subcon tract 100% of the work generally tits this definit ion. Most G Cs who build buildings subcontract about 80% of the ir work and perform the other 20% with empl oyees.

GC (JV

Partner]

Co nsulling Engincu s Soi lslFound:llions Civi l Sile:

T rade: Conrrucrors fSu~ &. Sub-subs]

Struc tural Mechanical

I.S

5

Electrica l e tc.

A GC PROJECT' S PRINCIPAL PARTICIPANTS

In addition to an AlE , the princ ipal part icipant s in the GC con tracting syste m include general contractors. trade contractors (subco ntracto rs and sub-s ubcon tracto rs). and suppliers.

f IGURE 1.3 Participants in the GC comracnng strueture.

-

Sup plicrs (Matcr i:llsl Eq ulp mcnl)

6

Chapte r 1

The Fundament als of th e Roo t Form of eM (ACM)

ArchilcctlEngincer: A design professional who is qualified by licen se to design facilities. Archi tects design facilities tha t pe ople occupy (architectural pro jec ts) a nd enginee rs design facilities that serve people (engineering projecnl.Tbe NE of record is in respo nsible charge of the project an d holds the contract with the ow ner. An asso cia te architect could be a limited partner o r joi nt ve nt ur er of the N E of recor d for a specific proje ct. Consulting Eng inee r: A design professional who IS q ual ified by license to design specific element s o r portions of a facility. They are either a pan o f.the A lE o~ga· nizution or have co ntracted their services to the AlE o n a proJcct.by- proJcc t basis. Financiers: Lend ing inst itut io ns that provide capi ta l in (he form of sho rt- term (co nstructio n) toun s. Io ng-tc rrn (rnc rtgage } 10<1m. to own e rs, and lo ng- and short-

,

Sectio n 1.10

\ j

1.7

!

Construction

Phase

Phase

Warra nty

Period Ar chilect/ Eogineer General Contractor FIGURE 1.5 The te nure of rhe GC and AlE on a G C project.

1.8

GCTENURE

A noth er importan t aspec t o f contrac ti ng syste ms is the length o f time for which eac h co ntracting party is invo lved ill the project.Th e te nure o f the Al E in all th ree syste ms exte nds from the start of de s ign to the e nd of cc nstr uction.The te nure of the GC is fro ~ the signi ng of the co ntract for co nstructio n to the e nd of the stip ula ted warranty pe nod. Th e te nure of the AtE an d GC is shown in Figure 1.5.

1.9

D ESIGN-BU ILD CONTRACTING

The simples! co ntract ing st ruct ure to visualize is the D-B system. Th ere is one prime co ntract that between the owner a nd the D-B co nt rac tor . It req uires the D- B con tracto r t ~ provid ~ both de sign.a nd co nstr uctio n se rvices. Ot he r parties who provide any of the SJ:< essential elements.I n who le o r in part. a re cor nracrual ro the D-B con tractor , Th e c~n~ r,ac ti ng. struc ture is d epicted in Figure 1.6. Refe r (0 Figure 1.1 to cc rrelute respo nsibility assign ments with the contracting structu re.

A GC BUILDING PROJECT'S NINE PHA SES

A cons truct ion proj ec t mo ves to occupancy by undertaking and completing a sequen ce of ac ti.. . iries or phases that ar e unique to the contra ctmg system bei ng u~ed. ? enc:al co nt racting. whe n used on an archi tectural or b uilding projec t uses a dcs lgn·bld·build

7

Design

I

term loa ns to con trac tors. Insure rs: Provid ers o f a varie ty o f insurance co verage suc h as err or s and omissions, builder's risk. worker's co m pe nsa tio n. pu blic liab ility an d pr operty damage. and othe r special co verage. Special Consult ants: Business e ntities or individu als with unl~ue expert ise who can assist owners in making use -oriented decisions fo r the project. Sure ties: Fina ncia l backe rs who provide bid bon ds. labo r an d mat erio. I bo nds, performa nce bo nds. an d other special bonds to contracto rs. The owner o r an other co ntracto r is the obl igee in the event of defau lt.

GC V5. o-S Differen ces

1.9.1 Alternative 0 - 8 Contracto r Th e box in the upp er left corne r o f Figu re 1.6 is an alte rnat ive D-B co nt ractor arr angeme.nt. So me o wn.crs prefer th is a rrangement beca use it provides a consequential sep ara tio n of the design and co ntracting en tities of the D-B co ntracto r. Th is se~a ra t ion may seem counter to the fundame nta l justification for using the D- B system 10 the first p lace . but from the perspect ive o f de sign-construction chec ks an d. bal ance s. t,his alternative provides the ow ne r a ma rgin o f protection agai nst desi gn-contracting overccmplicity Al tho ugh the AlE is the GC's age nt and conseq uently is req uired to act in the GC's best inte res~s in de sign de cisio ns, the AlE's pro fessional ethics prov ides a solid pla tform from which to make decis io ns that con sistent ly mee t the sta ndard of care for a design professional.

seq uence as shown in Figu re l A . . ' For an engineering projec t (such as a bridge, highway, o r waste tre~tme~l planu ra ther than a building as shown, design phases 2. 3 and 4 would be co m bined mto two phases: preliminar y desi gn and final design ..The activit ies of the. phases woul.d. ~o t ch ange, the number would sim ply be reduced by one, For an ove rview of the acttvtties du ring. each of the pha ses. see Appendix E.

1.10

GC VS. D-B DIFFEREN CES O ~e major d i ff~ren cc betwee n ~he GC and D-B systems is tha t in the: 0-8 syste m the owner has no direc t contract with th e NE. who designs the projec t an d produces the con tract d ocumen.ts.The,pu rported strength of the D-B co ntrac ting st ruct ure is based on the own e r having a single point of responsibi lity: one con tract instead of two. Th e

FIGURE 1.4

The nine phases c f a GC building project .

8

Chapter 1

The Fundamentals of the Root Form of

~ AJEColl~ullant

Sectio n 1.11

eM (ACM)

I

AlE Consul!:mt

o-B Participat ing Business Entities

9

I

o

··········t ·················· ········,

Dcsign-Buiic Contractor

I

Construction

(First Tier Co ntractor J

IGC·AlE )

_

D-B Cont ractor [Pri me]

Arch itects Engineers

[ l ndepc ndc tu Com rects)

SoihIFounda tions Civil Site Structural Mechan ic..' Eleclrica l e tc.

Ahe m ative D-B Contr actor A rra ngement

(P..rforn\in~ Con lr;1I::1I.1f1:

[Second T ier Contracto rs)

COlUt ru cl o~1

FIGURE 1.7 (Th ird Tier Co ntractors )

Suo-subccntrncrc rs

( PCrfllll l l.ng Cor\lf;j ~ lo rs : const ructors)

(S';~·"'ld. ThirJ .mJ F,.urlh ~ Tier Cu nl raclIlr..1

~

FIGURE 1.6 Tho: D-B conlrac ting m UCfUl C.

D-B contractor is en tru sted to look after the own er 's Intere sts in the design a m! co nstruciion of the projec t and is acco untable ( 0 the o wner for both. The pros and co ns of (he D- B system are cover ed in Cha pter 3. The De velopme nt of the eM System.The o ptio n of fas r-rracking is menti on ed in Chap ter 15. Value

Partic ipants in the De-B con tract ing struct ure

The two ~ddi ti o n a l phases in the D-B syste m. the documentation phase and the cos t .co nfirmauo n phase. ar e essent ia l to the system. The documenta tion phas e is requi red. 10 de v ~lop ~dequat c par.amc lri~ des ign defin ition (sche matic type dra wings and out1Ln~ specif icatio ns} to p ro vide project scope and quality parity in the proposals of com peung D-B contractors. The more complete and det ailed the documen tation. the better the chan ces that the owner will get the des ired en d result. Th e cost co nformation phase is requ ired to develo p an est imate of constructio n c~s t . based on c o ~pl eted or almost comple ted contrac t docume nts. befo re proceeding with (he construction phase. It is probab le that dur ing the design phase . many mutual

Managemen t. 1. 11 D-B PARTICIPATIN G BUSINESS ENTITIES

Figure 1.7 shows how (he various const ruction industry busine ss enti ties fit into the D-B system of cont ractin g. Aside from the Iact tha t desi gn and constr uctio n are under o ne contract to the owne r. the funct ion of a GC and D-B contractor d uring co nstructio n is practically iden tica l. and the parti cipan ts the same . 1.11.1

Docu me ntation

121 181

19/

A D-B Build ing Proj ect's Elev en Phases

Anoth e r majo r difference betw een th e GC system and D-B system is the sequence and number of phases req uired to execute the project. D-B contracting has a bid-
Design

Construct ion

FIGURE 1.8

The eleve n ph ases of a o-U building project.

10

Chapte r 1

The Fundamentals of the Root Form of eM (ACM)

Sectio n 1.14

decisions were made tha t increa sed or decreased the cost of cons truction. Although the owner is [0 be advised of these changes as design progresses their costs can only be accurately determined during the cont ract documents phase when definition is peakin g. It is common for D-B contracts to contain opti ons that may be exercised by the owne r before the cons truc tion phase. Afte r establishing the constructio n cost, the owner usually can co ntin ue on with the 0-8 cont racto r within the econo mic terms of the original D-B agree ment. con tinue on with the D- B contractor under ame nded econo mic ter ms. or termina te the agreeme nt with the D- B con tractor. If cont ract te rmination is chose n. the owner has the option to not bu ild the project or have the D-B contractor comple te the con tract documents so the owner can engage ano the r contractor to con struct the project. D-B contract docume nts are usually struc ture d to accommod ate these op tions by dividing the se rvices of a D- B contracto r into design and const ruction. Design services unde r the con tract ar e paid for on a cost-plus-fee arr angemen t. with or without a maximum amou nt specified . Wh e n the upda ted cos 1 of the projec t is de termined in the cos 1 confirma tion phase . constructio n services can be provided ;),5 a lump sum. a guaranteed maximum price. or on a cost-plus basis. 1.11.2

! IFiul Ticr Conl raclors )

F=::::{~~§~~J (Performing Co m ractces: Constructors]

[Second Tie r Contra ctc rsj

(ThIH! Tier Cllnu .u; lors)

($L'conJ. Thl rJ and Fourth

~ FIGURE 1.9

A comp ar ison

Oc~iJ:n-B lIild CUn l(;a~,,_O_'

Per iod ...

or the ten ure orJ OC and D-B con rractc r.

1.12 THE ACM CONTRACTING STRUCTURE The obvious characteristic of the ACM contracting structure is the abse nce of a single prime con tractor such as a GC or D-B con tractor and the inclusion of a construct ion manage r.This change must not be misconst rued. as it 50 often is. as the substitution of a CM for eithe r a GC or D-B con tractor. Refer back to figu re 1.1: the re is a comp letely different assignmen t of responsibilities for the six esse ntial e lements of project del ivery. and. compari ng figures 1.2 and 1.6 with Figure 1.10. we see that the contr acting structures of G c, O-B, and eM arc de finitely un ique.

Th e ACM ccntracnng stru cture

ACM PARTICI PATING BUSINESS ENTITI ES Figure l. 11 shows how construc tion industry business entities lit into the eM contract. ing structure . The GC is conspicuo usly abse nt. However, GCs [contractors/const ruetors) that normally cons truct pa rts of thei r projects, doing work such as concrete. carpentry.excavation and masonry, can be involved as trade con tractors on CM projects in those categories. The GC is excluded in the subco ntra cting and managing of the project. Addition ally. many GCs have responded by providing eM services in additio n to ge nera l contrac ting services. D-B contracto rs have unlimited opport unities in the ACM contracting struc ture as ArEs. CMs a nd Constructo rs. An overview of the activities included in each phase of the ACM contracting struct ure can be found in Appe ndix E.

Warran ty

I

r--L-~

FIGU RE 1.10

1.13

.4 Gl:n~ r ;a 1 Co nl rilc lu(

... Note: Th ere 15 no direct agreement be tween AlE a nd eM. The re IS a Responsihi lity Cha rt lhal prescribes intc rucno ns.

Tie r Ccru rar tors]

Constructi on

Phase

Io~,,, I

0 cp ~; ,(:'''''" A,,,,m'"'J S ----- -----C~l

(A,,,,," A"oem,:>

Figure 1.9 compa res the te nur e of a D-B co ntrac tor with tha t o f a G C cont ractor. Th e significance of each party's tenure in a contrac ting system is covered ill later chapters. Tenure is ver y importa nt when eval uating the poten tial effectiveness of differen t project delive ry syste ms.

P h 3 ~~

11

----r---,

r

D-B Tenure

Design

eM Tenur e

1.14

CM TENURE The tenure of a CM's se rvices on a proj ect excee ds tha t of a GC's services and is no less than the tenu re of a D-B con trac tor's services.This importan t feature of the CM contracting system is evident in Figure 1.12. A major porti on of the C~I 's efforts in behalf of the: owner occur during the design phas e in respect to designa bility, constructabiliry,and contractabiliry services.

12

Ch apter 1

The Fund am e nta ls of t he Ro o t Fo rm of CM (ACM)

Sect io n 1.16

(I)

A gency

A gency

Contract

Ccmract

_

SOllsIFoundatlons o.u Sile StrUClural Mechanical etc.

FIGURE 1.1 \

Independent Cont racts

Comeactc n

Su ppliers

Subcon u actcrs I Sub-subcontractors

(MJlerials!

FIGURE 1.13

1.16

Pan icipanls in the ACM contracting structu re.

Ccnstru cuc n

I

Phase

Wom a nl}'

Period Ge neral Conlr.J.clor

DC>ll:n- Build Conlt 3Clu I

A g " lIl:~'

Com lrui.:lioll ;'I !an agct

FIGURE 1.12 The tenure orGe and D- B con tr actors and lhe: CM.

1.1S

1'1

The nine phases or an ACM buildin g project (id..:nlical lO Figure I A for a GC huilding project ).

PRELIMINARY DEFIN ITIONS FOR THE THRE E SYSTE MS Based o n the informati on p ro vided so far . the three systems ca n he defined on the bas is o f their mos t o b v iou s characteri stic s. More cc mprcbcn slvc defini tion s will eme rge as addition al inform atio n is provided in la ter chapters,

Equi pmen t)

Desien Phase

(3J

13

Multiple

Engin.::.::ring Consultants

Eh:eui cal

(2J

Preliminary Def initio ns for th e Th ree Systems

AN ACM PROJECT' S NINE PHASES The phases of an AC M pr oject . as shown in Figure 1.13. are identica l to those of the GC svstern unless the ACM o ptio n o f fast-tracking is used . On a fast-tracked ACM project. th e design - b id-build se q uence is repeated [or ea ch phase that is bid. The desig n-b id-build Iast- track proc edure. un ique to ACM project s, is di scussed in Chapter 15. Value Man ag ement.

Ge ne ral Co nt ruc ting: A contracting struc ture tha t con sists of two p rime con tracts: (I) an agency con tract be tween an o wne r and a n A l E . who has respon sibility for desi gn. project m anage ment and con tract administration ser vices: a nd (2) an inde pen de nt co ntract be lween an own er and a G c, who ha s responsibilit y for con struction. con tracting. and co nstruc tion coordination se rvices. "m e selection. admini str atio n. co ordinruion and performance o f trade cont rac tors is th e respo nsibility of the GC co ntractor. The p roject se q uence is design-bid -bu ild. The A /E's invo lveme nt beg ins with design and e nds with o wne r occ upancy. TIle GC's invol vem ent begins with th e start of con struction and ends when warranty pe riods expire. Fast- track ing is not .:10 opt io n. D es ign-B uild Co ntruct iug: A contractin g struc ture that co nsists of one p rime contract : an independent contractor contract be twee n an owne r and a D-8 contractor. who has res po nsibility for de sign . project man agemen t. contract administration. co nstru ct io n. co ntract ing. and con str uct io n coord ina tio n services. The sele ction . admin istration. coordination . and per form an ce o f trade con tractors is the responsibili ty of the D-B con tractor. Th e pr oject seq uence is bid-design -bu ild. Th e co ntracto r's involvement be gins with (he sta rt of des ign and ends when the wa rra nt)' pe riod expi res. Fasttracki ng is
Agent:) Cons truc tion M anage me nt Co nt rac ting: A co ntracting struc tu re that co nsists of seve ra l prime cont racts: ( I) an :lgc ncy contract betwee n an owne r and a n AlE . who has responsibility for design and partial respon sibi lity for p rojec t ma nagem ent an d contrac t administration se rvices: (2 ) an agency co ntract be tween an ow ne r and ACM. who has sole respo nsi bility (o r construc tion coordinati on. and part ial respo nsibi lity (or project man agem en t. co ntrac t ad rninistraticn and contracting services; and (3) sev eral indepen dent contracto r contracts be twee n a n owner and trade contractor s. wh o ha ve individual respon sibilit y for the co nst ructio n se rvic es th ey provide .

14

Chapter 1

The p roject seque nce is design-bid-build. Th e invo"':~ment . of the AlE begins with the start o f des ign an d ends with owner occupancy. The mvol\'~ment o f the AC~t begins with the star t o f design and ends when the w:lCran~y pe ~od of the last co nt ractor expi res. Th e involveme nt of trade cont ractor s begins WIth the start of the constructi on th ey are engaged to perform and ends whe n the war ranty peri od co vering their work e xpires. Fast-tracking is an opt ion.

1.17

Section 1.18

The Fund a menta ls of t he Root f orm of eM (ACM)

I

!

A

1.18.2

D-B co ntrac tor acquisition with o ut significant modification . While this is readil y accomplished at the impulsive Iedcral Ievel, it is not the case a t the staid sta te. county, city. townshi p and school di strict leve ls. A combined QBS/P BS procedu re for the D- B sys tem ha s bee n made viable at the federallevel. but co m bined procedures are burden some . complicated. and slow in the lower public echelons . where acquisition procedures must legally bend exis ting regu lations. QBS is based on the pust pe rformance and cur ren t abi lities of the 0 -8 co ntrac tor. pa rticula rly in the area of design. PBS is based on an accep tab le cost co mpe titio n. A n unbiased fo rmula co m bines Q BS and PBS resul ts for final selectio n. Trade contracto rs hire d by the D-B co ntrac tor as subco ntractors are selec ted by the D-B contracto r o n a n subjective bas is. L 3W S a nd regul ations tha t go vern D- B selectio n on public p rojects do no t apply to the hi ring of subcont ract o rs. The use of the D-B system is mo re commo n in the private sector where public acquisition restrictions do not ap ply and where ind ustrial owners can use the system to advantage on a performance. rathe r tha n a prescripti on . specifica tio n basis.

ACQU ISITION OF SERVICE CONT RACTS

How own er s acquire con struct ion indu stry services dCiJend~ on. the legal ~tatus o.f the con tract being entered into and whethe r the o wner is ope ra ting 10 the pu b lic o r pn vate secto r. Public sector o wne rs commonly use a qu alificati on based se lec tio n (Q BS) pr oce ss to 'lequ ire the se rvices o f age nts such as NEs and CM s and do s~ with ,mini mum interfere nce from laws an d regul ati o ns. A QBS process stresses co nside ra tio n o f a compet itor 's qualificatio ns as well 3 S the cos t o f services. . . A price-based selectio n ( P BS) proces s. where selection IS ba~e.d. o n th~ cos t of services. can be used as an o p tion bu t is sel do m mand ated.The acqut stu cn of ind epende nt con tractors providing contracting and cc nsu ucuon services ge ner ally stipulat es that a PBS procedure be used .

1.18.1 Public and Private Sector In the pri va te secto r. the laws an d regulatio ns that contro l the public acq uisi tion of :er. vice con tra cts do not apply. The se rvices of con tractors and agents can be acq ui red acco rding to individual o wner prefe ren ce s.

Acqu iring Des ign-Build Services

PBS procedures. applicable to GC selection in the public sec to r, ca nno t be used for

The definit ion of a design-bui ld co ntractor ca n be: exp anded to include addi tio nal se rvices such as furni shing a site. financing the pr oject. commissioning the proj ect. trai ning owner perso nnel . an d operati ng the facilit y afte r it has been completed. The definition of J const ruct ion mana ger can be exp anded to incl ude a numbe r of op tional forms and va ria tions. all o f which ar e covered in Chap te r 5. ~~1 System Forms and Variat ions. The definit ion provided here is fo r an eM firm providi ng ACM services. Regardless of the eM form and variati on used on the pr oje ct. AC M service s o arc alwa ys pa rt of a eM projec t.

1.18

15

Public sector criteria and procedu res were established for the GC system to be as eq uita ble as possible to ow ners and to those competing for services. U nfort unately. the criteria and procedures used by so me priva te sector o wners a re less than equ itable to [hose competing fo r project se rvices. Th e unbala nce stems fro m the leverage that priva te ow ne rs ca n exert by "d angling" a contract in fron t of com pe ting service provider s. Leve rage is di fficu lt 10 apply in the pu blic sec to r by virtue of pu blic laws and regu lations. Chapter 2. Th e Re aso ns fo r a Third Syste m o f Co ntrac ting. po ints out that pub lic sec to r acq uisition p rocedu res are not without problems. However. p rivate secto r owners would have bet te r exper iences with the construction indus try if the y emulated the pu blic sector by at least eli minating leverage regar dle ss o f the co ntracting system they use. Th e con trac ting str uc ture o f the eM sys te m e limina tes the application of leverage tha t is detrimenta l to the owne r in the private sec to r in favo r of equi ta ble: competition. The GC and D -B contracting struc tures unwittingly invite this o wne r pract ice.

t

DEFINITIONS OF A GC. D-B CONT RACTOR. AND A CM

G eneral Conrracrors A ge ne ral co ntra ctor is a business organizat ion th at co ntrac ts with owners as an indepe nde nt co ntracto r to construct facili ties that arc designed and documented bv q ualified des ign pro fessionals. design- build contracto r is a business o rganizatio n De slan-Build Co n tracto r: that ~ontracts wit h o wne rs as an ind epe nd ent contractor to de sign . document . and con struct fac ilities for ov...ncrs, Construction Mana ger: A const ruc tio n ma nage r is a bu sine ss o rg3 n iza tio ~ ~~:ll cont racts with owners as an agent to man age the proc ess that pr oduces facilitie s fo r owners.

Acquisition of Service Contracts

1.18.3

Acq uirin g Gene ral Con t racti ng Services Cu rre nt PBS procedu res we re established to acco mmodate the use o f gene ral co nrractor s o n publ ic projects. Unlike the D-B system where de sign is con ceptual at the time o f bidding, G Cs can accura te ly quantify the work and estimate its cost from dra wings and pre scription specifica tions befo re SUbmitting proposals to owners. It is legally manda tor y that all bidders hav e id en tica l bidding docu ments to wor k fro m and all proposals be submitted at a single loca tion p rior to a specified dat e and time. The separa tion o f the design co ntract from the co ns truction con trac t facilitates pub lic bidding laws an d allows Q BS procedu res to be predomina ntly use d for the selec tion of a n NE . N E Q BS is ba sed on past perfo rmance a nd curre nt pote nti al abilities. A l E selection is ultimate ly dete rm ined from a Iace- tc -fucc interview process.

16

Chapt er 1

The Fundame nta ls of t he Root For m of CM (ACM)

Trade co ntracto rs h ired by the GC as subco ntracto rs are se lected by the GC o n a subjective basis. La ws and regu lation s that go ve rn G C selec tion on pu blic p rojects do no t ap p ly to the hir ing of subco n tracto rs. Th e use of GC contracting is popula r in bo th the public and priva te sectors, Howe ver. its co mplia nce to laws a nd regulation s infl ue nces its use in the public sector.

CH APTE R

2

The Reasons for a Third System of Contracting

1.18.4 Const ruction Management Services CM firms hir ed by owners to pe rfo rm ACM services are age n ts and typ ically co mpet e for projec ts th ro ugh Q BS procedu res similar to those use d by owners to select Al Es. The usc o f QBS for AC M services co mp lies with most service acqu isitio n laws and regulurion s in all ju risdictions. The separatio n o f the design contract from co nstruc tio n co ntract s facilitat es pu blic bidd ing laws and allows QBS pro cedures to be predomina ntly used fo r th e se lec tio n o f an AlE.The Al E QBS selectio n proced ure is similar to that use d in the G C system . Co ntractors nee ded 10 construct ::)0 ACM p roject are ob ta ined through a com petitive PBS process similar to tha t used by owners to acqui re the se rvices o f ge ne ral co nt ractors. Th e co ntractors a rc trade co nt racto rs a nd are prime con trac to rs in the ACM syste m rathe r than subcon trac tor s as they arc in the G C und D-B syste ms. ACM conrracrinu is an alte rn ative to GC co ntract ing in e ithe r the p ublic or pri vote sector. Th e llt::x ibii itv o f o ther (a rms and varia tio ns of positio n it :JS an altern ative to D-B contracting in bot h pu blic and priva te sectors.

Chap te r 1 expl ained the ACM contra cting system in te rms of co ntracting structure an d assignmen t o f responsibi litie s and co m pared so me of its attri butes with those of the gene ral con tracting and de sign-build systems. Co mpa risons show that . with the exce pt ion o f the add ition of a con struction manag er and the elim ination of the gene ra l co ntra cto r's trad itio nal ro le. proj ect pani cipants are the same in all th ree systems. Only co ntractual relationships, assigned responsibi lities. and time of in vo lvemen t in a p roj ect d iffer. In this chap te r. the reaso ns for developing a third syste m of contracti ng after year s of using the G C syste m (a nd to a lesser degree. the D-B syste m) are explained . In essence. the ideol ogical d evelopm ent of the CM system and its proc esses is based o n a co mb ina tion of owne r co ncerns fo r certain restrictive GC proced ure s and seve ral q ues tio nable GC pract ices.

eM

2.1

OW N ER CONCERNS

Sev eral areas oi con ce rn we re info rma lly but re pea tedl y exp ressed by owners in the lute 1960s.lllost o f which cou ld not be corrected wit hout a syn thesized cha nge in the way co nstruction proj ects wer e being deli vered. Th ese con cern s include d:

1. Projects com mon ly exceede d budgets 2. Projects cons istent ly fell be hin d schedu le 3. Co nstr uction qualit y was no t as expected ~. Design ser vices fell sho rt o f expec tat ions S. O wner s ha d limited part icipa tion 6. Contracting flex ib ility was minimal 7. Co ntrac t disp utes were co mmon 8. Fair val ue W:.IS no t being produced . U ntil the la te 1970s. owners had no o rga nized access to the cons truc tion indust ry. This state o f affairs slo wly ch an ged in the next decade wit h the proliferat ion of local and nati o nal owne r o rga n iza tio ns and cons truction- use r councils. These gro ups pro· vide d access to co nstruc tion ind ust ry participa nts and faci litated an ong oing dialogue be tween them and the co ntra cto rs. 17

18

Chapt er 2

The Rea son s for a Third Syste m of Contracti ng

Secti on 2.1

2.1.1 De, ig nab ility

2.1.3

A majo r owne r co nce rn was the A lE 's inte rpretat ion o f the o wner's needs in the d rawings and speci ficatio ns. Mo re owners are firs t-time builde rs than repeat-builders, The y are capable o f exp laining the ir pro ject req uire ments when proper ly prompted to do so, but cannot readily determ ine if their need s have bee n included in the AlE's design by lookin g at d rawings and read ing technic al sp ecificat ions, Many C:l SCS were cited where owne rs wer e upse t by the inadequacy or ove rprovision of the sizes and rel ati on ships of sp aces , TIle two-dimensi onal d ra wings and the specifica tions that the ow ne r approved during the des ign ph ase we re accepta ble 10 untr ained eyes. bu t after con struction a nd three-dimensional inspecti on wer e o ften ques tio ned and so metimes un acce pta ble. Ow ner co mme nts to the effect that AlE finn s oft en de signed facilities for their own edificatio n ra the r than for the o wner 's specific use an d pur pose were fairly common. In essence. o wne rs felt that design professiona ls had d ist anced thems elves from the real ities o f o wne r needs and we re tr eati ng inte rior and exterior arc hitec ture as mor e of an anform than a prag ma tic so lution to the owner's needs. Th e te rm deslgnability was int rod uced to rem ind A lEs that satisfying the ow ner 's pragmat ic needs. and doi ng so econo mically. has a much highe r prior ity than includin g arch itec tur e fo r the sake o f architecture, Alth ou gh bo th a rc a necessa ry par t of good design. the balance be twe en the two must favo r the o wne r's need s. Construetability A serious deficiency o f the G C system , as per ce ived by co nstruc tion use rs, was inad eq uate pr agm at ic co nstr uction inpu t d uring de sign. Few A lE firms reqUlre con str uct ion site expe rie nce as a prerequisite for their design perso nnel . and those that do have their sights se t too low, It was common for awkward co nstruction de rails a nd inap propriate mate rials and equ ipmen t to be incorpor at ed into design,

19

The term const ructability was introduced to de scri be the leve l of cost-relat ed Iea lu res designed into projects. G ood constructability referred to a good economic match be tween wha t had to be construct ed and wha t needed to be d one to co nstruct it. Sound knowledge o f hands-on co nstruc tion is a prerequisite for assessing and improving constructability, The GC system inherentl y excl udes contractors, the unchallenged constructability ex pe rts, from participation in a project until design is complete. Constructabi liry res pon sibility is vested so lely in the A lE . A so lution that su rfaced was to hire a third pa rty to perform a co nstruct ability rev iew of the d rawings an d specifica tions pr ior to bidding. Th is sol utio n not o nly p ro ved costly because o f the expe nse o f ext en sive rede sign bu t also raised question s re gard ing the A /E 's compe te ncy. Another pro posed so lut ion was to keep constructab ility expe rt ise available dur 109 the de sign pr ocess so that changes co uld be incorpo rated as the des ign proceeds. This proved less cost ly and mare accep ta ble. Design, re view, and redesign became an ongo ing less d isrup tive p roce ss, and also eliminated the trauma usu ally connected with a post-design re view. Th is solutio n allowed time for the A lE and constructability reviewer to gain each ot he r's respect during the proce ss.

Ow ners had been vocal w- ith their co ncerns p rio r to the (ormation of these: grou ps., but with out association or a fo rum it was difficult to impress the mem bers o f what had bec o me a very autonomou s and self-cen ter ed constru ctio n indu st ry. to change in their beh alf Th eir op tion was to vent individ ual pro blems a nd co ncerns to the AlEs an d contrac to rs who des igned an d con stru cted their facilities. With few excepti ons, owner complaint s wer e co ns idered part of doi ng b usiness as an A lE or contracto r. Over a peri od o f yea rs, cont inuing o wner grie vances became 0. mo re fre quent topi c o f co nversatio n amo ng co nstru ct ion users. This even tu ally prom pted medi i] attent ion, the initi ati on o f o wne r collec tives. and eve ntual recognition of the pr o blem s by so me of the mor e co ncerne d co ns truction ind ust ry pr acti tio ner s, A ltho ugh most simply coun tere d the compl aints with defensive co mme nts and denials, ot he rs inte rpret ed owner pe rsistence as cred ible: and respo nded with action. Us ing pr esent-da y terms, the majo r co ncerns o f co nst ruction users fell under five specific hea d ings: Designability, Constructability, Management. Ccnuactnbil ity, and Q uestionab le Indu stry Practices: an d add ressed fou r b rood prob lems : Cos t. 'li me. Q ualit y. and Busi ness Interrupti on.

2.1.2

Owner Concerns

f

I

Manag em e n t Man y owners ' concerns wer e managem ent related , The y were awar e that subco ntracting was increa sing-that the ro le of the gene ral co ntrac to r had switched from co nstructo r to cont ractor .This WJ S especially tr ue in the cons tructio n of bu ild ings whe re it could be fairly stated tha t trade cont rac tor s, no t genera l co ntrac tors, build buildings. A ge ne ral co ntra cto r's ma in fun ction was that o f a manager; his mai n responsibility was the supervisio n of subco ntracto rs. The traditiona l GC bidding p roce ss provided absolut ely no assuran ce o f a general co ntracto r's managemen t abi lity. Owners simply assumed that a ll ge ne ral co ntracto rs were cap able ma nag e rs. whe n in fact their ab ility and dedicat ion as managers varied grea tly.Th e awarding of contracts in the public secto r was on a low-bid basis. The con ven tional GC bidding process o nly att este d to a contractor 's ab ility to be the low bidd er and did not att est in any way to a contrac tor 's capability to man age. O wners realized that the keen price comp etition cre ated by the G C syste m place d gen eral con trac tors in a compromising pos ition when rati onali zing (he amo u nt o f managem ent costs they co uld affo rd to include in a com pe titive proposal. Th e)' couldn't lower thei r bids by cu tti ng ou t a yard of co ncre te o r a ton o f stee l. buttliey co uld pa re monies allocat ed to man agement to a bare minimum. Th e am ount and q ual ity o f conc rete an d stee l ar c speci fied; the amou nt o f ma nage ment applied to the project is nor. Conseque ntly the p ro per management o f the p roject d uring the co nstruct ion process e me rged as a ve ry se rious ow ner co nce rn when it was reali zed that even a minimum leve l of management might be further pruned from G C dollar proposals as a result o f the inte nse competition in the bidding pr oce ss. Th e fact that GCs co nt rac tu ally agreed to co mp lete a project o n time and a t specif ied qua lity no longe r p rov ided sufficient ass urances to owne rs that those agre em ents wo uld be kept. While a contract co uld mitigat e fina ncial loss to the owner if these

20

Chap te r 2

Section 2.2

The Reasons for a Third System of Contracti ng

promises were not kept. a con tract co uld not co mp ensate the o wner for the business interrupt ion co nt inge nt to the reso lutio n o f cla ims o r a b reach o f cont rac t. O wners realized tha t if they we re to ge t fair value for dollars spe nt o n con struction. a way had to be fo und to guar an tee high-le ve l managemen t with out sacrificing ea rnest compet itive bidding . Two alte rnatives e me rged. Th ey co uld exp licitly sp ecify management requi remen ts as th ey did steel and co ncre te, or they cou ld isola te managemen t from the co mpe titio n Cor co nt racti ng se rvices, Either app ro ach would like ly produce [he desired resul ts.

2.2

,

I

1. Payment for wvrk pe rfor med paid d irectly by the own er rat her than a p3SSthrou gh payme nt from the genera l co ntractor.

2. Re lief from the ge ne ral co n tracto r's practices o f pre-bid a nd pos t-bid shopping. 3. Eliminatio n of " pay if pa id" cla uses in gene ral co ntrac to r's co ntracts with sub co ntract ors, These three req uests re mained o n su bco ntrac tor associat ion legislat ion age nda s yea r aft er yea r. Subc o ntractors could not get re lief from ge ne ral co ntrac tor associatio ns. so they petitio ned the fede ral and state go vernmen ts to en act legislation that wou ld ease the ir burde n o n p ublic secto r proje cts, No t all ge neral co ntracto rs cond oned the se pract ices. and many who did were not eq ually over bea ring. Ho wev er. sufficien t co mpla ints existed to mot ivate subco ntractors 10 actively see k rel ief wh erever they cou ld find it.

2.2.2

O wner con ce rn in the arCJS o f dcsignabilit y, con st ructnbili ry, manage me nt . and C: 0 1)4 tractability spea r headed [he changes. Ho wever , lWO qu est io nable GC s ystem pra ctices influe nced the direct ion that the changes sho uld take (bo th involving the biddi ng process): the ma nn er in which trade contr ac tors we re se lected to be subcon tractors by G Cs, and th e ma nner in which G C propos als we re asse mb led.

As owners realized tha t su bcont rac tor s. not gen era l cont ract ors, ac tuall y built buildings and that ge nera l co ntrac to rs esse ntially provided supervision o f the con struct io n ph ase, mor e impo rtance was focused on t rade cont racto rs. and increa sed the ir value to owners in the co nt rac ting pr ocess. Th ese new pe rspect ives influe nced the direc tio n o f any ne w con tracting system.

Direct Paymen t to Subcon tr acto rs Subco ntractors claim lhut gene ra l co ntractors do no t make prom pt progress payment s to them afte r the gene ral con tracto r has be-en pa id by the o wne r for the work the subco ntrac tors performe d in th e general con tract or's behalf. This payme nt lag advers ely affec ts the subcont ractors cash flow and forces addi tio nal finan cing un til payme nt is received. Co nversely. it en hances the cash flow o f the gene ral co nt racto r. S ubco nt rac tors co mpe nsa te for slow payme nts by infla ting thei r pr oposals when deali ng with gene ral co ntractors kno wn to use this prac tice, The inflat io n effe ct o f this co un ter-p ra ctice by subcontractors eventually rea che s the owne r. Subcont rac tors claim that owne rs .....o uld save mo ney if the ir progress paym ent s were made o n time. Th ey suggest ed d irect payme nt by ow ners to subco ntracto rs as the ult imate so lutio n.

QUESTIONABLE INDUSTRY PRACTICES

2.2.1 Trade Cont ractor Select io n

21

In the GC system, trade co n trac to rs beca me subco ntracto rs o nly at the d iscre tion of gener a l co ntractors. As the p rime contr actor . the ge ne ral co ntrac tor autonomousl y selected the trade co nt rac tor s to who m wo rk wo uld be subco ntracted. Trade co nt racto rs were dependen t o n ge ne ral co nt ractors for their employment and , in man y cases. their s uccess in the con s tr uction indu stry. This dependenc y ga ve ge neral co ntractors the license 10 ind ividualize their trad e co ntrac tor selection pro cess and tailo r subc o ntract pro vision s to their own ad..'antage. Co nseq ue ntly, a broad ra nge o f s ubco ntracting poli cies a nd practices coe xisted. From a trade contractor's perspective. so me o f these practice s we re fair and eq uitab le a nd ot hers were part ial and de mand ing. (See Appe ndix F.) Subcontractors persiste n tly pe titioned ge nera l contracto rs fo r relief in three a reas :

2.1.4 Contra ctability Corurac tability was o riginally part of co nstr uctability but ex perience in both areas revealed that the e xpe rtise nee ded for ea ch was e ntire ly d iffe re nt. Cc nstruct a bility is the econ omic op timiza tio n o f the co ns tr uction aspects of a pr oject. Contractabiiity is the econ omi c optimization of the co nt ract ing as pe cts of a proje ct. Co nst ructabil it y re fe rences con tract d rawings and technical speci fica tio ns. Co nt racrabili ry references, contract struc tu res. co n tract documen ts a nd ge ner al cond ition s. As owners bec am e fumilia r with the inner workings of the co nstruction ind ustry, they showed increasing interest in the co ntrac tual arra nge ments of the pa rties involv ed. It was appa ren t that trad ition al co ntr acting st ructu res had 10 be mod ified in ord e r to accomm od ate the em e rging nee ds of o wne rs. The G C co ntrac t structure was strai ghtfo rwar d but inflexible: the re was little room for cont rac ting inno vation. Th e 0-3 co n tra ct s truc ture was even mor e straight . forwa rd but e ven less flexible. Bot h had bee n used for ma ny years and we re cod ified by strict pr ocedure s.. O wners were ready to de part fro m tradit ional co ntrac ting an d try some thin g o ther tha n wha t the cons truction indu stry then had to o ffe r. Th is bold att itude pro vide d th e licen se for res ponsive co nstruction indu st ry pa rt icipants to de velop the CM con trac ting structu re.

Questionable Indu stry Practices

2.2.3

Pre-Bid Sho pping

During the GC system 's bid d ing ph ase, gene ral contracto rs so licit pro posa ls fro m trade co ntrac to rs for the work they ha ve d ecided to subc on trac t. Prop osals received from trade co nt racto rs are in fact o ffers to do po rtion s o f the wor k for a stipula ted amo unt. and they are bind ing o n the pa rt o f the trade co ntracto r bu t not bind ing o n the part of the genera l co ntrac to r.

22

Chapter 2

The Reasons for a Third System of Contracting

Section 2.2

Cost prop osals are assumed [0 be co nfiden tial be tween [he subc ont ract or and general contractor. Howe ver . to inte nsify the competition in the trade contractor cat egories . gene ral contractors sometimes reveal ac tual o r false price information to cornpet ing trade cont rac tors. The inten t o f thi s ac tio n is to coe rce trad e co ntracto rs in to redu cing thei r do llar proposals or to increa se the scope of wo rk incl uded in thei: pr oposals wi thout increasing thei r pric e.This practice is called pre-b id shopping, and In the la tter case. scope enhancement. which is co nsidered by gene ral con tractors as :1 less int imidat ing descriptive than bid -sh opping. Trade cont rac tors ar c well awa re of p re-bid shopping and do what they can to protect the ir p roposals while att empting to remain competitive based on the cost informatio n be ing ba ndied around by ge ne ral co nt racto rs. One protect ive action is to inflate their initial dolla r pr oposal so there is room to absorb price-cutt ing or sco pe enhancement when pre-bid shopping be gins. Pre-bid shopping be nefits the owne r: it tends to lower gene ral contractors' pr o posals prior to their sub mi ttal to the o wner. However. its devi ou sne ss de tracts from the intended cre dibi lity of the bidd ing proce ss established {or publ ic projects. Subcon tractor price s reflect defensive stra tegies rat her than the true marke t value o f their work.

2.2.4

2.2.5 Post·Bid Sho pping Post-bid shopping occurs afte r a gen eral contractor receiv es a contract awa rd from the owne r. As previo usly stated. pr op osals received from trade contracto rs are o ffers th at can be accept ed o r rejected by the gene ral co ntrac to r for an y reason at any tim e. A fter.

23

an award is made. the ge neral contractor is free to search for better proposa ls fro m trad e contractors, whether they submitted a proposal to the GC d uring the bidd ing pe riod o r not. Pos t-bid sho pping p rovides no benefit to the owner; o n ly the gene ral Contracto r. who pocke ts the diffe rence when tr ad e co ntractors lower their pre -bid proposals. benefits from post-bid shopping. Du ring periods of heavy cc mpe tit icn for GC work, it is co mmo n for ge neral co ntractors to bid projects at thei r ba re cost with the intention of ex tracting profit through post-bid shoppi ng. To accomplish this, all Pre- bid offers from tr ade co n tractors are shopped. wh en the GC reso rts to th is pract ice. it is logical to assume that the G C will p rob ab ly selec t subcon tra cto rs on the basis of their price ra the r tha n o n the basis of thei r pote ntial pe rforma nce. Trade con trac tors pro tect them selves fro m pos t-bid shopp ing in much the same way tha t they protect them se lves from pre-bid sho pping: by increasing their proposals to ge ne ra l contractor s who they have identi fied as post- bid sho ppe rs from experie nce. In many instances. final trad e co ntracto r offe rs are mo re de penden t on their co unte r bid -shopping stra tegies tha n o n the actua l cost o f the wo rk . Experienced trade co n trac to rs submit their offers [0 GCs very p rude ntly. Th ey do not submit proposals to all GCs no r do they give the same dolla r figure to every general contractor they make an of fe r to. Based o n this selec tivity. it ca n be safely assume d that low-bid general con tr act ors rarely have all of the lo west trad e cont ractor prop osal s th nt are available when the ir bids a re submitted to the owne rs.

Stress on GC Estima tors The sizable num ber o f trad e cont ractors req uired on build ing projects has turn ed the biddin g pha se in the GC system into a period o f high stress fo r GC est imators. Literally hund reds of pieces of new and modified information from trade cont racto rs and suppliers must be received . so rted. and analyzed before a GCs proposal is finalized. Although bidd ing pe riods are several weeks long . the best tra d e co nt ractor pr oposuts are not received by GCs un til the last day of the bidding period. The reason for this is that tra de contractors do nOI want to revea l the ir best pr ices un til it is too la te fo r GCs to shop them. As a result. a good dea l o f trade contracto r infonnation is rece ived by the GC in a brie f period of time. and in so me cases not in sufficie nt time to be included in the prop osa l. It can be accep ted as a certainty tha t on most projects the low bid GC does no t have all of the bes t trad e co ntra ct pric es that were avai lab le pr io r to bidding. The chance o f an erro r in the GC's dolla r pro po sal becomes significan tly highe r as the owne r's bid dea dline approaches. Whethe r large. med ium o r small. er ror s do occur on pr act ically every prop osa l submi tted to th~ o wne r. Low bidders often stumble into a co ntra ct awa rd because the error the y made was a "a ood " er ro r. o ne so-ca lled bec ause the secon d bidd er's propo sal was closely higher (a "bad" error is whc n tht: secon d bidde r is sig nifican tly hig he r). It is not un usual for the low bid con trac tor to reche ck the prop osal 's content to loca le wher e errors might hav e occu rred.

Questionable Industry Practices

2.2.6

Pay-If-Paid Clau ses Th e commanding role o f general cont ractors in the GC contrac ting struc ture gives the m licen se 10 use subco nt rac t documents tha t lean heavily in thei r favor . One such co n tract p ro vision is refer red to as the pay-if-paid clause. This prov ision sta tes tha t subcontractors will on ly be paid by the general co ntractor if the general contractor is pa id by the owner. regar d less of the amou nt of work done o r expense incurred by the subcontractor. When G C pro jects are few a nd far be tween. gen e ral contrac tors sometimes o ve rextend (hei r normally aggressiv e pur suit of new work and (wi tti ngly o r unwittingly} get involved with owners who are no t financially so und. A nxious to ge l the work them selves. trade contractors sign s ubco n tracto r agreeme nts with the GC a nd proceed as usual to perform thei r por tion of the wor k. If. d urin g the co urse of constr uction . the owne r defaults and can no t pay a general contrac tor 's pr ogress paym ent. the ge nera l co ntracto r has no o bligation to pay the subco n tracto r if a pay -if-pa id cla use is included in the subcontract. even if the subco ntracto r ha s d o ne the wo rk included in the progress payment request To a lesser degree. on projec ts that are p rop erly funded. subcon tracto rs often pe rform wor k on contract changes and extra work requested by the general contractor o r the .AlE. If the change or ext ra wo rk is not appro ved as such by the o wner. and pay. ment IS no t made to the GC fo r the work don e. and if a pay -if-paid clause is in effect the subcont ract or who performed the work is out of pocke t without con trac tual reco urse.

24

Cha pter 2

The Reasons for a Third System of Contracting

2.3 GC SYSTEM BI DDI NG PROC EDUR ES The bidding of public projects under the GC system is a 'o'er)' organized process-at least on the su rface. Bid forms arc supplied to each bidde r with ins tructions as to how 10 fill them out and exactly when. where. and how to submit them. Bids not rece ived on time. rega rdless of cause. and those improperly filed are d ee med unrespons ive and no r accepted . Bids properly filed arc open and read pu blicly. The contractor with the low. est bid is the appa rent low bidder and will be awarded a contract unless the owner rejects all bids for cause. and if no latent irregularities surface du ring subsequent revi ews by the o wne r and N E. Behind the scenes, the GC bidding procedure. regardl ess of its lo nge vity, has shortco mings th at adversely affect all par ticipa nts-e-own er. ge neral co ntracto rs. sub contractors, and s uppl iers. This is especially true on architec tura l projects (wh er e a greater num ber o f subcon tracto rs are involved} as opposed to enginee ring projects wher e t he general contrac to r is essen tial ly a co nst ruc to r and perfo rms tne major per tio n of the work with on-payroll pe rso nnel. In addition to plann ing an approach to constructing the project. bidding consists of gathe ring strategic data and pricing mforrnation from which a firm cos t and time co mmi tme nt ca n be made by the general con tractor to the ow ner, Pricing is the main co mponen t of a ge neral co ntractor's bid .

2.3.1

Subm itti n g GC Proposal s Loc al bidders and bidders from ou t of town ha ve the ir ow n timin g stra tegies. Loc:J1 bidders gauge the time it will take [0 enter the final number and delive r the p roposal to the location where they ar e to be rece ived . To "level the playing field:' bidders from out o f town se nd a person to the location whe re proposals will be received with a bid fo rm that is co mp lete excep t for the bid amoun t. A phone call from the ou t o f to wn

Own er Assessments of the GCSyst e m

25

bidder's office to his represe ntative. sta tioned at a telepho ne close to wher e bids will be received, p rovides the final pri ce in fo rm at ion at the last poss ible mo ment. Th e rep rese ntative ente rs the fina l bid numbe r on the proposal form and del ivers it just in time. This scenario proba bly so unds ludicrous to those unfamiliar with the inner wor kings of the: const ruction industry, bu t be ass ured tha t it is a co mmon occ urrence. FAX machines elimi nate the manual e ntry o f the fina l am ount and the personal delive ry (p roviding that a FA X deli very is listed as an acceptable method o f submitting bids in the inst ruc tions to bidde rs). Th e use o f a FAX ma y req uire tha t the bid amoun t is not rev ealed. In that cascoa stand -in bid am ou n t is ente red on the proposal form befo re it is submitted. and the last-minu te FA X o nly contains a plus o r minus adjus tment figure.

t

I

!

2.4

OWNER ASSESSM ENTS OF THE GC SYSTEM As owne rs became familia r with the int rinsic workin gs of the con struc tion industry they realized that its business style was arc haic in ma ny ways when compared to the ir ow n. Wh ile blan ket ass ump tio ns were no t fair beca use e ach ind ustry is uniq ue. there we re areas whe re counterpart co m pa riso ns we re appropriat e. For example, ow ne rs in the manu facturi ng ind ustry had d ifficulty unders tanding why the leve l of quality o n a construct io n project always see mcd to be cont ro versial. Why was the quality goa l in co nst ruction " minimum defects" when the quality goal in man ufactu ring was " zero defects"? H owe ver. once the co nstru ction pr oce ss was thoro ughly understood , they accept ed the fact that const ru ction q uali ty cou ld never sim ulate manufactu ring qu ality. Cons truc tion's un cont rolla ble produ ctio n environ me nt. co nstantly changing wor k fo rce, ra pid mobilizat ion . and one-of-a-kind prod uct Jines we re ove rwhel ming det e rre nts. Owners ca me to understand that qua lity in a constructio n project is the result of the o verall project-ma nagement rather: tha n specific q uality -

Sortin g Bid d in g In f o rm a t ion A large am o unt o f pr icing info rm ation is gathere d an d processed by a gene ral contraclor while preparing a bid. The n um ber o f information pieces probab ly exceeds 500 on an uncomplicated project such as a school and reaches 1000on a hospital. More importan t tha n the number of pieces of price info rmation [0 he processed is the time in which processing m ust be accomplished. The length of bidding periods de pe nds upo n the size and complexity o f the pro]eel. However. regar d less of the time allocated by the owne r for bid co mp ila tion. the last day (the last hour) on every project is a hectic period for a general co ntractor's esti mat or . As no ted ab o ve. tra de co ntrac to rs and suppliers withh old th eir bes t p rice fruru general co nnecto rs un til late in the bidd ing perio d . Conseq uent ly, ge ne ra l con tractors must do everything possible to take advantage of last-minute prices. To this end . the tina l bid a moun t. an d othe r req uired informa tion relating to the Jina l b ill a mo un t such as the name s of r nujor subcon tractors nnd suppliers. is not en te red on the bid form un til the last possible mo ment.

2.3.2

I

Sectio n 2.4

co ntrol measures. 2.4.1

The GC Bidding Procedure Privat e owners were es pecially critica l o f GC biddin g proced ures. Ma ny o f the m re prese nt ed industri es where pre pari ng and sub mitti ng comp etitive bids was ro utine. Th ey q uickly poin ted out that nei ther the ph ilosoph y nor the proce dures used in the G C system wou ld be acceptable in their o wn industry. Th eir areas o f concern ce nt ered on the G C s cos t-gathe ring process and the co nfusion crea ted by sorti ng o ut vol u mes of infor mati o n in a brief per iod of time. O wne rs ag reed tha t int ense com pe titio n was essent ia l to favorab le co nstr uc tio n economics but felt that competition for con tr acts should be di rect. fair. and as free from time pres· sures as possible. Th ey observed tha t immediately aft er G C bids ha ve be en received , the o wne r: (1) knows the name o f the lo w bid contracto r, (2) has a price o n which to base a con trac t award . (3) has a promised date of com ple tio n, (4) do esn 't know who the trade contrac to rs are that will build the project, and (5) is awa re th at the low bid d id not include all of the lowes t trade cont ract or and su pplier prices avai lable. O wners fe lt that more and be tte r in forma tio n sho u ld be d rawn from a bidd ing pr ocess.

26

Chapter 2

The Reasons for a Third System of Contracting

2.4.2 Direct Payments to Subcont racto rs Another area of concern for pr ivate secto r owners was the pass-through paymen t arrangemen t for subcontracto rs. One of the anx ieties of private sector owners is mechan ic's liens filed against their property during construction, (Public secto r owne rs are spared this anxiety beca use mos t public pro perti es ar e exempt from lien s.) Owners sa w direct payme nt to subco ntracto rs as a way to automa tically reduce the occasions to have liens filed o n their pro pe rty. The pass-th rough arrangemen t can and does delay payment by GC s to Second Tie r pa rties who, along with Th ird and Fo urth Tier parties are usually the o nes who have reaso n to file lie ns. The o wne r had no way of kno wing if and to whom n G C was dispersing progress payments by the owner. Direct pay me nts to Seco nd Tier pa rt ies would elimin ate owner conce rn with an en tire tier o f contracto rs and sup plie rs,

2.4.3

Bid Shop ping In the GC system, pre-bid shoppi ng am biguously benefits the owne r and post-b id shopping indisputably does not. Una ware o f the exten t and seve rity of bid sho pping. owners quickl y realized thro ugh co nversa tions with trade contractors and from their own experien ce in purc hasing tha t its practi ce (especially post-bid shoppi ng) was del eterious and sho uld be rep laced in the co nt racting process. Some o wne rs initially tho ught bid shopping was a pra ctice eq ua lly accepted by bot h GCs and trade co ntractors-a business procedu re used by the co nstructio n ind ustry to provide fair co mpetition for the work to be don e.The y were not aware tha t trade con tractors vehementl y o pposed bid sho pping and considered it a mea ns of unfair competition. Private sector and publi c secto r owne rs indicat ed IhJ t they pre ferred W pay OJ fair. competitively-derived price rathe r than to coerce con tractors and supp liers into a blind aucti on that could adversely affect the qu ality and calibe r of their pe rformance under lump-sum co ntra cts.Th is coincided with trade co ntra ctor prefer ences to provide their bes t price. once, in a fair and op e n compe tition. (See Ap pe ndix F )

• '~

CH A P T E R

3

The Development of the eM System Chapter 2 covered the rea sons for developing a th ird syste m of contracting. pointing o ut owne r co ncerns of the day and the frailtie s of the GC syste m as it devel oped and was pract iced .This chapter provides insight into the deve lopme nt of the CM system as it occ urred in the early 19705. in separa te pa rts of the Uni ted Sta tes. CM's develop men t was not a coo rdina ted effort under the guidance of a gro up or associat ion. Ra ther. it was th e product of indepe ndent effo rts by individ ual firms who reco gnized that inhe rent pro blems existed with the GC and D-B systems. and coincidentally fou nd surp risingly simila r ways to solve them. The point that CM·s ideological devel opment and its practices were no t a coord inat ed effort is an exceptio nally imp o rtant one . Th e fact that simila r problems were recognized without collabo ra tion. and tha t similar solution s were installed witho ut association. helped to legitimat ize CM and valida te its soluti ons. There is a major difference betw een the de velopm ent of the GC and D-B syste ms and the CM system. The GC system. as we know it today. evolved o ve r a long period. Through ou t the bSI century. it was adjusted to accomm odate the o ngoing change s in the co nstruction industry and the de veloping needs of private and pub lic o wners. The D-B system , an ad apta tion of the GC syste m. de veloped in the private sector to serve manufacturing indu stries who had competitive production sched ules to mee t. Co mbining design and co nstr uction into o ne contract permitted co nstructio n to begin be fore design was com pleted. sa ving considerable time in the tot al length of the project deli very process. In the public secto r. the D-B system was used o n a large SCJIt:: duri ng World War II to accele rate the co nstruction of muni tions manu facturing facilities, Th e strategy was to quickly catc h up to and then o utproduce the axis na tions. who were far ahead of the allies in weapons and amm unitio n invent ories.There was no faste r wa~' to crea te a producing facility than by using th e D-B process.The federa l go vernment's use of the system under those threate ning circumstances was tremendo usly effective and served its pur pose. If the development of the GC and D-B syste ms was an evolut io n. the devel opment of the eM system was by time ccmpanson a revo lution. C ~ 1 se rvices were bein g provided by fledgling C M firms in various part s of the country in the la te 1960s and ea rly 19705.but by 1975. the first sta nda rd co ntract documen ts cove ring the CM syste m wer e in print. A num ber of pro prieta ry CM doc uments, fashio ned after rhe existing standard documents used in the GC system. were forerunners of the 1975 documents, Prior [ 0 27

28

Chapt er 3

Sect io n 3.1

Development of th e eM System

P(6) Esta blished contracting process. familia r to pa rticipants, PO?) Cornrcct docum en ts which have stood the test of time.

1975. pio nee r C.\1 firms chose to mod ify standard GC documents to fit the C ~1 system, because owners and their attorn eys kit comfortable with the wo rding of standard documen ts and had Jess difficulty understanding the eM amendments than digesting a complet e new se t of documents. C!'wI's rapid ma tura tion was influe nced by the owners ' enth usiastic acceptance of the new contractin g co ncept. CM's pote ntial as the syste m they wer e looki ng for. and the: possibilities that su rfaced as the system was used. generated a syne rgistic effo rt by owners a nd Cxt to develop the system as q uickly as possib le. Once CM' s basic concep ts and initial procedures were installe d and in wor king orde r, atte ntion shifted to the num erou s collat era l ben efits of the system th at emer ged : these 100 were qu ickly refined and incc rpo rurcd as procedu res. Today it is difficult to de termine which are ma rc ben eficial to the owne r. those tha t form ed the bas is for CM, o r those tha t arc the produ ct of C xt. A point wor thy of no te IS that the ACM form as practiced by many firms prio r to 1975 is still practiced with little change today. ACM prac tices and proce dures were so obvious a nd straigh tforwa rd when first developed that few modifications were req uired as experi ence with ACM was gai ned .The o nly real changes were in the too ls used to get the jo b done (i.c.• perso nal computers, FAX communicatio n. and tele co nferencing) . This stabi lity speaks well for the system 's early credibi lity and its present integrity. Prob lems tha t persi st today a re the lack of uniform ity in the extent and q ualit y of se rvices provided by C~t firms and the availab ility of expe rtise to prope rly provide eMservices that serve th~ owne r's best interests.The expect ed level and range of eM services will be clearly e xplained in following chapters.

3.1,2

pog) P09) rIO) Pl l) P12) PI3 ) 3,1.3

ACM SYSTEM DEVELO PMENT

Firm commitment on cos t and time of cons tructio n. Single design/construc t co ntract to ad ministe r. Single cont ract res po nsib ility for de sign and constru ction . Accommod ates fast-track con structio n. Co nstruction expe rt ise availability during design. Co ntinuity be lween de sign and constructio n.

Po sit ive Attr ibu tes Com mon to Bo t h th e GC a nd D- B Syste m s P14) P15) P16) P17)

Sheds the majority of owner risks connected with con str uction . Con tractor's perfo rmance secured by sur et y bonds. The COli tractor IS an at-r isk stakeholder in the project. Uses Exist ing Indus try Par ticipan ts.

Neg ative Attri butes of the GC System as Use d in t he Public Sect or

NOl) lnsutficicnt co nstr uction e xpertise available duri ng design. N02) Insufficient co ntracting expert ise available to the ow ner. N03) Lack of ow ner decisio n-ma king involve ment d uring const ruction . N04) No meas ure of J bidder's man agement ab ility prior to awar d. N05) Limit s o wner involveme nt in the select ion of tra de contractors. N06) Insufficient conti nuity bel ween des ign and con structio n. N07) The stressful natu re of the proposal assem bly pe riod .

TIle process most e ffectively used by fi rms when developi ng eM se rvices was to con side r how to reta in the positive and eliminate the negative attributes of the G C and D-B systems.The governing criteria for chan ge were : (I) the result sho uid use existing con struc tion ind ustry reso urces and be cons isten t with its basic practices. a nd (2) it sho uld improve the cos t. time, q uality, and business interr up tion con sidera tions (r o m the persp ective of the owner . The following is a list of the pos itive and nega tive attributes of the GC and D- B systems. The GC list assumes build ing projects compe titively bid in tne public sector. The D- B list assumes build ing projects not competitively bid in the pr iva te sector . Lists a re not pn oriuzed.

3.1.1

Posi t ive Attributes of t h e D-B System a s Used in the Priva te Secto r

3.1.4

3.1

ACM Syste m Development

3.1. 5

Negative At t ributes of th e 0-8 System a s Use d in the Priva te Secto r NOS) Competiti on IS pro visional withou t complete contract doc ume nts, N09) Des igned quality direct ly affects [he cont racto r's profit. NIO) Owne r must ha . . e high-level constru ction industry expert ise. Nil) Potential conflict of inte rest with combined services contract. N12) No decisio n-ma king chec ks and ba lances. N13) Can no t be used in the pub lic secto r witho ut modificat io n. N14) Non-synergistic approach to prob lem solving.

Posit ive Attribute s of the GC Syste m a s Used in th e Pub lic Sector

POI) Firm co mmitment to cos t. time. and quality of cons tructi on . P02) Competitive bidding of a pre scribed work -scope . P03) Single const ruction cont ract to ad ministe r. P04) Single con trac t respo nsibility for const ruction performance. POS) Minimum o wner involvement required during co nstruction.

I

29

30 3.1.6

Chapter 3

Development of the

Nega tiv e Attributes Co mm on to Both t he GC an d D-B Systems N15) Lo ng reten tio n time o n early subcon trac tor comp letio ns. N16) Covert asse mbly of gen eral con tractor's cos t proposal. N17) Adve rsar ial rel atio nship exists between contractor and own er. NIS) Pass-through progress payments to performing con trac tors. N19) Ques tionable competitio n between trade cont ractors. N20) Prepa ckaged risk ide ntification and man age ment. N21) Q uestion able su pervision of trade co nt rac tors. N22) Does not per mit direct contact with tra de contractors. N2J) Delegates authority for determining co ntract change costs.

3.2

Sect io n 3.3

eM System

1,

3.2.4

3.2.5

KEEPIN G THE POSITIVE ATIRIBU TES

3.2.6

Uses Exist in g Indust ry Part icipan t s (P17) To rapidly succeed. a new cont racti ng system wou ld have to use as ma ny existing con str uctio n industry partici pa nts as possib le and. as much as possible keep them in their tradi tio nal roles. The ge neral co ntractor and design-bu ild cont rac tors were the hubs of the ir respective systems so the ir invo lve ment would ha ve to be d rastically modified or eliminat ed. It should be noted that gene ral co nuac rors and design-build co nt ractors as business en tities were no t the proble m; the problem stem med from the co nt racting structu re in wh ich they func tioned . Bo th had the opportu nity to be pa rt o f the new syste m in a non trad itional role.

Competi tive Bidding o f Prescri bed Wo rk -Scope (P02) From the pe rspect ive of the pub lic sec to r. ope n bidding o n a co mpe titive pr ice bas is is a legal pre req uisite for a ny con tracti ng syste m. Eq ually fair but more co mple x bidd ing formats have bee n used with some measure of success in the p ublic sector. Bidd ers are asked to include other value criteria. which converts to cos t and modifies th e do llar proposal. However. most C:vt system developers opted (or the simplicity and decis iveness of comparing dollar proPOSOlJS only. It was felt that othe r valuable criteria could be covered in bidde r qua lifications sta tements and in biddi ng screeni ng procedu res.

3.3 3. 3. 1

Accom moda te s Fas t-Tra ck Con stru ct io n (P11 ) O ne advantage of the D-B system was its inherent ability to usc fast-track construction procedu res. Because there was one contract for design and cons t ruct ion. construction could sta rt prio r to the completion of d rawings and specifications. This permitted the late r stages of design to proceed concu rrent with the ea rly stages o f co nst ruction . the end result being compressed overall project time.

Contin uit y Between Design and Con struct io n (P13 ) The G C system precl ude d the rel ia bility o f co ntin uity desired by owners. It was a twoleade r process: the Al E du ring design a nd GC du ring co nstruction. A lthough the A lE provides continui ty for con tract ad ministr a tio n purposes. leadership d uring cons truetion was vested in the ge ne ral co ntractor.Th e con tinu ity bet wee n des ign and constru ction p rovided by [he desig n-build co ntrac ting system was idea l. Some how it had to be e mula ted in a new syste m.

The GC co ntract for construction pro vided this three-pronged attribute beca use of the definitive wo rk-sco pe provided by the com plete drawings and spec ificatio ns provided by the N E prior to the awa rd. The D-B syste m coul d no t eq ua l thc requ ireme nt because o f the bid-design-build seq ue nce it follo wed. Ho wever. having a co mmitmen t o n cost. time. and q uality in the form of a con trac t does not guarantee a trouble-free end resu lt. In the even t a gene ral con tractor did not mee t the terms of the co nt ract. the owner had legal recou rse 10 recove r damages for sho rtcomings bUI had no way to avo id the expense and inco nvenience of recovery. A con tractual commi tment fro m a contracto r on COSI . lime. a nd q uality was no t providing the level of assu rance tha t owners wa nted in thes e areas.Th ey wanted minimum inrerrupricn of their business. both during the project and after its completion.

3.2.3

Construction Expertise Availability Dur ing Desig n (P12) The GC system precl ude d avai la bility o f the ge neral cont racto r's construction expertise prio r to construc tion. The D-B sys te m p rovided for this facet. but in doing so. ereatcd a po tential for co nflict o f inter est resulting from the single respon sibility co ntract fo rma t. 11 was co nside red es sential tha t con structio n ex pe rtise: be available to the owner and the Al E during de sign. while re taining the chec ks and balances not pr ovide d by the D-B syste m. Thi s was th e p rime reason (or crea ting a ne w syste m of con tra cting rat her than trying in so me way to change the G C system.

3.2.1 Firm Commitment on Cost. Time and Qua lity (P01)

3.2.2

31

Many public owners were lo ok ing for ways to comple te [hei r pro jects as ea rly as poss ible. Fast-tra cking was an answe r, bu t it was nOI compat ible with the designbid-build criteria they were esse ntia lly bou nd to.

I

!

Eli minati ng t he GC System Negatives

,

, I

I

ELIMINATING THE GC SYSTEM NEGATIVES Ins ufficie nt Const ructio n Ex pertise Ava ilabl e During Des ig n (NOH Co ns truction cos t is established d u ring the design phase. It is based o n [he scope of wor k included. the practical ity o f the co nstruct ion de tai ls. a nd the qu ality a nd availabi lity of the ma te rials a nd eq uipm en t specified. Designabllh y and co nsrrucrabili ry desc ribe the cost facto rs. A better system wo uld provide experienced des ignabi lity and constructability input during. design . Because the cos t benefi t of both decreases as design develops (cos t is incurred by cha nging what has already been finalized) desig na bility must be provided ea rly and co nst ructa bility inpu t must be prov ided as early as possible durin g the design phase .

32 3.3.2

Chapter 3

Development of the CM System

Insufficient Contract ing Experti se Available to the Owner (N02)

Contracting for services is a major facet of project delivery. Numer ous contracts are necessarily involved and many contracting poss ibilit ies are available within the constructio n indus try, Choosing the best way to contract for the most efficient e ngagemen t of services is called con tractability, A be tter syst em would pro vide owne rs with experienced based adv ice on the cont ra cting possibilities available for a pa rticula r project, and provide the op tion te select the com bina tion which provides th e bes t end results. 3.3.3

Sectio n 3.3

1 t

lack of Own er Decision -Making Involvemen t Durin g Constr uct ion (N03)

3.3.7

Insufficient Continuity Between De sign and Construction (NOG)

The St ressful Natu re of th e Proposa l Assem bly Period (N07) Th e proposal assem bly per iod o r bidding period is unn ecessari ly dema nding and pro ne to mistakes in judgme nt and calculat ion s. especially in the publ ic secto r. Regar d less of how long the period lasts. the cur rent process co ncentrates the major effo rt by con tracto rs in the final days and hours of the bidding per iod. It is common fo r a mistake in commu nica tion . ari thmetic. or ju dgme nt to de termine the low bidde r. In sp ite of the fact that prime co ntractors and trade con tractors a rc used [0 the GC bidding system and have sho v..'n relu ctance to chan ge. it is ce rta inly no t in the best interes t of the o wne r when a mistake is the deciding factor in the selection of a co ntrac to r. TIle convers ion of comple x co ntract docum ent s into a rirm dollar proposal. within a sho rt spa n of time. has been a prac tice of the GC system for as lo ng as it has existed . Howe ver. the increase d num ber of spec ialized trade s cont ractors and produ cts involved on arch itec tural projects has grea tly increased the burden of the estimating effo rt. While there have bee n atte mpts to relieve th e stress co nnected with biddi ng. non e has pro ved popular with all pa rties. The pr incipal concern is the late receipt of offers from trade contracto rs d ue to pre-bi d shop ping a nd bid pedd ling. Bid deposit ories. where trade con trac to rs deposi ted wri tte n offers 10 individ ua l prime contrac tors the day prio r [ 0 the owner-s rece ipt of proposals. eliminated bid shopping and peddling and the- late rush of information. but was unpopu lar with those con tractors who wanted to be invo lved in pre-bid shop ping and peddl ing. Bid dep osito ries are used in so me areas of the United States and Canada but have no t becom e pop ula r ind ustry-wide. Where they are in use. ca re mus t be take n to co mply with rest rain t of tr ade laws. which in a broad interpre tation favo r bid shopping act ivities. A bc ne r cont rac ting syst em wo uld pro vide a biddi ng process less pron e to mistake s-c-o ne that suitab ly recogn izes the gravit y of the fina ncial comm itmen t betwee n an ow ner and a Contrac to r an d re plac es chance with appro pr iate business acum en.

No Measure of a Bidder's Manag ement Ability Prior to Award (N04 ) The GC syste m provides no ass urance tha t the lo w bid genera l cont ract or IS a q ualified man ager of cons tructio n op era tions o r that qu alified pe rso nnel will be assigned to the project. Th e standard cont ract do cument s addr ess the latter poin t. but no r the for me r. Owne rs ha ve the right to as k the ge neral co ntractor to re place per son nel who are not pe rforming to the o wner's expectati on s. Ho wever. the re is no recou rse ava ilab le to an owner. other than co ntract termination . if the gene ra l contrac to r is not performing at the level of mana gem ent expe cted by th e o wner. With the success of the project so depe nde nt o n well-managed per for mance d uring constructio n. a better system would allow the o wne r to sepa rate the quality-based sele ction of a manager fro m the price-selec tio n of a co ntractor.

3.3.5

33

The respo nsibility of the AlE for co nt rac t admi nistra tion notw ithstand ing. there is an obvious chan ge in Al E proj ect invo lveme nt on ce constru ction begins, This is much mo re eviden t o n a rch itectu ra l projec ts than o n engineering projects, The change is most no ticeable in N E leadership roles. The project enginee r or project architect who had a very active lead role during design does no t always re main ilS active during constr uctio n. Re spon sibility for o n-site liaiso n and con trac t ad ministra tion is usua lly assigned to a field representati ve of the N E firm. o ne who was probe bly not involved in the proj ec t du ring de sign. Because many decision s made du ring the design. bidding. and award phases of the project arc relative to pro blems du ring the con st ruction phase of the project. a be tte r system would improve the co ntinuity of per sonne l th rough all pha ses o f the proj ect.

i

The standa rd contrac t betwee n gene ral con tractor and ow ne r restricts [he owne r's interactio n and invo lve mem with the gen e ra l cont ractor 's decisio ns. Duri ng the course of cons tructio n. the gener al co ntrac tor's unilate ral de cisions so me times crea te problems for the owne r which cou ld havc been avoided through own er inte rac tion and involvem en t. A beuer system would pos itio n owners as close to the day- to -da y constructio n decision -making. process as they ch oos e 10 be. Reducing unilat eral deci sions to a minimum dec reases the possibility and consequences of surpr ise.

3.3.4

3.3 .6

Eliminat ing the GCSystem Negat ives

li m its Owner Invol ve m e nt in the Selection of Trade Contractors (NOS) The GC system requ ires the gene ral contractor to select the trade cont ractors who will constru ct the project. Due to the intense GC system bidd ing competition. th e selection criteria used by the general co ntractor may be price -or iented rathe r tha n pe rfor man ce-orien ted.Th eir decisions may not be (a nd do not have to be) in the o wne r's bes t interes t Especially on buildings. where trade contractors exclusively ma y provide ha ndson co nstructio n. it would be app ropriate and mo re e ffective for the ow ne r to be involved in the selec tion of the trade con trac tors, A bette r system wou ld involve the o wner in the trade cont racto r se lection process to a greater degree. d irect ly o r indirectly.

1

i

Developm ent of the

eM System

34

Chapter 3

3.4

ELIMINATING THE D-B SYSTEM NEGATIVES

3.4.1 Competition is Provision al Witho ut Co mplete Co ntract Docum ents (NOS)

Section 3.5

3.4.2

3.4.5

Desig ned Qua lity Directly Affects t he Contra ctor's Profit (N09)

3.4.6

Cannot Be Use d in the Public Sect o r witho ut Mod ificatio n (N13) In the publi c secto r. the majo r de terre nt o f the D-B system IS its bid-design-bui ld seq ue nce. Mos: pub lic statutes require a des ign-bid-build seq uence by stipulating tha t co mpetitive bidding is to take place based on a fully de fined and documen ted sco pe o f wo rk. Ea ch bidder must bid on the exac t same wo rk-scope, unde r uniform con ditions. To usc the D-B system in the public secto r wo uld require own ers to amend their sta tutes. Th is was con side red a major impositio n-on e which wou ld req uire either considcrable own er edu ca tio n and time . o r installation o f a unique: competi tive D-B bid di ng system that respected e xisting sta tutes. Th is was conside red too co mplicated to effectively install a t the time. A bett er contracting syste m would be o ne that co uld se rve bot h pub lic and priva te sec tor owne rs witho ut the need to amen d existing sta tu tes o r pr o vide selec tive modific a tion .

Own er Must Have Hiqh -Level Con stru ction Ind ust ry Expe rt ise (Nl 0) w hen using the D-B system. the single-res ponsibility con tract places the ow ner in a prime decisio n-ma kin g pos itio n on all project delive ry q ues tion s which a rise. The owner must have cons iderable knowledge o f all face ts o f des ign, contracting. construc tion. and the wor kings of the construc tion industry-c-total dependency on the Independe nt design-build cont ractor can create misundersta ndi ngs and gen erate prob lems. Ma ny owne rs, especially in the pu blic secto r, do no t have sufficie nt expertise to accep t this role . Most are first-t ime user s o f the construction industry, proficie nt in the ir own endeavors bu t no t capable of rationalizing the many de ma ndin g decisions they must make d uring the project, A bette r system wou ld pro vide ow ners with rel ia ble. impartial expe rtise in all areas wher e o wner deci sion s must be ma de an d where o wne r knowledge may be lacking.

3.4.4

No nedslon -Ma kinq Chec ks and Balances (NU) A sing le-re spon sibility con tr act sup presses debate and preclude s the positive effects of checks and balance s in decisi on making. Because of the independent cont ract or sta tus. unilateral decisions often favor the cont ract o r, no t the owne r. Uni lateral decis ions should be avoided as much as possible. The many -faceted effects o f proje ct del ivery de cisions call for a syne rgistic approac h to solutions. and owne rs. the ultima te deci sion makers. deserve the benefit o f comple te and diver se input for thei r deci sion s. Che cks and balances in decis io n making have become the esse ntial clements o f succe ssful p roject del ivery and sho uld be part of an effective co ntrac ting system .

when the responsibilities {or design and con struc uo n arc under a single con tra ct. design decision s m:Jy lose owne r Objec tivity beyond cod e requireme nts. As an inde pendent contracto r. with the right to place his own inte res ts above the owner's, the design-build cont ract or ca n make biased cos t-q uality decisions withou t challe nge ir om a design profe ssion al. A bet te r syst em would se para te cos t dec ision s an d qua lity de cision s and allow the owne r to make the final determination based o n expe rt cos tqua lity informat ion .

3.4.3

35

[he poten tial for confl ict of inte res t is higher. A better con trac ting system .....ould pre clude dUJ!. contesting responsibili ties and rel y on legal co nsequences [0 minim ize po te ntial conflicts of inte re st :JS much as possible.

I

It is impossible for co nt racto rs to sub mit high ly competitive pr oposals o n a project .....itho ut the benefit o f a compre hen sive work -scope to work from. The D-B system precl udes this be ne fit. The bid-desi gn-build seq uence requ ire s bidd ers to devel op pr o posa ls from performance crite ria. ou tline specificatio ns and schema tic d rawings, the contents of which are o pen to broad inter p retation and subject ive deci sions on quality, quantity. and in general. the credibility o f the co nstructed p roject. Price competition. based on complet e dr awings and specification s. is esse ntia l if not mandato ry when co nd ucting an equitable bidding pr ocess. A bette r contracting system would pr eclude subjec tive pro pos al int erpretat ion in the bidd ing process.

Eliminating the Common Negatives

3.4.7

Non-Sy nerg istic Approa ch t o Pro b le m So lving (N 14) Vesting re sponsi bility {o r project de livery in o ne con tra ct ing entity prod uces a provincial approach 10 deci sions by limit ing expo sure 10 the project de livery experiences of other co nst ruc tion industry participan ts, While this may be an asset to provi ncial priva te sector o wners, many own e rs wanted more diverse inpu t and the choices which that input gene rates. A be tte r cont racting system would bring togethe r part ies with diverse expe rience to promote synergistic de sign. contractin g. and co ns truction so lut ions.

Potential Conf lict of Int er est w ith Combined Services Contract (N11) A potent ial for conflict of inte res t is prese nt any time two part ies ente r into a contract. espe cially when o ne pa rty has two or mo re con tes ting respon sibilities to pe rform o n the same undert aking {or the o the r pa rt)'. Ca n a pa rty co nsiste ntly mak e deci sions to the adva ntage o f the pa rty he/she is serving, if the decisions wou ld prove detrimental to the party ma king the decisions? Whe n legal o r eth ical consequences are conside red . the po tentia l {or co nflict of interest is minim ized . Whe n nei ther legal nor e thical conseque nces impe de. ho weve r,

3.5

ELIMINATING THE COM MON NEGATIVES

3.5.1 lo ng Reten tio n Time on Early Subcon tr actor Comp letions (N 1S)

,

I

Th e own er 's ret ent ion o n progress paym ents was a major concern o f prime contracto rs and su bco ntrac tors du ring the late 19605 an d ea rly t 970s whe n intere st rate s soa red alo ng with inflation. Re tai nag e is mon ey already ea rne d by the co ntractors which rem a ins in the owner's cust od y. accruing inte rest for the owne r's account ins tead of the

36

Chapt er 3

Develo pment of th e CM System

contractor's. A n example of reta inage is whe n pri me con trac tors hold back pro po rtionate amo unts tram su bcontractors under pa y-if-paid clauses. Re tain ed amounts and the tim e of re lease by the o wner are contrac tual and vary fro m project 10 proje ct. A 10% re ta ined amount based on the value of work in place is a comm on provision .Th e retainage is so me times re du ced when the project is half co mplete, but it oft en remains at a se t lc vel unt il the dat e of substa ntial completi on or final complet ion of the project. Subcon tr acto rs, who compl et e thei r wo rk early in the proje ct, are mo re a ffected by retainagc because their monies a rc not freed up by the o wner until month s o r years after the y have completed their cont rac tua l obligations to the prime contractor. Subcontractors invo lved in a project during the late stages of a project are a lso denied full paymen t bu t fo r a sho rter period of time. Retained am ounts Increase the cost of d oing business for contracto rs and conseq uen tly increase the ow ner 's cos t o f co nstruction. Alt hough the owne r earns inte rest on the retained balance. contrac tors add to their dol lar proposals the cost of finan cing the ret ained money. A bett er cont ract ing system wou ld simpl ify th e re tainage provisio ns to make them easily adm inistered and mo re eq uitable to tra de cont ractors. 3.5 .2

Co vert Asse m bly o f Co ntr a cto r's Cost Pro posal (N16) Th e GC system typically requires pr ime co ntract o rs to sub mit cost pro posals for the work-sco pe described in the con tr act docu ment s. Prop osa ls are usually in the form of a lump sum o n architectural projects
3.5.3 Adversar ial Relationsh ip Exists Between Contr actor an d Ow ner (Nl7) When any contract is signed. an adversa rial relation shi p is created in a variable sense of the term . Both parti es have a specific commitment to meet: a prescribed obl igation to perform . Howeve r. as long as value and money a re the basis of the contractual arrangeme nt. con tr acted part ies are inclined to act in their own best interests an d extract as much money o r value as they ca n from the ar rangement.

Section 3.5

!!

Eliminating th e Commo n Negati v es

37

Lum p sum contr acts commi t the own er to pa y the contractor. or the contracto r to pay a subcont ractor or sup plier. to co mplete a defined work-scop e o r provide a product for a predetermined price. o n tim e. and at speci fied qu ality. If these cond ition s require change: d uring the co urse of construc tion . bot h part ies react defensively to negotiate the change in their own best intere st. In the GC and D-B systems. the prime co ntra cto r must negot iate all cont rac t ch anges because eve ry change will affec t either the owner an dlor his subco ntract ors and suppliers. The size and nature of the change. and who is involvcd in it, will determine where the con tracto r's best interests a nd advocacy is position ed, Cha nges that ma teriall y affect the contract or 's financ ial o utcome will get the con trac tor's attent ion more than those which do not , and the pa rties involved in the cha nge will determine the con tract o r' s ad vocacy position when nego tiat ing. The contractor rna.... be his own adv oca te. the ad ...oca te of the owner. o r the advocate of his subcon t'racto r; o r suppliers. A be tte r syste m wou ld minim ize the crea tio n of adversarial situa tions by limiting the parties involved in negotia ting chan ges and eliminating the que stion of advoc acy

3.5.4 Pass-Throu gh Progress Pa ym e nts to Perfo rm ing Cont ractors (N18) Pass-th rough paym ent sys tems (whe re prim e contracto rs arc paid by the owner and subco ntractors arc paid by the prime co nt ractor) create problem s for the ow ner and for subcontrac tors. (Set: A ppendix F.) O wners do not kno w when . if. o r how much su bcontrac tors and suppliers are pa id for se rvices and produ cts inco rpo ra ted in their project. Subcont ractors do no t kno w when , if. or how much they wiII be paid. Prim e cont rac tors have thei r own contrac tua l paym ent arra ngements with su bcontractors and supp liers. and the owne r is no t privy to the m. In the private seclor. and in so me public sector jurisdiction s. un paid supplie rs and subco ntracto rs have the legal right to fi le mechan ic's lie ns again st the owner's prop erty. A lien gives the lie no r a financial interest in the o wner's property in th e am ount of the lien 's face value, and payment of th nt amount to the lie nor is the o nly solu tion avai lable to the o wner. While sure ty bo nds which fina ncially protect the o wner are mandatory in the pu blic sector and o pt iona l in the priv ate sec tor . they cann o t pre vern lien s from bei ng filed again st the ow ner o r the sure ty and the inconvenience which accompanies them . From the trade co ntracto r's per spect iv e. prompt pro gress payme nts from pnme contracto rs are a posui ve influen ce on cash-flow, Paym en t del ays. howe v er. requ ire addi tio nal financing and incre ase trade contracto r costs. Trade contractors who sub contract to prime co ntractors known to be' "s low pay" increase their do llar prop osals to compensa te for it. and o wners suffer negat ive financial conseq ue nces from increa sed prime co ntrac tors dollar proposals. Trade co ntracto rs have tried long and har d to e liminate pass-through payments. They have made some pr ogress in the public sec to r but none in the private secto r. So me fede ral contractin g regul ati on s req uire prime cont ractors to pay subcontrac tors with in a stated time. Efforts by trade contractor s to simila rly change standard co ntr act doc ume nts have met with refu sal by prime contractor assoc iations. A be tte r syste m of

38

Chapter 3

Development of the CM System

Section 3.5

contrac ting wou ld elim inate the inco nvenie nce and costly con sequences of passthrough progress paym ent s by requ iring direc t payment to trade contractors.

3.5.5

39

Trade con tractors do not make offe rs to all prime co ntractors bidding a project. nor do they give every co nt rac to r the sa me price . Offers are withheld o r adjus ted base d on past experience with prime contractors. Seldom if ever does the low bid prime can. trac tor hav e all of the a vaila ble low trade cont ractor offers in the proposal he submits to the owne r. A better contracting system wou ld eliminate bid-shop ping. ensure that all of the lowest bids are received. and retain a high level of competition . (See Appendix E)

Question abl e Competitio n Betw een Tra de Contractors (N19) Bid shopping, scope en hance men t. and bid peddling ha ve become an int egral part of the GC and D-B contrac ting systems. All three detr act fro m a logical compe titive bidding process. pr oduce questionable results. and can generate seri ous p ro blems for tht: owner as well as trade contractor s du ring the project. Bid shopping is when a prime contractor ba rga ins (truth fully or untrut hfully) with trade cont ractors over a price for the wo rk they in tend to do. Scop e e nhancemen t is bid sho pping where the am ou nt of work , not the price. is the subject of the bargaining. Bid sho pping an d scope en hancemen t o riginat e with the prime contractor. Bid pedd ling is bid shopping or scope en hancement [hat o riginates with the trade co ntractor. When these pr act ices occur be fore bids ar e received by the own er. the y arc term ed pre-bid; if the y occur after award o f a contract to a prime con tractor, they are ter med post-bid . Although pre-bid and pos t-bid sho pping and scop e enhancement intensify com petiti on. the ultimate value o f the se practices to the owner is q uest ionab le. In both G C and D-B cont rac ting syste ms. trade cont rac to rs depend en tirel y on prim e co nt racto rs for the ir wor k load . U nde r p ressu re to ob tai n a su bco ntr act. trade contractors so metimes cut the ir prices o r ex pa nd their work scop e to a po int wher e their pe rfo rma nce durin g cons truction is adve rsely influenced by their efforts to extrac t a pro fit that is no t there or to mitigate losses from o verze alous bidd ing. Trade contract or (sub con tracto r) grou ps ha ve had bid sho ppin g elimination on thei r agenda for years but have made little progr ess. AlEs are in a pos ition to reduce pre-bid shop ping by having prim e contractors lisl su bcon tractors and s uppliers on pr oposals forms. but have not invo lved them selves in an effo rt to stop this practice. The NEs claim th ai listing complicates the bid p reparat ion process a nd is no t in the owner's best interest. When listing is required. prime con trac to rs o ften ignore it. knowing that the owner can wa ive propo sal irr egula rities and are mor e int erested in the dollar prop osal any",lay. Prim e co ntracto rs con sider bid sho ppi ng [heir priv ilege and a re o pe nly ad am ant abo ut retaining it. They insist that pre-bid shopping lo wers their bids to o wners- that it gives them an unbrid led opportun ity to find the lowest trade con trac tor o ffers an d to assemble the lowes t poss ible proposal to the o wner. Prime co ntracto rs claim that post -bid sho pping gives them the: opportun ity to ret rieve the pro fit the y surr endered in thei r competit ive bid. Th ey read ily admi t th at post- bid shop ping ( the more vigoro us o f the two ) does no t direc tly benefit o wners bu t assert that it reduc es all p rime co nt rac tor pr o posa ls in the end. To co mbat the negative effects of bid shopping and sco pe enhanceme nt. trade cont ractor s inflate their initial o ffers to allow room fo r sh rinkage under sho pping pressures.Th ey also wail as long as possib le in the bidd ing period to pass on o ffe rs to prime contracto rs, Thi s sho rte ns the time fo r Sho pping by reducing the num ber of bid shopping round s that prime co ntrac tors ca n mak e.

Eliminating the Common Negatives

3.5.6

Prepackaged Risk Id entifi ca tion and Manageme nt (N20) As own ers became awa re of the inh e rent risks of the project de liver y proc ess. they re lated them to risks they we re exp osed to in day-to-day ope rat ions o f their own bustness. Whatever their end eavors. risk taking was part of it. Th ey understood th at risk. o nce i?entifh:d and eva lua ted. cou ld be managed. elimi na ted or assig ned tha t the cost o f assignment often exceeded the cost of management, and that elimination, when appropriate. was least costly o f all. There are two types of risks invo lved in any enterprise: stat ic and dynamic. Static risks are: those OVer which ma nagemen t decisions have no control. Accide nts result ing in inju ry. loss of life o r property da mage . and situatio ns leadi ng to financial loss fro m co ntract or nonperform ance ar e s ta tic risks which. on a co nst ruc tion project. can be assigned to o thers in the for m of insurance or su rety bo nd ing. Dynam ic risks arc the result o f managemen t decis ions. and alth ough the financ ial loss can be su bstant ial. it is ne ither po ssible nor practical to insure or bond the ir finan cial consequences. These risks must be man aged o r eliminated by the party who is assigned the risks. Both the GC a nd D- B syste ms remove the owner from risk invo lvement by essen tially assigning all risks, static and dyna mic. to the prime co ntracto r, as part the dol1ar pr oposal. Pro tection agai nst static loss is spec ified in con tract documents as pro pe rty an d liability insura nce s. labor and material. an d pe rfo rma nce bo nds. But protection against dynam ic loss is co vered by cont inge ncy amo un ts in co ntractor proposa ls and the da y-to -da y decision s made bv the contractor. Owne rs saw the pros pect o f cost savings and the ben efit o f syne rgistic decision mak ing if they were invo lved in risk disp osal and risk sha ring. They rea lized many dynamic risk decision s d irectly o r ind irect ly affected their best inte rests and wanted to be invo lved in those d ecisio ns. Th ey also favored the se lf-funding of proj ect delive ry contingenci es rathe r than pay ing contractors continge nt am ount s tha t mayor may no t be used. A better contrac ting syste m wo uld per mit risk s hari ng and invo lve owners in dynami c risk decision rna king to whateve r exte nt they desire.

3.5.7

Que sti o na ble Supervision of Trade Contractors (N21) Subcon trac tors rely o n (he prime cont ract o r to sched ule the ir wor k and coo rd inate contracting and constr uction inte rfaces o n-site. A subco nt racto r's su ccessful ope ration depends .on getting o ~ the project when en ough work is availa ble. getting o ff the pr oject as quickly as possible. and experiencing few. if anv. ca ll-back s, When sched uling and co ordina ting '~)O-si te activities, prime con tractors are nOI always sensi tive to th e pe rformance goals of thei r subcont ractors. It is com mon for

40

Chapte r 3

Development of the eM System

prim e co ntractors [ 0 premature ly order subcontractors o n-site and to prio ritize thei r o wn work in a manner de trim en tal [0 the subcon tractor's best interests. O wners are n OI priv y to the contracts between subco ntracto rs and prime con tracto rs. Subc ontract form s are mostly nonstandard and o fte n favor the pri me con tra cto r due to the relative ba rgain ing positions duri ng subcontract negotiation s, Subc ont ractors resist one-sid ed ag reements but face the rea lity tha t their access [ 0 work is th ro ugh a p rime co nt rac tor. Th e impo rtanc e o f trad e con tractors 35 co nstructo rs. especially on an arch itectura l project. sugg ests tha i their in volvernen t in the project should have high priorit y with regard to sched uling work and coo rd inating con tracti ng and co nstructio n interfaces. As well. their co ntractual responsibilities sho uld not be enc umbe red by inco nsistent and subjective co ntrac tual language. A bet ter con trac ting system wo uld recognize the ope ra tional goals of trade contractors. priori tize o n-site tra de co nt ractor coo rd inati o n. a nd eliminate ind ividu alized contracts and one-sided contract provision s.

I

Sect ion 3.6

3.6

Trad e co ntractors are the const ructors o n the project. Co nseq uen tly, performa nce and coordinati on co mmu nication eithe r begins or e nds with them . Both th e GC an d D-B systems preclude di rect com munication between the owner and subcon trac to rs. Standard co ntract documents inte rject the p rime contrac to r as the liaiso n for co mmu nicatio n in bot h syste ms. In the GC syste m. the AlE is also positioned between the prime cont rac to r and the o wner . As a result. problem solvi ng is a puss- thro ugh ac tivity prone to lime del ays and misu ndersta ndings. In both the G C and D-B systems. the re is good reason for an inte rmedia ry. The insertion respects the contractual hierarchy designed into both controcting structu res and protects the integ rity of the de sign clement in the GC system. Witho ut inte rmediaries. co nstruc tio n decisions and co ntract changes could not be co n tro lled. A better con trac ting system would bring the o wner and perfo rming con tract ors close r in the comm un icatio n chain without weakening the design integrity link .

41

subcontracto rs. or (2) bo th ind irectly and di rectly th ro ugh the mark-up on supplie rs and su bcontracto rs and o n the cos t o f h is own work in the eve nt he is also a performing co nt ractor involved in the chang e. Th e prime con tr acto r. an independent contractor and a finan cial be neficiary of a cha nge, has no obli ga tion and litt le ince ntive to co nside r the o wner's best interests whe n assessing an d ass embling th e cos t of changes. Th is is true in both the p ublic and priva te sec to rs and for bo th co mpetitively bid or nego tia ted con tracts. In the D-B syste m . the o wne r is expected to be the know ledgeable pa rt)" when eva luat ing and negotia ting cha nges. In the GC syste m. the AlE act s as an agent represen ting th e o wner's bes t inte rests, re placing the owne r as the knowledgeable part y in evaluati ng a nd nego tiati ng ch anges. A be tte r cont racting syste m wou ld put the owne r in a bette r position to evalua te and nego tiate cha nges and allow a qu alified knowledge ab le party obliga ted to loo k a fte r the o wner's best interests to closely scru tinize trade co ntrac tor and supplier costs.

~

3.5.8 Does Not Perm it Direct Conta ct w ith Trad e Con tracto rs (N22)

Contracting System Comparis ons

CONTRACTIN G SYSTEM COMPARISONS A ll three co ntracti ng syste ms- ge ne ral. design-b uild . and cc nstr ucno n mana gementhav e the ir o wn co mposi te advanta ges and disadv an tages tha t foster their use. Co nseq ue ntly. they can be rated o n fea tures tha i are o f inter est 10 o wners. Figure 3.1 provid es a relati ve rat ing of the syste ms from the perspecti ves of project cost, proje ct time. o wne r risk. a nd conflict of in te rest pot ent ial. C." f is represented witho ut con sldcrut ion for its sev e ral fo rms and vari ati o ns. The positive and negat ive influen ce o f CM for ms and varia lio ns o n the four pe rspectives will be co ve red in later cha pte rs. In Figure 3.1. the systems are depicted und er thei r best-u se conditions from the owne r's perspective: De sign-Build J S a negot iated co ntract. fast-tra cked. in the pnva te sector; G ene ral Contracting. compe titively bid as a lump sum. in the public sector: Co nstructio n Managemen t as Agency eM. in the p ublic sec to r.

3_5. 9 Delegates Aut hor ity for Determ ining Contract Chang e Costs (N23)

Figur e 3.1a revea ls [ha r multiple con trac ting eM provides the owner w ith the lowest project cost. Gene ra l contract ing is second best and design-build. third. Th e reaso n for this di ffer ence is multiple co ntracting-e-rne oppo rtu nity to ob tain trad e con tractor pr o po sals in d irect co mpet ition with ou t bid shoppi ng or a seco nd layer of pro fit ad ded in. Multiple biddi ng a nd its affect on project cost is exp lained in Chap ter 22. Multiple Biddi ng and Co ntracting. Figu re 3. Jb reveals tha t fast -tracked desi gn-build provides the owne r with the fastest project detiverv lime. Fas t-track ed cons tructio n man agement is secon d best an d gene ral co ntrac ting, thi rd . • Th e basis for D- B' s h igh rating is fast-tracking (sta rting co nst ructio n befo re design is comple te) . The single po int responsibility for desig n and construction pe rmits this. Ge nera l con trac ting requires complete desig n before bidd ing which p reclu des fast- trac king.

Few projects are cons truc ted wit hout ma king technica l or administrative cha nges that increase or dec re ase the owne r's cost after construe lion cont rac ts are signed. and mos t changes invo lve mo re than o m: co ntractor or supplier rind invo lve complex price nego tiations. ~ On both GC and D-B pr oje cts, the p rime contractor assembles the costs of a change from subcontrac tors and suppliers and submits the to tal for re vie w and app ro va l. In the G C system. a cost change is submi tted to the AlE fo r review and passed o n to the owner for appro val. In the D-B syste m. the pr ime contractor s ubmits a cost change direc tly [0 the owner for review and approval. Th e cost of a change is developed acco rding to the provisio ns in the con tract for costing cha nge s. Th e p rime co ntractor in both systems stands to gain from a cha nge in one of two wrlys: (1) ind irectly throu gh the mark -up on the accumulated cos ts of his sup pliers and

t

42

Chapter 3

Section 3.7

Development of the CM System Meat

Most Effective Genera l Contucling

Co nstru ction Managem ent Design- Build Con tracting

Least Effective

i !

(a ) Provides the l owes t Project COSt

f

Most

Coosrrucricn

Effective

Management Ge ne ral Con rr:u,:ting

leJ)l

Ettecuvc

Design- Build Fast-T raded Co ntrac ting

M~l

•

Effectiv e

Fast -Tr acked

:-'Iulliple Cuntra\:ting.

lC .lS,t Effc cti\'c

(b) Provid es the Shortest Project DehveryTlme

~I osl

Effective

Least Effccti \c

Gene ral Co ntracun g

Design -llullJ Co ntracting

Constructiun M.lllJgcm el'lt Multiple Con trac ting

Mu st Effective

U:;bl

Effecn vc

(c) Provides me Le:t)1 Potentia l for Cunll iel of lnr crest

Most Effce tiv

,

)I

Leas!

Con" l ructlon General Com racun g

Multiple: Con trncting

Effective

Least Ef fcctiv(

(d ) Provid es the Le ast Exp osure to Dollar Risk FIGURE 3.1

1

Mos t Eflccti\(

~tan ;lgemcn t

Design-Build Contracting

43

re view or the benefits of checks and bala nces. The D-B cont ractor's reputatio n and pro fession al acume n must be relied upon to protect the owner 's best interests. The pot enti al for conflict of int ere st is discussed in Chapter 5, eM System Forms and Variat ion s. and Chapter 6, Constru ction Managem ent Under Dual Services Agreem ent s. Figure 3.1d places the D-B system as the best for pro tec ting owners against cost increases du ring design and constru ction. D-B has a bid-design-bui ld sequen ce. General con tracting a nd CM. with the ir des ign-bid-build seque nce. rank second and third, respectively. Assuming the D-B con tractor provids a lump sum or gua ranteed maximum price to the owner before design begins and the re are no owner changes. the cost of the project sho uld not increase.The D- B contractor shou ld des ign 10 cost. build to cost. and do all possible to remain within the prop osal amoun t. The gene ral contractor. on the o ther hand . has no input on the design and provides a price based exclusively on the contract documents produced by the NE. There is no guaran tee thai GC proposa ls will be below the Al E' s estimate or (hat the project will be completed without increased cost due to owne r and N E cha nges. The eM system provides checks and balances during design which greatly reduce the incidence of errors and influence the AlE 10 design within budge t. The likelihood that cost will not be controlled is offset by the diligence and expertise of the team 's effort. However. multiple cont racting does not provide a single lump-sum amo unt that limits the owne r's cost by contract. For examp le. construction suppor t items are part of AGe's and D-B 's dollar proposal. In the CM system construction support items are budget ed for owner payment. They could inflate, however: budget ed items. such as construction support. only repr esent about 15% of tota l project cost. Inflation in construction suppo rt would be very small in term s of the total cost of the project.

Ef fective

~tu lt iple

Contr.acting

CM as a Composite System

Retauve ratmg or the three systems under bes t-use cund itiun!..

The CM system facilita tes fast-tracking with a series of design-b id-build sequences-eo mpleting the project almost as fast as D-B but with bett er cost results. CM fast-track ing is covered in Chapter 15. Value Manag em ent. Figure 3.1c reveals that multipl e-contracting eM has the best rating with regard to potenti al conflict of inte rest. General contrac ting ranks second and D-B. third.The constr uction mana ger 's age ncy relationship with the owne r and the team concep t of checks and balances provides an almost conflict-fret: con tracting struct ure. Ge neral contracting generales a potential conflict situa tion betwee n the owner. who believes the contract documents esta blish the project's minimu m per forma nce requir ements. and the indep endent contractor who conve rsely believes that they establish the maximum requirements. The combined design-construct respon sibility o f a D-B contractor vests responsibility for both deve loping and inter pretin g the con tract documents without critical

3.7

eM AS A COMPOSITE SYSTEM The rank ing of eM in the four ca tegories shown in Figure 3.1 indicates the direction construction managers too k in the development of the ACM system. ACM received the highest ranking in two of the categorie s: it is a close second in one, and last in the other. It should be unde rstood that there are forms and variations that can change CM's ranking accordi ng to owne r needs.They arc discussed in Chapte rs 5, CM Syste m Forms and Variations. and 6. CM U nde r Dual Services Ag reements.

The ACM Contracting Structure

Sect ion 4.1

4S

ProjJ:[1 D d i n~l)" Element

CHAPT ER

4

The Agency Form of

eM

Construction

Design

ProJI:l:1 Manage menl

Com>!Tuclion

CUnlr.lc1inx 5)'slem

Conuacling

Conslruction

Cocruinator

Ad minis trator

General Contracting Agl:nc)" eM (ACM )

AE AE

AE

GC

AE

0

GC TC

GC

AE.'CM

eM

AEtC M

e M:

Con~lru,t i<)n "bna~e r

AE: A!'t"h,le,;1/En,ineet

Chapter 3 laid the groundwork tha t sup po rted the need for beneficial change in the way co nstructio n projects were del ivered . The option of chang ing either o r bot h the GC and D-B systems was consider ed. but the ch anges needed by con st ruction user s and practitioners were loa funda menta l and ext ensive to tit within the basic framewor k of either system .The alternat ive was the devel opment of 3 new con tracting struc ture tha t could accomm odate as many of the beneficial changes as possible. Th e new

TC: Tr3
FIGURE 4 .1

system was conveniently called Construction Management or eM after a similar con-

GC: Gel'l:,,,l Ctwltr,ll:tor

0: O...."e r

Ro::spo ns ihi lil)' dist ribution: :\ C ~ l :JmJ G C S ) ~h: rre...

~-------

tracting process being used by the General Ser vices A dmin istrat ion at the time. This cha pte r in trod uces the eM syste m by exp laining ACM. the root form of e M. in suff icient detail to di ffer entiate between the forms an d variations of Cr-. t pre sented in Chapter 5.

8 ------j AOII I

Tier Contractors]

(S econJ li.:r

4.1 THE ACM CONTRACTING STR UCTUR E One majo r differen ce be tween ACM and the trudiuonu l GC system is that one complete contracting tier has been elimina te d. Th e gen er al con tra ctor. the trad itio nal prime con tractor, has been eliminated . and trad e co ntracto rs, traditionally subcontracto rs to the prime con tractor, becom e prime cont ractors. A no ther major difference is thut a new busin ess cruity.a new co nstructio n ind ustry participan t. is included in the structure: a co nstructio n manage r; not in the role of an independen t co ntracto r but that of an agent wit h fiducia ry res ponsibility to the owne r. The C M. whose services beg in prior to the sian of design, has the oppo rtunity to add co nstruction and cont racting expe rtise to the com mon goals of the project. The availability of this expertise d uring design and construction favorably responds [0 many o f the primary concerns exp ressed by con st ructi on industry users. To pro vide a perspective, Figures 4.1.4.2.4 .3. a nd 404 show the differences an d the simi lari ties of the GC and ACM systems of co ntracting. The distribu tion of resp onsibil ity for th e six essent ia l el eme nts o f project de live ry. the contra ctin g structure, an d the project te nures arc di ffe rent. Th e design-bid-bu ild seq uence and th e use of an A lE e mploy ed directl y by the o wner a re commo n to both. Both systems use the same co ns tructio n ind us try re so urces. The trade co ntr a ctor s who ar e subcontrac tors a nd sub-subcon trac tors in the GC co nt racting st ructure are prime contractors a nd su bcon tract ors in the ACM contract in g st ructure . fo r e xample, the Acme Mason ry Co.. e mploye d by GC Co ns tru ctio n Inc . on the loca l cour thou se pr oject. is em ployed by the Westport Scho ol D istric t on the

( Firs!

Contractors]

FIGURE 4.2 TIll: GC and ACM contra cting structures.

Ccnstrccuoo W,Jfrant y

Ge ntral Co nlrat:lOr

I

Per iod

A gclIC)" CtllIMfUcti"n !\ b nagc r FIGURE 4 .3

j

The project tenu re of

OJ

GC a nd an ACM .

new middle scho ol CM project. Acme is a subco nt rac to r on th e courthouse and a prime contract or on the middle school. Keeping the ob vious sim ila rities and differences between the G C and ACM syste ms in mind will hel p the reade r understand the num er ou s but less o bvious differ ence s betwee n the two.

46

Chapter 4

The Ag ency Form of

Ii)

eM

Section 4.2

[2J

[3J

[4J

[61

FIGURE4.4

17/

(81

t [91

4.2.3

4.2 WH AT AN ACM 15 AN D 15NOT

A major miscon ceptio n about Clvl is that the co nstruct ion ma nage r is the lea der of a sched ule-driven pr oject tea m,an autono mo us superior who makes unila te ral decision s and issues orders for all ot hers to fo llow. Thi s is not so. A lth ou gh the project is necessa rily sche d ule driven. th e decis io ns tha t guide the p rojec t are tea m decisio ns based on the uniq ue exp e rtise o f ea ch team me mber and p rop aga ted by the te am 's co mmon commitmen t to the project. The C~I is th e team 's facilita tor.

4.2.1 Team le adersh ip

I,

chec ks and balances to team decisi on mak ing. The uniq ue knowledge of the owne r is expec ted to p rovide lim iting guida nce, and as the e mpl oye r of se rvices. fina l deci sio ns in the absence of team cons ensus. This concept of mutu al team leade rship based o n experti se, not s ta tus, is vital to the success of a eM pr oject With o ut it, te am cooperation would d isin tegra te. synergism would be lost, and no ben efit s co uld be extracted fro m the eM syste m. Th e te am co ncep t and leadership sharing provid e the fou ndat ion o f the ACM form of eM.

4.2.2 Partn ering The common commitmen t of the AC M tea m to project success is the fore runner of the part nering co ncep t use d with some degree of success in the G C sys tem. ACM is panne ring in its fundamental a nd mo st wo rk able form. TIle dif ference betwee n GC an d ACM partncring is that the com mitmen t to syner gize a nd coope rate is part of the ACM syste m rat her than an add-on. Pa rt ncring is an assured part of the pr oject whe n the AC M for m of CM is select ed by the owne r. It is put in to effe ct when the CM and AlE ar c hired as team members by the owner.

The A CM's Legal St atus

In som e polit ical jurisd ictio ns, co nstructio n managers are req uired by law to be licensed gene ral cont rac to rs. registe red arch itec ts. or professio na l engineers. Wh ile such req uir ements o bvious ly mu st be o bserved, legal sta tus in the se thr ee area s has vt:. ry litt le to do with co mpete ncy in pro viding cons truction ma nag eme nt services. Unfortuna tely, this requ ire men t erro neo usly implies that ge neral co nt racto rs, arc hitects . and en gineers have the expe rtise to be co nstruc tio n ma nage rs. This co uld not be fur ther from the truth. A CM firm is a un ique or gan ization of all three. A cons truc tion man ager is a m ultid iscipline bu siness o rganiz ation with pr imary manage me nt expert ise, fund am ent al co nst ruction and co ntr act ing expe rt ise, and mo re than ancillary design exper tise. The CM 's expert ise in all areas must be suppo rted by relat ed' e'd"uC"Jt ion and ex te nsive experie nce. When an owne r hire s a CM , he/she hires an o rganizat io n. no t a person. It woul d be ph ysically impossible fo r on e per so n to p rov ide all of the Clvl require ments o r re nder all o f the dec ision s necessary to produ ce a proje ct in a timely ma nne r. I -.' .~:

The r une phase s of a C C or ;J 11 ,\CM building pro ject.

Team leadership agreea bly shifts between team members according (0 the expertise that is relevam at th a t phase of the p roj ec t o r is ge~ma"'n~ "to the topic bei ng disc ussed. The overlappi ng kno wledge o f the AlE . CM. and owner is fully ex pec te d to provide

47

GC partne ring co mes into play afte r an awa rd is mad e to a ge neral contracto r an d cons tructio n con tracts are signed. It amo un ts to a co nge n ial recomm itm ent to the terms of the con tracts; ev erybody ag rees to do what they co ntracted for , b ut to do so in a mor e coope rative way. Th e be ne ficiary is now the project instead of the individ ual pa rt icipa nts.

•

f,

[;J

What an ACM Is and Is Not

4.2.4

Perfo rm anc e Meas urement Un like th e A/E . who provi de s services accor di ng to a recognized format that has ceditied itself over the years. CM services are en ume rated but no t defined in the CM's co ntrac t with the ow ner and ar e subject to varying inte rpre tatio ns. When pe rfo rma nce is q uest ion ed , the se rvices pro vided by an AlE or an AC M is me asu red by standards of care that p re vail in the con stru ct ion indu stry. A n N E's standa rd of car e has been we ll estab lished over a long period o f exp erience. An AC M·s standa rd of care is curre ntly in the p rocess of being esta blished. State laws notwi thst and ing. it is ina ppropria te to consid e r ACM practiti o ners as ar ch itects or enginee rs o r to me asu re their pe rfo rmance aga inst an A'E's stand ard of care. It is eq ually inappropria te to co mpa re ACM se rvices to the constructio n services prov ided by a Gc. A n A CM sho uld be perceived as a firm that pro vid es a professio nal service to the owner (professional in the con text of the cha racter o f the services pr ovided, no t o f the legal sta tus of those pro vid ing se rvices) . A rch itec ts and engi ne ers provide professio nal se rvices which arc pe rforme d by per so ns who arc legal p ro fessiona ls by virt ue of edu cat io n, examination . an d lice nsu re. Design is a professio nal se rvice that must be provided by legal pro fessio nals" ACf\.1 is a pro fessio nal service tha t may or may no t be provided by pro fessio nals. Based on this d ifference alone, A CM pe rforman ce sho uld be judged on its ow n sta ndard o f care.

48

Chapte r 4

4.3

THE A CM FORM OF CM

The Agency Form of CM

As the: C ~t system developed in vari ous parts of the coun try. it became apparent that it had ma ny varia tions. However, each varia tion had a block of core se rvices that tended to bond them all together. This block of services became the basic form of Cr--1. la ter called Agency CM or AC~1. AC M is a fonn o f C~'1 that has no var iati ons, It is sometimes referred to as pl4re c.\/ o r professional eM.The o ther forms and the ir varia tions co mb ine additio nal con struction industry services with the AC~ I fo rmal. To fully understand the eMsystem. a clea r unders tanding of the AC M form is necessary. A n ACM acts exclusively as a fiduciary age n t of the owner th ro ugho ut the cou rse of the pro jec t: the limits o f agency arc specified in the Owner-Clvl agreement. The C ~'1 is expec ted to have su fficient. competent hum an resou rces ava ilable to pe rform ACM responsibili ties in a time ly manner.

Sectio n 4.5 4.4.2

1

t 4.5

1. the Cr-.'I be a contractual age nt o f the owner 2. the owner hold all construction and de sign contracts. and J. the CM has no co ntracted res ponsibilities to the o wner as an indepe nde nt con tra ctor or as the AlE.

4.5.1

THE CM AS A TEA M MEM BER

CM -A/ E Peer Relat ionship

To be an effec tive team mem ber and facilitato r. th e CM must be a respected pee r o f the Al E and a san ctio ned ally of the owner. Th is is a uniqu e pos ition in contracting str uctu res that only exists in th e ACM form o f CM. In the GC syste m. the A lE has no pee rs to work with . and the inde pendent co ntracto r status of the gen era l cont racto r creates co mpe tition rath er t han coop eratio n. It has been often sai d tha t the G C system crea tes an adve rsari al rel ationship be tween the Al E-o wne r and the Gc. In the D- B syste m. a quasi-peer relation ship exists betwee n the Al E and con tracting en tities. A deg ree of auton o my will ex ist beca use design is a p ro fessio n fro m a lega l pe rspective and con u ucung is a p ro fessio n from a se rvice pe rspec tive. The situatio n is not as adve rsari ul as in the case of GC, but frictio n exists nonetheless.

THE CM' S PLACE IN THE ACM CONTRACTING STR UCTURE

11\e CM 's kno wledge and experience. agency re lations hip with the owne r. and straregic position in the co ntrac tin g st ructu re facilita tes timely and useful construction a nd co ntracting expe rtise du ring all phases of the pr oject. Un like the G C syste m. where pragmat ic co nst ruc tion an d co nt ract ing expertise is lack ing pr ior to con stru ctio n. the eMmakes it availab le during the design phase. 4.4.1 The Tea m Rela t io nsh ip The first rnandare of the CM's role. tha t the CM must be a contractu al age nt of the o wner . places the CM in the same legal rel atio nship with the owner as the AlE . They are team peers along with the owner. Bo th are selected o n their q ualificat ions th rough an interview process. Their involvement is collaborat ive. nei the r have a financial sta ke in the projec t. and bo th are work ing for a professional fee. They have one goal in com mon with the o wner - the success of the pr oject-and bot h are aware that thei r fu ture de pends on the success of the pro ject from the owne r's perspective.

Confl icts of Interest

There should be no doubt that the ACM syste m is based on the tea m conce pt in the mos t lite ra l sens e of the word. Perh aps the bes t ana logy wo uld be a desig n team wher e co nt rac t doc uments arc dev elo ped coope rative ly by an a rchi tect and e lectrical and mechanical engineers. In th e case of AC M, the projec t is delive red thro ugh the same coopera tive efforts of the o wne r. N E , and CM. Design team mem bers p urs ue thei r specialt ies in deve lopi ng the uniqu e com ponen ts of design. and the archit ect coo rdinate s thei r work into a total design prcscnta tio n. Th is dov etailing o f a ll des ign d isciplines into a set of co ntract doc ument s is re ferred to as design coord ination. In the case of ACM. the uniq ue ex pe rtise of eac h p rojec t team member is d raw n up on and all efforts are coo rdin at ed by the eM. Th e CM 's effo rt cou ld be ca lled pro ject de livery coo rdin ati on .

The ACl\·1 form of Cl\.'1 mandates tha t:

4.4

49

Th e second and thi rd ma nda tes are necessary to re tai n the CM's o bjective expe rtise and sustai n the subj ectiv ity o f the ACM's re lat ionshi p wit h the owner . AlE. and the goals of the project. Bot h mand at es preclude the possibility of a con flict of interest in the performance of the CM's respon sibilities and the crea tion of an independent co ntracto r re lations h ip between th e eM and the ow ner. Chapter 6. Construc tion Management Under D ual Se rvices Ag reemen ts. ad dresses the rel ation sh ips when providi ng o the r forms and vari at ion s o f CM.

4.3.1 ACM Man dales

These th ree mandates establish a un ique pla tfo rm in the contracting st ructu re fro m which the cons tr uction manager can effec tively carr y o ut his res po nsibilities as an agent o f the owne r and a peer of the A'EiThc character of the services that support the ACM form can o nly be provided from suc h a pla tfo rm.

The eM as a Team Member

4. 5.2

The CM's Acceptance A llho ugh mitigated by good expe riences ove r the years. the attitude o f man y AlEs towa rds construction ma nagers still varies fro m one of high regard to virt ual nonaccep tance. There are seve ral reasons behind thi s broad posit ion. fo remost of which is the intrusion of the C\I into what was an exclu sive AIE-owne r client relationship.

50

Cha pter 4

An o ther reaso n is th e NE 's fo rced allegiance wit h 3 co nstru ct ion/contracting type organization. which is certainly nontradi tional fo r AlEs. A third reason is the N E 's rel uctance to accept the premise th at a co nstruc tion manager can provide expertise to the projec t tha t an AlE cannot. Owne rs d id no t sha re th e AlE's attit ude toward e Ms to the sam e deg ree. Many were oc casional users of the co nst ructio n indus try and unfamiliar with its hier archy and pa rticipants. Th ey fa nned the ir opinions from their ex periences wh en build ing projec ts an d from the co mm ents made by AlEs and fello w const ruction indust ry use rs.. Prio r to the advent o f CM, the ir opinion was that the constructio n ind us try con sisted of AlEs and general con tract o rs; Al Es we re their o nly available ad voca tes and general co nt ractors wer e co n tentious opportunists that they had to d o busi ness with if th ey wanted to build. Oc casiona l construction industry use rs unwittingl y connected C Ms with gen e ral con tractors and had difficulty underst and ing and accepting the allegiance o ffered by CMs in the ne w system. The mor e k no wledgeable use rs o f the con struction industry welcom ed th e suppo rt pr ovided by CM s and had no diffi cult y unders tand ing wh o an d what a con structi on man ager was. TIlt: inconsisten t un ce rta inty of owne rs an d Al Es compels cons tructio n managers (Q ma ke an extra ef fo r t to become a nd rem a in e ffec lively invol ved in thei r pr oje cts. Th ey wer e a nd o ften still are con stant ly re quired to prove their va lue and maintain the ir status as a competen t tea m member with th e owne r's bes t int erests fo re mos t in [he ir m inds- som e th ing that ihc eM contract ing st ructure ca nno t automatically provide. Although the ACM 's contractual status and team involveme nt crea tes a pos itiv e image and facili tate s interacti on . acc e p ta nce as a peer of th e AlE and an ally o f the own er m ust be earned through ex ce pt io na l perform an ce on every p roj ec t.

I \

)

(

4.6

Sectio n 4.6

The Agency Form of CM

51

Th e ex pertise req uired to pe rfo rm ACM services is ves ted in twe lve areas of kn owl edge:

t r

Budget Manageme nt

Project Manage ment

Con tra ct Management

Qu ality Man agem ent

De cision Managemen t

Reso urce Managem ent

In for m ation Man ageme nt

Risk Manage ment

Mater ial/Equipme nt Management value , Ianagement

Sched ule Management Sa fe ty Management

Ea ch area will be discu ssed in depth in later chap te rs: the y are briefl y covered he re to pro vide prelim inary insight to the CMos req uire d ab ility. 4.6. 1

Budget Manage ment BUdget Man ageme nt enco mpass es all cost-rel ated as pect s of the project and focu ses on the ability to comple te th e proje ct withi n the bud ge t established by the owner. The co nstructio n manage r sho uld fo rm ulate and install a bu dget -control syste m whic h provides for the accurat e and timely estimating/tracking of p roject costs from the concept ua l estimate to the final b udget acco u nting. Th e syste m must be co nsistent with th e o wner 's budget requireme nt s and fo rmat. a nd all aspects of pr oje ct co st sh o uld be SUbjec t to team review.

4.6.2

Contract Ma na g em e n t Contract Management encom passes th e content , ex ecuti on. and admi nistrati on o f the contracts in force on the project. The eM sys tem realigns tradi tio na l contracting rol es and responsibilities e nd has unique requ ireme nts fo r each CM for m an d variation used . The eM should perfor m a contr actability review, reco mmend an appropriate cont ra cting format. and coo rdi na te its requirements. Although no t respo nsible fo r d rafting contracts. the eM sho uld pr ovid e guidance to the owner to ens ure tha t all un iqu e req uirem ents a re included in the contracts issued by th e owne r,

THE CONSTRUCTIO N M AN A GER'S EXPERTISE

To the same de gree that we understand tha t the man agemen t o f co nstruc tio n (D task

l

The Const ruct ion Manager's Expert ise

which must be pe rfo rm ed o n ever y projec t) and const ruc tio n manageme nt (3 unique con tract ing sys te m) are no t syn o nym ous, we mu st also u nd ers ta nd tha t a eM is an org ani zati on and not an ind ividual. Wh ile it is poss ible fo r an individu al to be quali fied to pe r fo rm nil of the task s requ ired of a eM on an ACM project, it is ph ysically im possible fo r o ne ind ividual to accomplish the tas ks in a timely manne r, except perhaps on a very s ma ll p roject. To fully understand CM. we mus t ack no wledge that a CM is an o rga nizatio n co mp rised o f individ uals qualified in one o r m or e o f the seve ral discip lines requ ired to pe rform th e ACM 's bloc k o f co re se rvices. A s we will see in Chapte r 5, CM System Forms and Variat ions. 'lit other form s and variations of CM inco rpora te design, co nstru ction. and co n tracting services in dif ferent co mb ina tions with the ACM services co ve red in this chapter. Con sequently. a eM m ust be ex pe rt an d expe rienced in ACM se rvices to prope rly function in the o ther forms and varia tio n o f CM .

4.6.3

De cision Ma r.agem e nt De cision Managemen t enco m passes the decision -making interrela tio nship of the Program Team (own er. AlE, an d CM) and the Projec t Team (t he Program Team plu s co ntracto rs) du ring th e course o f the pr oje ct. The team makes collective decision s. recogni zing each oth er's expe rti se a nd contractual o bl igations.. De cisio ns sho uld be c riented tow a rd synergistic resu lts a nd in clude checks and ba lances. The Cl,..I sho uld form ulate a nd pr opagate a deci sion-makin g process that ex tracts the best input from each team mem ber an d favo rs th e o wner 's bes t interes ts. Th e spe cific respo nsibilities of tea m me mbe rs must be agr eed to, defined within the co ntex t of their co ntracts .....ith th e ow ne r, record ed. an d pu blished as a reference.

I

S2

4.6.4

Cha pt er 4

Th e Agency Form of

eM

Info rmation Mana gem en t Inform ati o n Management encompasses the issuing. coll ec tio n. documentation. dissemination, safe keeping, and disposal of written . verba l. and graphi c pr oject informatio n. The volume of information made available by the e M system. which is freely shared

,

Sect ion 4.6

Qu alit y Man agement encompasses all activities which contrib ute to the quality of the co nstructed proje ct. Q ua lity is iden tified by the own er . designed into t he project bj the , revie wed fol" dequaey by the learn. an d conformed to by (he con structe Q uality only has a ra nge d uring de sign. O nce specified by the NE, qu ality from the tea m's and contractor's pe rspective is conforma nce. The EM is not an inspecto r. The-CM's re ponsib ilit y should be to install and e xecute q uality plan fo r: th project which w'lI ensu re: that the defini ti't' needs: 0 the rO'perlyjncorporated:in to rh project: Qwn

with team members. requires a comprehensive. well-organized gathering and reporting

Mater ial/E qu ipm en t Manag em e n t 4.6 .9 Ma terial/Eq uip men t Mana gemen t enco mpasses acnvrncs relati ng to construction materials and equipmen t from specificatio ns to installation. The execu tio n o f direct pu rchasing must be efficient and defi nitive to extract maximu m bene fits and conform to client's acq uisitio n policies.The C ~l sys tem facilita tes direct purchases of materia l and eq uipment. the impac t o f which can be significa nt. The cons truction manager shou ld identify direct purchase item s as soon as possible. evaluate them with rega rd to avai la bility and cost . co mpe titively bid and appro priarely pu rchase them . a nd a rran ge tr anspo rta tion. safe storage . and proper inst allation.

4.6.6

Resource Ma na gemen t Resource Management e ncompasses the selection. o rganization and utilization o f the human. mat erial. equipment a nd se rvice resources fo r the project. The eM cont ract ing structu re positio ns cons ulting. design. co ntrac ting and const ruc tio n functions at the project ream level and assigns coordinat ion o f these services to the constr uction ma nage r. In add itio n to managing projec t team res ou rces. the co nstructio n manager should guide con tra ctors in using the ir resou rces and strategically integrate his own multidiscipline reso urces into the pro ject effort.

Value Man a g e men t 4.6.10

Value Management en compasses the interfacing o f cost and valu e o n the p roject. There are three bas ic areas of val ue: de signability. construrtability and co n tra ctibility Dcsignabiliry and ccnstructability optimize project value th ro ugh the efficient integration of des ign and constr uction . Co nt rac tibili ty is the opumizntic n o f va lue throu gh the efficient integra tion of owner requirement s and available con tract ing op tions. The const ruc tio n manage r sh ould extract maximum value from all optio ns ava ilable to the owner thro ugh the decision -mak ing pro cess. A clear de finition of " valu e .. fro m the own e r's perspective must be est a blishe d an d co nsiste ntly used in team delibe ratio ns. The eM should poi nt OUt alterna tives and assig n cos t to tho se selected as practical by the AlE and owner. 4.6.7

S3

4.6.8 Q ual it y Manage ment

structur e base d on a " nee d- to-k no w" philoso phy. The co nstruction ma nager shou ld install an effec tive informa tion management system. the goal of which is t~ provid e an imp ea cha ble information pape r trailfor the dur atio n o f the p roject and fo r fut ure recall. 4 .6. 5

The Constr uct ion Manager's Expertise

Risk Man agem ent Risk Management en co mp asses the d ynamic and static risks which are inherent 10 all busi ness ven tures and to cons truction p roject d elivery in pa rticular. Dynamic risks (avoid abl e occurre nces resulting from opera tional de cisions) and static risks (unavoidabl e occ urrences re late d to uncont ro llable for ces) must be ide ntified, eva luate d. and d isposed of with minimu m consequences accruing [Q the owner. O ccurren ces result ing fro m risk taking affect pro jec t lime. cost. and qua lity and crea te costly b usiness int er r uptio ns for the owne r. Th e construc tio n ma nage r must de sign. install. and ope ra te risk-management pr ocedures that minimizes owne r ex po sure to occurr enc es resulting from sta tic and dynamic risks.

Pro ject Ma na g e m e n t

4. 6.1 1

Sch e du le Mana geme n t Schedule Management e nco mpasses all scheduling req uirements du ring the course of the project. The const ruction manager is res po nsible for the synthesis of p rojec t time and proj ec t reso urces a t th e tea m level and at the constru cto r level o f the contract st ructu re. Th e goal of eM scheduli ng is th e mitigat io n o r el iminat ion of reso urce crisis and the p ractical p redictio n of project compl e tio n. Schedu ling is considered a prime management tool o f the co ns tr uctio n manager. It is used sp aringly as a means to an en d and best exempl ifies the eM philosophy which drives the project-delivery proces s.

Project Managem ent enc ompasses the operationa l as pects of the pr oject from p redesign to final acce ptance. It is the most sensitive area in which the con structio n manage r must functio n. S uccess de pends o n how well the eM has postu red itsel f withi n the team . Th e CM's contra ctual platform p ro vide s authority. bu t only a eM rep resen tative' s demeanor as a team me mber ca n p roduce the requ ired results. Th e C~'1 should decide d irec tion. determine emphasis. moti vat e participan ts. guide act ivities. coordinate effo rts, and document the pe rformance o f itse lf. the owne r. the rVE . and the perfo rmi ng cont ractors in pu rsu it of completion req uirements.

i

t

\!

\

S4

J

Chapter 4

4.6.12

The Agen cy Form of

eM

Safety Management

Safety Mana gement encompasses the procedures necessary to promote safe practices at the constru ction site. in accorda nce with prevailing co nstruction ind ustry prac tices, federal and state laws, a nd local o rdina nces. The constru ction mana ger is not in cha rge of safety at the construction site but must accep t an appro priate obligation to protect the owne r's bes t intere sts with rega rd to contractor safety practices. The construction manage r's responsibi lity should be to verify that eve ry cont ractor operating on the site has a written safety program. that they hold regular safety meetings. that they carry QUI site posting requirements. and file required ccmmun icutions promp tly.

4.7

I

4.8

I

CM SERVICES PERSONNEL

The per son nel in a CM firm can be classified in five groups: resource, operations. ad ministrati o n. company officers. a nd suppo rt per sons. Each group collectively contributes to the success of a CM project. Resource per sons are those with special expertise. such as value eng inee rs. schedulers. est imators. accountants. planne rs; contract. construction and risk specialists. and so o n- people who can be depended upo n 10 provide competent inp ut to a proj ect. The level and the ra nge of expertise with in the resou rce grou p are fundame ntal to the successful exec ution of CM's core serv ices. Expe rtise must be available when needed

The Project Team Structure

55

and com pet ently dissemi na ted as ne eded. Reso urces must be well man aged within the CM finn , at least as well as when bein g used in behalf of a client. Ope ra tions perso nnel are the m anagers.They repr esent the eM on the project tea m, formul ate/administer the eM format. coordinate performing cont ractor s, and utilize the services of the reso urce group. To facilitat e CM o pe rations there are three distinct levels of managemen t autho rity; executive. management. an d ad ministra tive. Operati ons perso nnel functi on at two levels: man agem en t. and ad ministr ative; the third level is reserved for th e co mpa ny office rs. the executives. The management hierarchy is explained in Ch apter 8. The CM Org anizati on. The administra tion group hand les the day-to-day ope ra tion o r the eM finn (per sonne l. payroll. accoun ts payab le/rece ivable. finances. et c.) an d also co ntributes to CM projects when appropriate. Th e respon sibilities of the ad minis tra tion gro up are similar to those found in any business enterprise except when called upon as a resource by ope ra tions. The compa ny officers funct ion as all compa ny officers do; they es tab lish compan y policy and CM policy and over view the o perations of (he firm. An added responsibility is that of inter facing with owner and Al E tea m count erp arts o n CM projects. establishing team policies. and respond ing to situa tions which cannot be handled at the administra tive or management levels. SUppOTt pe rsonnel provi de service as the title implies: support to the operations, reso urce. adm inistra tion. and compa ny mana geme nt gro ups in the reception, clerical. co mputer, tr avel, and secre ta ria l are as. Support pers on nel pro vide the glue tha t keeps com pan y opera tions toge ther.

EARLY SERVICES

Prior to the recogn ition and establishm ent of the block of co re CM ser vices, the disconnected deve lopm ent of the CM system in vario us pa rts of the Uni ted Sta tes produced progr a ms with varying emphasis, Firms ente ring the e M field stressed the ir stronger abilities whe n explaining C ~ t to prospective clients. General contr actors st ressed their experti se in const ructio n an d contrac ting. AlE s emph asized their kno wledge of design and cont ract administra tion . Sche duling consultants pointed to project and constru ction schedu ling as rhe impo rta nt element in successful eM. Est imat ing co nsulta nts put cost expe rtise above all e lse. U nawa re of the scope of services really requ ired . owners selected a cons truction manager on their own impression of what effective C~l services should encompass. It took seve ra l years befo re o wners and pioneer co nst ruction managers recognized or admitted th at CM was a multidiscipline se rvice, one (hilt req uire d the combined streng ths of all early CM pract itioner s who be lieved themse lves adequate. It took even lon ger for eM pra ctitioners to rea lize that multidiscipline abili ty had to be supported by manager ial expe rt ise in order to successf ully execute CM services. By the mid-198Ds. eM had mat ured enough to de fine the reso urces req uired to provide successful CM services to owne rs.Th e resou rces had to be able to pro vide the core services and any ot he r services th e CM practitioner want ed to include. However, the availabil ity and degree of co mpet en cy of the resources rema ins unr esol ved.

1

Section 4.9

4.9

THE PROJEa TEA M STRUa URE

Th e CM team structure shoul d have at least three levels of matched auth orit y. The owne r, N E. and CM eac h provide representatives with speci fic authority to act in thei r beha lf. at each level. E ach re pre sent ative 's aut hor ity sho uld be understood by all team mem bers. Decisio ns sho uld be made at the lo west practical level of aut hority. When decisions falte r collectively at one level, they sho uld be referred to the next highest level. Issues which a rc not collecti vely resolved at the top level of the decision structure should be decided up on by th e owne r' s team re pre sentativ e at that level. In pra cuce. the tea m hie rar chy should funct ion consistent ly but withou t rigid formality, espec ially at the two lowest levels.The owner. eM. and NE team repr esent atives a re matched at eac h level base d o n their autho rity to act fo r their empl oyer. Each is represent ed at the third or to p level of autho rity by a principa l or exec utive who ca n obl igate her/his firm by co ntract o r agreement. The seco nd o r middle level should be learn members who are managerially involve d with their own firm. Th e AlE's project engineer o r architec t and the CM's project manager match up with a compet ent cons tru ctio n/contracting person who represent s the o wner. Project di rection, design . const ruc tion. and contracti ng issues are decided at this level. In the case of th e NE a nd CM, the representa tive at this level should be the managing liaiso n be twee n hom e office reso urces and field ope ratio ns.

56

Cha pter 4

The Age ncy For m of ( M

The third level is field opera tio ns. The CM's chief on -site person is the CM 's rep resentative at this deci sion- making le vel. Th e o wne r and ArE ma y o r may no t have per so ns assigned full-time on -site. Howe ver . it is crit ical to team synergism tha t n: p resen tation be assigned at this leve l to pe rso ns readily a vailable and qua lified to interact wit h the Cvl 's on-site pe rso n. d ay o r night. The size of the pr oject dic tates the size of the tea m. the num be r o f au thority levels. and the ability o f th e repre se ntatives. Large an d complex projec ts req uire la rge site c rganizations,suborganizaticns, a nd mul tip le dec isio n-maki ng levels. Lesse r pr oject s ca n be handled adequa tely by one full-time. on -site C ~ 1 per son and se rved ad eq uately by A l E an d o wne r repr ese nta tives whose deci sion mak ing au tho rity spans two or all levels. 4.10

QUALITY Of PERfORMANCE

The CM is a con trac ting/construc tio n resource a nd a responsible manager who. in conj unction with the Al E. owner, an d a complement of capable co ns tructo rs. has a respon sib ility to d eliver a project on time . .....ithin budget , at specified quali ty. and with minimum inconven ien ce to the owner.

Quality of Performance

57

The role of the A CM has be co me ubiquitous a nd very co nse que ntial, to the poi nt whe re project success is more dependent on the perform ance o f the con struction manage r in the ACM system than o n the performance o f the ge neral contrac tor in the G C system. From th e sta rt o f design to oc cu panc y, the eM is functi oning in behalf of the project in so me way. A s an agent o f the o wner. with legal and e thical obliga tions to 3C[ in the be st in teres ts of [he owner, the re is constant pressur e o n the CM to do the righ t th ing. d o it o nce and do it now. Proc rastina tion hJS no place in the CM 's vocabulary whe n performingACM se rvices. . .... ~. ~<-:'... ' In the GC syste m. th e da y-to-day deci sion s o f the general contractor do no t directly af fect the owner. They may ultimat ely be co nseque ntial to the o wner in terms of the owner-Gf. con tr act , but o n a day- to-day basis. GC de cisions ar e con sequential to the Gc. De laying a d ecision. closing the projec t down for a d ay, try ing a certain con struction techniq ue: the se actio ns are all with in the au tho rity o f the GC because they aIfect no 0 1her . Each lime the C M is Iacc d with a de cis ion o n an A CM p roject the first q ues tion to be as ked is which so lutio n will be in the best interest o f the o wne r. Th e Ct\ 1 mus t place himself in the position o f the owne r at eve ry juncture in the project. The quality o f the C lvl's performance o n an ACM project simply cann ot be cornp ro mised. Every decision mad e. every ac tion tak en. and every piece o f advice given or informa tion dissemina te d m ust pa ss the test of age nc), repre sentat ion . Performance quality is drive n by the age ncy agree ment bet wee n the ow ne r and CM .

•

h

TEAM DECISIONS

On co m plex projects. especially thos e tha t ar e fast-trucked and th ose in volvi ng ad d ition s and re no va tions. it is impor ta nt thai the a ut hority of re prese nta tives o f the ow ner . C:o.l. and Al E is specifical ly and accur ate ly defined. Projects in these categorie s usu ally ha ve num ero us tech nical and phy sica l interfaces that can be se rio usly pro blematic unless resolv ed exped itio usly and properly. Expedience is necessa ry to mitigate the effects 0 11 an owne r's bu sine ss op eration s an d avo id an y neg at ive impact o n the mo ment um of the contrac to rs in volved. Man y interface issues re ly almost en tirel y on the ca use co ndi tions wh ich, if not interpreted co rr ect ly. co uld have serio us effects o n th e so lu tion. The p rojec t team should approach interface issues co llecti ve ly and use the checks and balances of the team decision making proce ss to ward proper resolu tion. The c :-.rs con cern for int erface issues re lates [0 the co mbined ef fect of the problem and its solut ion on the cos t a nd p rogress of the project. D elay in d eci sion making or as a con sequ e nce o f the sol ution coul d mean bot h inc reased cos t and addit ional cont ract lime. Th e CM's team re presen tative sho uld approach the de cision- ma king effort from th is per spective. The N E' s respo nsibility when facing inter face issues is to find the technical solu tio n that confo rms to the ow ner's es tabl ished needs an d standa rds a nd meets the A/E 's pr ofessional respo nsibility. Whi le the decision- making process sh o uld be han dled in an expeditio us manne r. a fast soluuon may not be the bes t answer. Alterna tives should be con sidered if time allow s. The A/E' s team represcntauve should app ro ach the dccisicn-rnaking effor t from this pe rspec tive . The owne r's involve me nt in interface issues is to evalu ate the input of the eM and Al E fro m the pe rspective of the proble m' s affec t on current a nd future co nse q ucn ces. Thi s is value judgme nt [vpay no w or pay late r") time fo r the owne r. Th e owner is the on ly tea m mem ber who is qualified to mak e the right decision when faced with the facts presen ted by the Al E an d CM . 4.11

I

Section 4.11

4.1 1.1

..

The ACM St and a rd o f Car e Alt hou gh A CM is establis hed and in wide use tod ay. un iversally acce pted standards of practice th at stipulate accepta ble pe rform an ce do not exist an d pr obably ne ver will. A CM performance is not susceptible to published performance standards and will eventua lly be evaluated o n its own standard of care. However, es tab lishing a "s tandard " of care will nOI be ea sy beca use ACM practices and pr ocedures diffe r substantially from o ne CM to ano ther o n an arbitrary basis.Two reasons can be cited:

1. all CM s do not provide a ll available ACM se rvices to clients. and 2. all CMs do not provide A CM ser vices to the services' full potential: an d there a re two reasons for this : a. all e Ms are not staffed to an ad eq ua te leve l e ithe r in num bers or talen t. an d b. price-based co m pe titio n fo r A CM services is co nd ucive to minimizing the services pro vided . 4.11.2

Meas urin g

eM Performan ce

ACM se rvices only ha ve fo ur cul mina tion poi nts where success ca n be objec tive ly measured:

1. 2. 3. 4.

when the bidd ing pr ocess pro d uces cos ts that are with in the budget when owner oc cupa ncy occurs o n sched ule when an owner wal k-through reveals expected quality,and t; "'~ "'" , whe n no clai ms are brough t agai ns t the owne r by con tracto rs.

----

58

Chapter 4

If the project is completed within budge t, on time, at specified q uali ty. and does not cause undu e busine ss interru ption for the owne r, d id the owner get a fair re turn on the C~t's fee? Did the CM ext ricate ma ximum value for the owne r? Could the cost have been red uced? Was it possible to comple te the projec t soo ner? Coul d quality have be en upgraded? In othe r wo rds, did the C:-...t provide a complete and maximum effort in the owner's bes t interests. o r did the Cr-. l simply co nt rol a con trollable set of circumstan ces? Owners have no way of telling if a CM is prov iding ACM services at an acce ptable standa rd of car e du ring the cou rse of the proje ct unless they had ACM e xpe rienc e on previou s projects o r unless the C:-.t mak es it a po int to info rm the owner of progress and accomplish ments. Subs eq ue nt cha pte rs of this boo k cover the process of keepi ng the o wne r and the AlE info rmed so performance can be evaluated at o ther than the four culminat ion po ints. 4.11.3

I I

4.12

EARLY RESPONSIBIUTI ES

The compar atively sho rt histo ry of C M an d the complex ities of its many inno vations imposes a professional res po nsibi lity o n the cons tructio n manager to info rm the owne r of its feat ures. function s, and use befo re an agree me nt for se rvices is ente red into . A dete rmination of the form and variation of the CM system to be employe d was the initial and most consequential decisi on made. The CM sho uld ca nd idly guide the owne r to a form a nd varia tion se lectio n with the professional integ rity inherent to age ncy and app rise the owne r of po tential problems and ben efits inhe rent to that selection.

,I

4.13

59

CHECKS A ND BALA NCES

All form s/variati ons of the eM sys tem depend o n tea m interaction and a synergis tic approach to decisio n makin g. Th e program team-s- the owner. AlE and CM-is struclured (0 act in conce rt when ma king decisions and determining the course of projec t deliv er y. Unilate ral dec ision s on eM proj ect s are precluded by the team concep t and by a built-in system of chec ks and balances. In effect . the CM 's e xpertise in contracting an d co nst ruction is mon itored a nd test ed by the AlE 's kn owle dge of those same area s. Co nverseI)'. the AIE's expert ise in design is similarly tes ted by the CM's experience and kno wledge of the design process. The tea m's system of checks and balances precludes au ton omous actions and inte nsifies deliberation bu t does no t inhibit decision making in any way, Experience has shown that self -imposed pre pa ration by team members actua lly speeds the deci sia n-making process up ra ther th an slowing it down and provide s a high level of co mfort with the decisions made.

L<et'ltt

The standa rd of care fo r ACM serv ices has become a ve ry important issue for construction managem en t advoca tes. If CM is to someda y be the prefe rred contracting system of o wne rs. the sta nda rd of care must be se t a t its highe st level. To achie ve this. bo th owners an d constr uction man agers will have to cha nge the ir current pract ices. Owners will ha ve to place mor e e mphas is o n a CM's q ua lification s than o n the amount of the cr-..rs fee. Q uality- base d selection (OBS) m ust completely repla ce pricebased selection (PB S) when o wne rs acqu ire AC M serv ices. As long as owne rs visual ize CMs in the context of a contracto r and buy services o n price. this will be hard to accompli sh. As long as CMs willfully abbrevia te the sco pe of their ser vices and are satisfied with ha lf an e ffort, it will be even mor e di fficult. The same argument that supports Q SS when acquiring desi gn services can be used when acquiring ACM se rvices. However. (he a rgument for QSS in the case of ACM is even more valid. if tha t is possibl e. ACM se rvices are much more diversified and subject to wider latitudes than de sign se rvices. It seems ludicr o us for own ers to choose a contracting system specifically des igned to pro tect their interests and the n price shop for a Clvl to opera te the system. Append ix B. A Mod el Program for the Certificatio n of Con struction Ma nagers. describes a way to ass ure owners that full service e Ms are included in the sele ction process described in Ch apte r 24. Acquiring CM Services.

The ACM Process in Brief

The bro ad areas of CM responsibility. estab lished in most standard eM contract do cum ents. are management o rie nted an d cover th e twelve areas of CM knowledge. Resp onsibility in all of these areas are gene ro usly implied but the re are few specifics regarding the procedures that sho uld be fo llowed. Th e CM covenants to provid e these func tion s using its best skills and judgment. The CM is ob ligate d to explain to the owne r at an und e rstandable level of de tail how respo nsibilities in the se areas will be ca rried out. The C!'-l must take into consideration the owner 's familiaritv with the con st ruct ion ind ustry and the process of project del iver y. The goal of the C~t sho uld be to preclude service-rela ted surprises once the project begins.

The Standard of Care Quan dary ~,

1

Section 4.14

The Age ncy Form of eM

4.14

THE ACM PROCESS IN BRIEF

ACM is a design-bid-build procedure that facilitates compe titive ly bid single-phase. multiple-phase and fast-track projects. The: ACM proce ss uses trad itio nal trade contr actors as prime contractors by dividing the project into strategically defined indiv idual work -scopes with the owner holding all contracts. The CM is e xclusively a n agent of the owner and does not pro vide either design se rvices. contracting services. or constr uctio n services on the project. A broad-scope list of typ ical AC M activ ities includes. bu t is not restrict ed to, [he following:

1. Develop the proj ect budge t fro m information provided by the owne r and AlE 2_ Develo p the ma nagement stra tegy and ma nagement plan based on the owne r's pa rameters 3. Assemble and maintain th e proj ect proc ed ures man ual ~ , Sched ule the project de livery process fro m de sign thro ugh co nstructio n to occup.IOCY

60

Chapt er 4

Section 4. 15

The Agen cy Form of CM

S. Apply val ue manageme nt procedures to ensure the des igna bility. constructabilhy, and co ntractabi lity inte grity of the project 6. Formu late contract provisions to facilitat e the use of the ACM project deli v e ry system 7. Revi ew the bidding docum en ts from the per spective of q uality prior to issu a nce to bidders for proposals 8. De termine a work-scope list that facilitate s the multiple bidding pro cess

9. Write individ ua l de scripti ons for all work -scop e division s

J

I

10. Qualify all tra de contractors interest ed in bidding wor k-scop es 11. Ide ntify long-lead items and ot he r benefici al d irec t owner purchases 11. Ass ist the own er in Obtain ing proposa ls for materials. equipment. a nd co ntracts 13. Evalua te the labo r poo l and the contracting practices in the area of the project 14. Pro vide ream leadership du ring the time tha t the expertise of the co nstruction manage r is germa ne 15. Devel op bidd ing co mpe tition to ge ne ra te the most favorable pricing condit ions 16. Communicate wit h bidd ing contracto rs to clarify condit ions and resolve d iscrepancies in bidd ing documen ts 17. Assist the owne r Juring the bidd ing process 10 ens ure the prope r receipt of proposals 18. Rev iew trade cont ractor pro posals to determine if those being considered are complete and in the owner's bes t interests 19. Lead necessary negotiations with co ntractors o n behalf of the owner 20. Provide assistance in the signing o f contracts and the acc umu lation of req uired con tractor docu men tation 21. O rga nize and chair preco nstru crion meeti ngs with trade con trac to rs 22_ De velop a nd implem ent the on-site const ruction schedule 23. Coo rdina te cont rac to rs at the site on a full-time bas is 24. Cha ir project and prog ress meetings d uring co nstruction 25. O rgan ize an d adm inister a system for expediting ow ner-p urcha sed and co ntr actor-pu rcha sed mater ial and equipmen t 26. Develop and adm iniste r finan cial and ma nageme nt information systems 27. De velop and coo rdinate a progress pay ment procedu re for con tractors 28. Procu re and administer the con struc tion suppo rt requirements 29. Assist the o wne r and cont ract ors with labo r relat ions connected with the project 30. Deve lop. implement. and maintain a projec t quality-managemen t program 31. Adm inister contract changes and the pr oject's change o rder procedu re 32. Track project costs and administer the owne r's project cost accounting program 33. Assist in the res olution of disputes arising from the performance of contracts (Th e te rms used in the above list and throughout the cha pters may not be those used by all readers. A glossary o f term s appears at the back of the bock.)

Wha t the ACM Fo rm of CM Is Designed t o Do

61

4.1 5 W HAT THE ACM FORM OF CM 15 DESIGNED TO DO The: ACM fonn of CM was des igned to imp rove the de livery ~f ~ rch~tecturaf (buildin? ) projec ts in the public secto r fro m the owne r's perspect~ve. S~mllllr Imp rove ments w~ 1I occu r o n engineering projects or o n pr ivate secto r projects If the procedures used m the private secto r o n archi tect ural projects are emu lated. Th e following is a list of the things the ACM form of eM was specifically de signed to do o n pu blic building projects:

1. Allow the ow ne r to select the manager of the project strictly On an abi lity basis 2_ Allow the owne r to be more invo lved in the selec tio n of trad e contractors 3. A llow trade cont racto rs to compe te for work o n a fair competitive bidd ing basis 4. Pay earned progress payments directly to the cont ract or s who did the work 5. Eliminate pre-bid and pos t-bid shopping of trade cont ractors' prices 6. In troduce pragmatic designability and constructability val ues to the des ign p~ase 7. Inject ccnt rac tabi lity op portunities into the preconstruct ion phase of the project 8. Use synergistic tea m decision maki ng thr oug ho ut the project 9. Provide checks a nd balances to the dec ision-making proce ss during the course of the project 10. Provide positive continuity between the design and the co nstr uction phases of .. . the project 11. E mpha size projec t managem ent as a planning too l as well as an admi nistrative too l 12. Pro vide a practic al pla tform fo r the usc of modern ma nageme nt tools and meth ods 13_ Ensure that all of the lo west con tractor proposals were availabl e for award 14. Eliminate the ad ve rsarial relat ionships tha t de velop in the tra ditiona l system 15. Reduce the oppo rtunity for co nflicts of intere st to surface in project parti cip an ts 16. Pe rmit the usc of competitive biddi ng on projec ts that req uire the use of fasttracking . 17. Econom ically dea l with the sta tic and dynanuc risks inheren t to a cc nstrucuon

project

, .

.

.

18. Provide a new level of ow ne r awa renes s and opti o nal owner paruc rpaucn In the proje ct-del ivery proce ss 19. Ga in insight iro m a const ruct ion and con trac ting expert who is the owner's ally 20. Provide a way to use the ser vices of both unio n-affiliated and non-affiliated con tract ors on a competit ive bas is It should be remem be red that as man y ancillary benefits surfaced d uring the ea rly use of the ACM form of CM as were originall y and purposely built into the system . Man y of the above goa ls we re developed during the use of C to.t between 1975 and 1990.

(

1

[

Sect ion 5.2

C H A P T E R

I

Chapter 4 intro d uced the eM system by describing its root form. AC~'I. in some deta il. This chap ter confirms the ACM system and extends e M underst anding by presenting the variation s tha t can be de rived from the AC:VI form. The eM system slo wly acquired ident ity after its spo ntaneo us and contro versia l start in the late 1960s. ACM . had to be defin ed first. so tha t variat io ns o f the syste m could be exp lained fro m a comm on pers pe ctive. eMfirms gene ra ted these form s and their varia tion s to accommod ate the specific need s of owne rs, and many owner needs were uniqu e. Co nseque ntly. the contract struct ures which sa tisfied their needs had to he unique. It sho uld be underst ood that when eM contracting began. it on ly had a name, no t a definitio n. The pra ctices that de veloped d uring its brief hist ory eventually provide d definit ion . It certainly was no t a case of eM firms und erst anding ACM and develop ing, mutati ons that became forms and varia tio ns. Ma ny of the fo nn s and var iation s of CM were the o riginal progra ms devel oped by CM firms in the ir effo rt to satisfy owne r needs. Many prov iders of eM serv ices have never prac ticed ACM . In fact, many curre nt CM practitioners will gain thei r first com pre hensive understand ing of ACM in the pages of this book . CM and its varia tions has su fficiently stabilized La per mit bound ed definition s and are diag ram med from a contract per spe ctive. TIle inherent relation ships between each are explained .

I

)1

s.t

62

5.1.1 Genera l Cont racting The parties involved in a gen eral con trac ting project are the owner, G C. NE. trad e contractors, and supp liers.The N E provides des ign an d guidance to the owner.The GC provides cont racti ng and construc tion se rvices. includ ing the man agem en t of construetion. The NE designs the project. prod uces d raw ings a nd specifications for bidd ing and construction pu rposes. and administers the project overall in the owne r's be half. The G C. an inde pe ndent co ntractor. privately deve lop s a proposa l for the project 's const ruction cost. uses his own resour ces to purch ase materials. subcont racts work . and constructs work in accorda nce with the terms of his contract. On buildings. 80 to 100 % of the const ruct ion is accomplish ed by subco ntrac to rs. Extensi ve subcontracting postu res the gener al con tractor as a manager of subco ntracto rs rather tha n 3 construc tor. (See Appe nd ix E.)

5.1.2

Design-Bui ld Contr acting The parties involved in a design-build pro ject art: the owner . D-B contracto r. trade co ntr ac tors. and suppl iers. Th e D-B cont racto r provides all req uired se rvices under a single contra ct with the owne r. Design se rvices are accom plished by the D-B cont r.actor's own forces or bv an AlE firm hired d irectly by the D- B contractor. Construct ion serv ices are provided as in the GC syste m; D- B contractor s are some times OC contr actors functioning in a design - build capac ity on a projec t basis. (See Append ix E.)

5.1.3 eM Contracting The parti es involved in a CM project are [he own er . AlE . CM. trade co ntrac tors. and suppliers. Th e in.. . olverne nt of the NE and CM ca n vary o n a project basis. Th e service assignme nt op tio ns in the CM system are num erous. and a variety of co nt ract configurations are pro d uced as a res ult. Th is flexibilit y captured the imagina tio n of the ind ustry an d contri but ed significan tly to the popul arity of the system. Its versatilit y facilitates its use. O wners can custom ize a CM form and variatio n to suit a specific need. (See Ap pe nd ix E. ) eM has often been refe rred to simply as Inno va tive Co ntracting.

REVIEWING SYSTEMS INFORM ATION

CM co ntracting is a uniqu e al ternative to GC con tracting and D- B contra cting. The signal differe nce betwee n the syst ems is the philosophical app roa ch to thei r execut ion, foste red by the configurations of the contrac ts be twee n the part ies in the proje ct delivery process. In the C:VI system . the indepen dent contractor relation ship inhe rent to the GC system (and to a grea ter ext ent. the D-B system) is altered by eliminating the general contractor o r design-build cont ractor and add ing an agen t/fiduciary constru ction manager . The inten t of CM is [ 0 prov ide a more syne rgistic approach to the delivery of the proje ct: to mitigate ad versaria! relatio nships commo n to prime independent con tract or configuration s. a nd en hance the contracting and co nstruction experti se available to th e owner during the project. Th e goal is to improve the quality, time. and cost param e ters of the proje ct and to elimi nate problems att rib uted to traditional cons tr uction such as litigation stemming from cla ims against th e o wne r afte r the project is comp leted.

63

Th e constr uctio n manage r. a mul ti-discip line o rganization spe cifica lly created for the role, has the respon sibility of guiding the o wner thr ou gh all pha ses of the project . In essen ce. the o wne r beco mes his ow n general contrac to r who, on the advice of the CM. assigns tne respon sibili tie s and eliminates or assigns the inherent risks involved in the del ivery proce ss. The CM 's compe te nce. expertise. and initiative keep the project o n course from feasibility to occ upa ncy.

5

eM Sys tem Forms a nd Variations

Comparative Def initions

S.2

COMPARATIVE DEFINITIONS

Gene ral Contracting ( Public Sc clo r):The use of a single prim e contractor, hired as an independent contractor. who has a financial sta ke in the co nstruction phase of a design-hid- build sequence projec t. Project de sign. managemen t. and adm inistration

64

Chapter 5

Sect io n 5.2

eM System Forms and Variat ions

responsibilities are assigned to an AlE by the owner. The: owner is not privy to the: development of the project's constr uction costs. Design-Build Contracting (Privat e Sector ): The use of a single prime contractor . hired as an independe nt co ntract or. who has a financial stake in both the design and construction phases of the bid-design-b uild seq uence project. Project ma nagem en t and adminis tra tio n is the responsibility of the owner. Us ually the owne r is not privy to the developmen t of the project's cons tructi on costs. Construction :\l an:Jgcmcn t Cuntructlng (Public a nd Privat e Secto rs): The use of multiple prime cont ractors, hired as independent cont ractors. who have a financia l stake in the construction phase of a desig n-bid-b uild sequence projec t. Project design. managemen t. an d administrat ion responsibility is assigned to a team. consisting of the owne r. N E. and a eM who prov ides construction and contracting expe rtise and advice. Some form s of construction man agement assign othe r respons ibilities 10 the C 1.Th e o......ner always is always privy to the de velopment of the project's cons tructi on costs. Th e three basic co ntract ing system s are diagramed in Figure 5.1. No te that the CM system show n in the figure is the ACM form . the root of all CM form s. Re view Chapters I and 4 if the pa rticulars shown in the diagra ms arc not clearly under stood. 5.2.1

Diagr a m Conve nt io ns

.. .. . .. .. . . . Team. .. .

IO" ;ner I

IOW"" I

D0 -B

s D-B

GC

lOW ,"" I

:0

0

:8 -- 1---8 ................. ...............

5.2.2

ACM Differ ences Rest a ted Viewing the Gc. O-B. and C~I con tracting structures side-by-side clearl y shows the differe nces be tween them. Th e ACM form: 1. eliminates one complete contracting tier 2. adds a cons truction manage r to the structu re 3. substitu tes multip le contrac to rs for the single prim e co nrcc tor .t. elevates trade cont racto rs to prime contractors 5. allows the owne r to cont rac t di rectly with trade contractors 6. increases agency rela tionships. a nd 7. crea tes a tea m to des ign. man age. and administra te the projec t. Tenure of Se rvices An other obvious difference betwee n the three systems is the involveme nt of the principal par ticipant s with the own er and the project In all three systems. the A/E is invo lved from the sta rt of design unti l the e nd of construction . Design se rvices may begin as earl y as the planning or feasibility phase. depe nding on the needs o f the owne r. and may extend into the occu pancy or start up phase. dependi ng on the type of proje ct. The GC svstem exclud es genera l cont ractors fro m the design phase and leaves construction/contracting exclusively in the hands of the A/E. In the D-B a nd CM systems. construction/co ntrac ting inp ut during desig n is provided by the D-B contractor and the ACM. respectively. In essence. the D- B a nd CM systems provide a team approach to design that is not availab le in the GC system. unless compe titive bidd ing on com pleted plans and speci fications is replaced by predesign negot iations. The service tenures of the GC.A/E. and CM are co mpared in Figure 5.2.

Fc:asibililY Dc ~ ' ltn Pha se

Co n:.lr uClio n Ph ase

I

oI

Design-Build Co ntractor's & Cc nstructlon Manager's Tenu re

SuD-subs

GC System FIGURE 5.1

D- B System

A CM Form CM System

The three basic: contracting system structures,

65

As in pre vious diag rams. (S)deno tes an independent co ntractor relationship between contracted pa rties.@ indicates a legal agency relationship between com racted par ties tha t is stipulated a nd limited by the term s of the agreement ente red into by the parties.

5.2.3

The solid lines con nect ing the par ties de notes privity of con tract by written agreemen t. The dashed lines indicate a cooperative relationship between pa rties established by provisions in each contract held by the owne r. As previously established. there is no cc ntructual relationship created be tween the pa rties connected by a dashed line. Th e dotted lines in the A C~1 diagram enclose the te am mem bers.

Compa rative Definitio ns

Ge neral Contractor's Te nure FIGURE 5.2

Co mparative tenu res or service.

66

Chapter 5

eM System Forms and Varia tions

5.3

CM FORMS AND VARIATIONS

All fo rms an d variations of the eM syste m. except Ille ACM form, have a seco nd . thi rd , or fourth co ntractual rel at io nship a dded to the p rimary AC M rela tio nsh ip bet ween the eM and own er . Ad ded rel at ion ships comp ro mise the "pu re " advantages of ACM, but compe nsate by pac kagi ng project -delivery respon sibili ties according to the o wne r's preferred requ irements. Un like the GC a nd the D-B sys te ms which ha ve only one contrac ting s tr uctu re, the contracting flexi b ility o f eM permits a vari et y of co ntracting structu res, ccch of which has use-benefits to o wne rs. Ho wever. to deri ve ben efits. owne rs m us t accura tely assess their pro ject requ iremen ts and pro pe rly mat ch a eM for m/varia tion to them . An ob vious key to an owne r's success with Ct-..'1 is the pr oper match -up of CM for m/va riatio n with his/h er req uire me nts. Referrin g to ACM as the roo t for m, thre e d istinct subfo rms evol ve by cha nging the ves te d respon sibilities of the A CM team's membe rs: Exten de d Se rvices eM

(XCM). Guaranteed Maximum Price CM (GMPCM). and Owner- GM (OCM). In each case , respon sibil ity fo r mor e than one of the six esse n tial el ements of se rvice, in

Sectio n 5.3

eM Forms and Variation s

67

Ow ner

s

Con l raClOr-XCM

Prime Cont r actors

eM

Consl ructor- XCM

Design-XOI Owner

whole o r pa rr, must be assig ned to tea m mem ber s. Th e segrega tio n o f se rvices tha t ide ntifies the ACM form beco mes a n inte gra tion o f se rvices in th e sub forms. A ddition ally, var iati ons of the three subforms ca n be crea ted by mer ging subforms and further co mb ini ng service respo nsibiliti es. Subform s and var iations of sub for ms have a practicallim it based an the num ber o f participa nts involved and services required . 5.3 .1

Extended Serv ice, CM (XCM) The XC M subform has three va ria tions. each rela ted to the types of o rgan izat io ns providing se rvices to the owner. Design-X CM, th e co mbining of design service with eM services. can o nly be accomplish ed with the AlE firm p rovid ing des ign services for the proje ct. Th e team 's AlE exte nds desi gn respon sibili ties to include e Ivl res po nsibi lities or enters into a second co nt rac t with th e ow ne r to provide e M services. Constructor- X'Ctd and Contractor-X'Ctd ar c var iat ions which can only be p rovide d by the te am's e M. and then o nly if the CM has the capability to co ns tr uct with their own forces or to e nter into and bonded cont racts for co nstruc tion. In these variations. the CM's respon sibility is exten d ed to include construc tio n se rvices and contrac ting se rvices. respectivel y. The ultim at e variation of the XC M sub form vests bo th contrac ting an d co nstruction res pons ibilities in the CM. Thi s vari a tion is appropria tely designated Contractor/ Constructor-XCid , The fo ur vari a tion s of Exte nded Se rvices CM are diagrammed in Figure 5.3.

5.3 .2

I

FIGURE 5.3 The four variations ~,f Extended Services CM .

for the comp lete constr uc tion o f the projec t. Th is subfor m, G uara nteed Maxim um Price CM, is diag rammed in Figu re 5.4 . The bas ic GM P subform re fe rred to as GMPCM is esse ntially an Agency eM arrangement in which the e M p ro vides a guar antee d maximum price (GMP) to th e o wner. The GMP cove rs the cos t o f the co mp lete d co nstr uctio n of the p roje ct bef or e design is com plet e.

Gu a ranteed Maximum Price CM (GM PCM) Th is sub fc rm of AC M appea rs to be a va riatio n of XCM but in fact is a se pa ra te s ubform which has its own vari ati on s in co mbination with X CM forms. Guaranteed Maximum Price CM ca n o nly be p rovi ded by a CM with an ap propria te co ntrac ting cap abi lity who can provide the owne r with a sure ty bo nd co vering the max imum price

I

Conrrac tor/Consrructor-Xf'M

FIGURE 5.4 The basicsubform of GMPCM .

68

Chapter 5

I

eM System Forms and Variatio ns

Section S.5

eM 's Identifying Feature

69

I

f A

F!

Prim.: COnlraCIOn

Co nSlrllclOr-GMP/X CM

I

Prime Con lrac lo rs

I

Cu nt racror-G MPtXC~I

Cons tructor/Con1rJ.Clor- G M PIX c.\-I

FIGURE 5.5 The jhrce XCM vana nc ns of GM PC M.

The: three XCM co mbination fo rms of GMPCM are diagrammed in Figure 5,5. The basic for m of G ~:I PC!vl combined with Co nstructo r- XC M. ContractorXCM. o r both prod uces vari a tions that str etc h the GVf system to its definable limits. The con tract structu re o f the COflSlructorICOlllrllcrvr- G,HPCM va ria tion very closely resembles the co nt ract Structure of the G C system bu t remains a CM form and variation. The credib ility of Con stru ctor/Cont ractor GMP CM as CM depends o n th e fina l req uirement of the compara tive definiti on of e M , which is tha t tht: owner must be privy to rile development oj the project's construction CO~'(S. If this is so, Con structor/ Contrac tor-G MP CM is J Cvl form and no t genera l con trac ting, 5.4

THE OWNER FORM Of eM

As the contracting struct ures of the CM system were o wne r insp ired, an owner su bform probably existed before CM firms came into existence. Referred to as OwnerCM or DCAI, this fo rm depe nds on owner in-hous e sta ffing to pro vide some or all of the req uired CM services. The re are three varia tio ns of OC\ 1: O wner-Monu ge-Ctd, Owner-Design-Cst, and Owner-Design/Munage-Cid, As the nam es imp ly, O wner-Manage - Cfvl uses OU t~ side design services and inte rna l CM services. Owner-De sign- Cxt uses inside design se rvices and Outside CM servi ces, O wne r-Des ign/Man age- Civl uses interna l design and Clvl services . (See Figu re 5.6.) The owner form of eM req uire s per sonnel who are q ualified in the discip lines of the constr uction ind ustry as pa rl of the ow ner's organiza tio n. The o wner has to develop an approp ria te ly staffed des ign/cont racting departm en t that can unde rtake a construction project with mi nimum outside assistance, 5.5

I I

Own~r-D~sign!Miln.1gc - C~1

Own~r ·M.1nagc-CM

FIGURE 5.6

O .... ner -De s ign-Cvt

oeM variations,

industry ha ve pushed the ir cont ra cting st ructure imaginat io n to its limits once they had th e opportu nity and confide nce to do so. , , Without actuall y diagra mming the contracting struc~ure ami designa ting the le ga l relati o nships betwee n pa rt ies. it is difficult to de te rmine wher e CM sta rts and e nds. Wit hout careful exam ination , eM co uld easily be confused with the GC or D-B system. For this reason. carefu l st udy of this chapte r is ~ccomme nd ed . Const.ruction ind ustry users. participa nts. and studen ts should haw solid knowledge of CM s paramet ers to rou nd out thei r e xpert ise. Figure 5.7 shows the sim ilarities between G C contrac ting and .Constructo rl CO!ltT:lcwr-G MPCM . Figure 5.8 sho ws the resem blance of D-B to Dcsig n-Xf.M, or Design/Ma nage-eM.111!:: prese nce of a CM in a co ntracti ng st ru ctu ~e all~ the agency rela tionship betwee n the C M and o wne r dete rmines if the stru ctu re IS or IS not a for m of the CM system . . Reade rs Olav ask . " Why bot her to identify CM where su ch a line line must be drawn? Doe s it really ma tte r th at we know if the con tract structure is CM or not ?"

O wne r

CM' S IDENTIFYING FEATURE

As the Ci\1 fo rms and vari ations diagrams arc com par ed. it bec ome s obvious that perhaps the ap pro pria te definition of con struction manageme nt is In no vati ve Cont ract ing. The re is litt le doubt tha t Owners and part icipants in the construction

GC Co ntracting FIGURE 5.7

Co nslruetor/Co nt rec tor --GMP XC~f

GC compau:d lo CCG MPXCM ,

70

Chapter S

Section S.7

CM Syste m Forms an d Variations

1 ,, FIGURE 5.8

71

word in the selection an d awa rding of subcon tracts. Howe ver, this is not typical of G C pr ojects.

Owne r

DcsignlMtlnllge-C M Syste m

Ot her Forms and Variations of CM

5.6

The contra cting struc ture of the CM syste m was strategically designed to be cwne r-oriented,The contractual arrangement s and processes were designed to accrue benefits to the owner-bene fits that eithe r coul d not or did not consistcml v accrue from the structu res of gen eral contracting or design -bui ld con tracting. CM acc omplished this by substituting an agency rela tionship for the major indep ende nt contractor relationships that drives the GC and D-B cont racting structures. (Th e ACM form of the CM system de monstrates this very clearl y.) ACl\'1 is tot ally depe ndent on agency per formance until the start of construct ion when trad e contractors are hired. From the n on, althoug h independen t contractors are pe rforming construction, the da y-to-day management and adm inistra tion of the project remain s dependen t on agency performance. Recognizing that the dec isions of an agent must always be made in the best interest of the own er (but decisions by independent contractors need not be ). it is a pparent tha t ACM provide s a better opportunity for owners to benefit (rom the dec isions made. Agen cy per for mance through out the project facilitates the pursuit of a comm on goal by the owner. A lE . and ACM and encourages syne rgistic decision making. An appropriate overlap of team member experti se introd uces critica l and impa rtia l checks and balances to the decision-making process. and the agency status of both N E and ACM esse ntially elimina tes a potential for conflict of interest in the decision-making process.

Design-Bu ild S ~ . rem

Ocsign-XCM ccmpared 10

o-u

Th e- answer docs milner. bcc;JUSC a eM co ntracting stru cture ack nowledges an existen ce of agen cy not found in either GC and D- B- tontractu ally an d more importantly. philosophically. The philosophy of eM is differellt from eith er GC or D-B contracting. It shoul d be re membered that the CM system emerged only because traditional systems wer e not pro viding owners with satisfactory resul ts, Th e success of GC and D-B contra cting is heavily dependent on the performa nce of a prime independe nt contractor. eM co ntracting cha nges this situation by placing success challe nges on the perform ance of an agent of the owner. This is a significant cha nge considering the legal responsibilities of inde pende nt cont ractors a nd agents. 5.5.1 Project Co st De ter mina tion

The one unique feature of the CM syste m, tha t sur vives all attempts to confuse it with D- B contracting and GC con tracting. is the overt manner in which the costs of the project are obtained an d assemb led. In bot h the GC and D- B system. cons truction needs (services. subco ntracts, mat eria ls. equ ipme nt. e rc.) are unilaterally dete rmined, priced. and presen ted to the owner by the contra ctor . Owners ar e not part of the propos al process or the selection of subcon tracto rs and suppliers. A t the heart of the eM system. regardless of form or varia tion. is the overt process by which projec t costs are determ ined. Proje ct need s ere established by the team . and all decisions are exposed to chec ks a nd balances. Th e projec t is selectivel y divided into numerous work-scopes . allowing the owne r to be exposed to project costs at the trade con tractor level. Cost exposu re is exemplified when using ACM in the public secto r. whe re each work-scope is individually bid by tra de cont ractors in open competiti on with their pee rs. To definitively determine if a cont racti ng system is or is not e M, the following will suffice: an agenc y rel ationship must be involved in providi ng some or all of the construction, contr acting. and manage ment services. and the process by which the needs and con tributing costs of the project are determ ined mus t be open to the owner's scruti ny. In the final ana lysis, a GC project co uld very well be classified as a eM project if the owner has comple te access to the G C's estimati ng infor ma tion and has the final

5.7

,

!

MAINTAINING AN OWN ER ORIENTATION

OTHER FORMS AND VA RIATIONS OF eM

Re laxing the optimum agency rela tionships in ACM, which occurs in all othe r forms and variations of Cr..t dilutes the intrin sic be nefits of an agency relat ionship. Howe ver. other forms a nd variat ions of CM may be more ap peal ing or may more appropriatel y sa tisfy the owner's requirements. Using form s other than ACM could produce tradeoffs which comp ensate for a less-than-optimum agency prese nce. Project delive ry is depe nde nt on the collective results of individual pertermances, Exercising compe tent mana gement achie ves collective results. and involving credibl e individuals results in individual pe rformanc e. Additio nally. the owner must feel com fortable with the contracting strate gy used. In construc tion. the "ind ividual s" are groups of individuals; business firms. tha t collectively provide the six req uired elemen ts of se rvice on which projec t de livery depe nds. Ah hough ACM theoretically rep resents a n ideal owner-oriented con tracti ng structu re. constr uctio n project de livery has too many primary and ancillary face ts to blindly recommend its use on every project . Con tracta bility, expla ined in Chapt er 2. The Rea sons for a Th ird System . is the process of det ermining the best contracting arra ngement for a particular project. A contractabilit y review should be under taken to de termin e which form of CM is best sui ted to the projec t. The review should take into consideration project type, size.

72

Chapter 5

eM System Forms and Variations

, FIGURE 5.9

Relative potential conlliet l.lf interest in the three systems.

Manage-oC:-.t Design-OCM

D.esign·M;1n..age-Oc.\1

ACM Design-XCM GMPC.\ 1

POTENTIAL FOR CONFLICT OF INTEREST

Higher

Construetor-XCM Conslructo r-GMPCM Contractc r-Cc nstructor -Xf'M Conlrae tor-Conslructor-GMPCM FIGURE 5.10

Potemial

I

Co ntracll.lr-GMPC~ t

I I

I I I

Relative potential contliet of interes t in the eMsysh: m.

A co mparison of the forms and variat ion s of CM reveals varying ex pos ure to po te ntial co nflict o f intere sts. Figure 5.9 s hows the relative po te ntial fo r co nflict of in ter est o f the G C and D-B syste ms and the three CM forms. Figu re 5.10 shows the relative po tenti al for conll ict of interest o f the fo rms and varia tion s o f eM. Re lati vity is no minally based o n the oppo rtu nity for finan cial gain by person s o the r than the owner in the learn dec ision ma king process. It sho uld be noted tha t the three O CM structures a nd the ACM structure arc similar with regard to pot ential fo r co nflict of inter est. Howe v er. the three OC M forms do have a potential to not se rve the owner to the le vel of ACM . OeM is a clo iste red fo rm of e M-it excludes dive rsified cu tting-edge managemen t. construct ion. co ntracting. and design expe rtise from the project expe rtise tha i exp ands with ex pos ure to a varie ty of projects in the eM and Al E disciplines. To co mpensa te for this exclusion. o wners who use OeM sho uld pe riod ically use ACM as a means o f upd atin g the ir kno wledge and abi lities in these areas.

Combining Co ntra ct s

If one pari)' sim ultaneo usly has an age ncy con tract and an indepe ndent co ntractor co ntract with a not her pa rty. and the contracted responsibi lities of each co n trac t interac t. it is realistic to assume tha t the agency rela tionship wou ld at some point. consciously o r unconsciously. defe r in favor o f th e independe nt con tracto r's position. The o nly miti gat ing influe nce in such a situa tion wou ld be professional ethics. The sam e issues will arise if one party simulta neous ly has two agency con trac ts or has a co mbi ned services agency contrac t with anothe r pa rty.•md the con tracted respo nsibilities of each contrac t or se r.. . ices interact. 5.8 .2

L I

Cont ractor-Xf'M

Whe n respon sibilities for the six essential elements of project delivery arc combinedsuch as when the Al E also provides C~f se rvice or the eM also performs as a cont rac lor or const ructor-the credibi lity of [he team 's actions is subject to question. A po tential for contliet of interest is created which must be dealt with in a produc tive man ner if the project is to extract maximum pe rformance from the tea m. A po tent ial for conflic t of interest exists in every contract, regar d less of whether it is be tween an independent co ntractor and an o wne r or an age nt and an ow ner. This po te ntial is indepe ndent of a party's technica l abili ties. and it mus t be accepted tha t an assert ion of professiona l eth ics provides no gua rantee tha t a conflict will not arise or that the conflict will not adversely affect the owne r. Unfor tuna tely. we are ex posed to exam ples of con flic t of interest on a dai ly basis thro ugh the media. E thical be ha vio r whet her in socie ty. business o r the professions is ebbing world -wide. The United Stat es and its co nstruc tio n ind us try is certainly no exception to this tre nd. 5.8.1

73

:

complexi ty. location, schedule. financing, o vv'oc r invo lvement and restrictio ns, and any other potential influences.. If all things are considered and prioritized. an ap propria te cont racting structure will be identified at the end of the study. The initial cho ice will be either general can . tracung, D-B contracting . or eM contracting. If the choice is Cfo.-l ccntractinz, fur ther conside ration mus t be given to select a suitable form and varia tion . Ini tial consideration should be given [0 ACM. unless owner req uireme nts or preferences poin t o therwise. Th e most suitab le form eMcan be selected based o n how and to who m the owner prefe rs to allocate project delivery respon sibilities. II is sug gested thet the [a nn selected be the most conserva tive of those unde r conside ration [i.e.. if Co nstruc r-XCv t meets all the own er's criteria. Cons truct/Contract.-X'Clvl should not be considered). S.8

Checks and Bala nce s Revisite d

Section 5,9

Potential as a Qualifi er TIle word "potential" is used [0 mod ify the exp ression "conflict o f interest" ou t of respect for the cons truction industry part icipants who pro v ide services on CM projects. It is important to re membe r that it is the contracting structure that creates a potential for con flict of interest. not the people. when a conflict of interes t situation presents itself. the com mo n goal of the project will be the beneficiary if all proje ct participa nts rigid ly adhere to their contractual commitments to the owne r.

S.9

I

I

CHECKS AND BALAN CES REVISITED

It is assumed that each team membe r.owner.A'B.end C~1 has un ique ability in hisfhe r field of expe rtise. It m ust also be ass umed that each has v al ue to co nt ribute to the othe r's performance. based on the ir individual co nstruction industry knowled ge and experience. As peers on the p roject team. it is expected that each will appropriately

[

74

f

I

Chap t er 5

CM System Fo rms and Variations

assist the other in the collective ge ne ra tion of o wner-orient ed sol utions to design and constr uction issues. A simp le example of checks and balances would be a manufact uring process wher e the sales. prod uction, and design departments meet with management to design or modify a produ ct. Each depart me nt has un ique expert ise. expe rience, and fringe knowledge o f the oth er 's experti se. If all four ha ve a co mmo n goal-p rofit- they can collect ively design the solution that produ ces that goal. The re will be give and tak e in the discussio ns. and ma nagement may have to assert its final authori ty, but the e ventua l solution will be in the bes t interest of the com pnny. By ana logy, CM puts the owne r in the role of ma nageme nt; A/ E, the design depa rt ment: and the eM.the prod uction de partmen t. The goa l is performa nce in te rms of time. cost. a nd q uality. with minimum business interrup tion to the ow ne r. In the CM system. the per form ance goa l is no t an eve nt but rath er a series of events which co ntinue throu ghout the projec t. The CJ\1syste m con tinuo usly pursues its goa l thr oug h a compre he nsive. ongoing manageme nt pro cess that d raws upon the 12 a reas of knowledge cove red in Chap ters to through 2 1.

C HAPTE R

Const ructio n Management Under Dua l Services Ag reements

",-.

Cha pter 5 explained the vario us CM for ms and vari ation s which emanate from the ACM form of eM. Eve ry form and varia tion has its own potent ial for conflict of inte rest. as sho wn in Figure 5.10. Th is chapter discusses this conflict of interest poten tial when using the Cl\t system and offers suggestio ns for mitigat ing any per ceived conseque nces. From its beginni ng, constructio n manag em ent has bee n pro vided to owners under se veral unigue contrac tual co nfigura tions. eac h req uiring differe nt combinations of co nstruction/contracti ng services. E ach form and variation of the system relies o n ap prop riate exper tise and ope rational procedures for success.

j

6.1

CONCERN FOR THE OWNER

Unlike the rigid GC a nd D-B cont rac ting st ruc tures. the Cl'vl contracting structure has alte rnatives worthy of considerat ion by owne rs. Owners who use CM shou ld understa nd the alternati ves and all the sub tle ties involved before ente ring into a CM agreement. The individuals providing const ruc tion managem ent se rvices arc responsible for making cert ain tha t the o wne r is pro perly infor med . Du al services are ves ted in a single organizat ion in all eM forms except ACM. Co nseq uently, the poten tial fo r conflict of interest is an accepted pa n of the othe r form s of C M con tract ing. just as it is in GC and D- B contracting. As staled previously. the way to red uce o r contro l this pot enti al is to maintain e ffective checks and bala nces in team decision-mak ing. It is essen tia l that cont ractual and o rganizati o nal separa tions be installed to pre vent th e ove rt co nsolida tion of two services. Failure to do so could negate the inherent be nefits of eM per formance. It is the CM's responsibility [0: ( I) alert owners to the fact that several form s and va riations of CM are a vailable for use. (2) expla in how each for m and variat ion works, (3) pinpoint areas where pot ent ial conflicts of interest exist. and (4) suggest ways to mitigate the potential to the owne r's sa tisfact ion. h ems 1 and 2 are academ ic; they can be demonst rated by diagrams such as those in Chap ter 5. Item 3 can be a pro blem beca use ther e are some important but subt le differences tha t req uire considerable comprehension o f the three systems. Item 4 usua lly can be accomp lished by finding ways to maintain the chec ks and balances that will make the form and variation wor k to the owner's best advan tage.

J

I 1

r r

6

75

J

76

Cha pter 6

Constr uction Manag ement un der Dual Services Agreements

It is importa nt to note that none of the standard cont rac t forms for eMservices should be used without modifica tion through supple menta l and special cond itions, Modification is not necessarily the best approach to co ntracting for cert ain forms and variat ion s of eM, Sepa rate contracts for each service is a much better alte rnative whe n contracting for dua l se rvices.

6.2

Sect ion 6.5 6.4

6.3

f

THE CM /O W NER RELATION SHIP

6.5 6.5.1

EXTENDED SERVICES CM

When const rucuon and co ntracting responsibilit ies are assigned to [he co nstruction manager. a dual role of age nt/indepe nde nt contra ctor is crea ted. The construction manage r holds the status of an agent during the precoostr ucticn phase but forfeits that status when performing co nstruc tion or when assuming co ntracting responsibilities after the design phase has bee n comple ted . The dual agent/indepe ndent cont ractor status crea tes a poten tial for conflict of inte rest dur ing the feasibility and design phases, when agency services are being provided. as well as du ring the contracting and construc tion phases whe n indepe nde nt contra ctor se rvices are being provided. It is understandably impossible for a CM to represent the owne r's best inte rests whe n making preconst ruc rion dec isions" whe n the CM is aware that the decisions will impact the CM's fina ncial stake in the project duri ng co nstruction. Du al agent/ indepen den t co ntrac tor stat us interfe res with. if not elimi na tes, the check s and balances insta lled in the "agen ts only " en vironme nt of the ACi\ l form of CM. A similar situation develops when the projec t's NE accepts the adde d respo nsibility of constr uction manage r. In this case, although bo th involve men ts comply with agent and consulta nt criteri a. the uniqu e ar eas of expertise provide d by the sa me party obscu res the checks and balances inhe re nt to AC~ t. It is difficult to extrac t a leve l of designability and ccn structa bility that reflects the owner's best inte rests without the prese nce of professional conte ntion . Delibera tions in ar eas that rely heavily on chec ks and bala nces a re subject to potential conflict of interest when design and C:-"1 services are combined in the AlE's cont rac t with the owne r.

.

I

77

THE POTEN TIAL FOR CONFLICT OF INTEREST

As stated in the previous chapte r. it is import ant that the adjective "poten tial" precede the phrase "co nflict of interest" whe neve r it is used to describe a cont racting structure. The only det errents to sel f-serving decisions made in a conflict of interest situatio n withou t checks and bala nces are business and professional e thics.There is a signif. icant diffe rence bet ween the two. Busine ss e thics are accepted rules of conducting business that have evolved thro ugh years of commerce. Business e thics are not supervised by a higher autho rity; profe ssion al et hics are. lt co uld be assumed that pa rties with dual responsibilities will act eth ica lly in eve ry decision that affects the owne r: howeve r. in this day and age every effort should be ma de to eliminate a sal e de pe nde ncy o n ethics. More positive steps should be take n.

•

In the agency form of C~t the construction manager ccts JS an agent of the owner and . among other things. provides the construction and con trac ting expe rtise gener a lly charac teris tic of a gene ral contractor in the GC system , ACM pe rmits the co nstruction manager's expert ise to be beneficially used by the design professional duri ng the proj ect's design phase , the phase that is inaccessible to a gene ral cont racto r when using the GC system. As agents. cons truction managers are consultants rather than contractors an d are hired to pe rform a specific task tha t can be evalua ted by a standard of care. Th is relationship holds true until the construc tion manage r's co ntrac ted respons ibilities exte nd beyond those usually assigned to an agen t (which occurs in all forms and varia tions of the cons tructio n man agement system except AC M. Oe M. and Design- XCM).

Et hics

ETHICS Eth ics in t he GC System

The G C system of con trac ting is a goo d example of a syste m that mitiga tes reliance on e thics for owne r-orien ted perform ance.Th e GC has a contract with a mensurable end res ult and limited options du ring perform ance.Th e end result can be provided any way the GC sees fit. so long as the term s of the contract are fulfilled. Th e per forman ce options available to the GC are specifically spelled out in the contract for construction. The busine ss e thics of the GC affect the GC 's subco ntracto rs and supp liers and have few op port unities to be tested in the GC's rela tionship with the owne r. If the GC"s business ethic s adversely affect the owner. they do so most often indirec tly through the GC's dea lings with subco ntracto rs or suppliers. A n exa mple is nonpayment of obligations 10 suppliers tha t prompt the tiling of mechanic's liens against the owne r's prope rty. An exampl e of a direct adverse effect of GC business ethic s is fro nt-loading the sched ule of values on a lump sum const ruction con tract. (FrorH-loading is when the owne r is paying more than the value of the work done by the cont racto r duri ng the ea rly part of the project ) In the GC system. the A /E's per formance is highly depen dent on professional e thics.When providing design se rvices. A l E business ethi cs usually fall unde r the head ing of professio nal e thics. Professional ethics a re subscribe d to by [he A l E through des ign professio n licensing and AlE socie ties and associations. They are codified and monitored internally. Breaches of pro fessional e thics are responded to by a hearing and a pe nalty such as suspensio n or revocat ion of the AlE's license ( 0 practice in a geogra phic jurisdiction. The GC contract structu re precludes inte raction bet ween the cont ractor and NE during design; therefore, no inte rrela ted decisions can be mad e. During construction. the ha rd mone y contract excludes AlE involvement except in the approval processes where the AlE represe nts the owner's best inter ests on the basis of Al E professional e thics. There are no checks and balances to provide accoun tability 10 NE decision making .

78

Chapter 6

Construct ion Management under Dual Services Agreements

6.S.2 Eth ics in the D-B Syste m Th e D-B con trac ting structu re. whe re AlE and GC services are provided by a single busine ss en tity. is very depen den t o n ethi cal perform ance for success, bec a use a productive leve l of objec tive checks and balances a re not part of the system , The D-B contrac t's single poi nt responsibility vests desig n, contracting, a nd construction accountability in o ne party. O versights must be spotted by the owner o r by a consultant hired by the owner. It is comm on for users of the D-B system to rely on the indep ende nt consulta nt who est ablished the bid ding pa rameters for the proje ct to pro vide o versight and assist in peri od ic reviews d ur ing design and constructio n. Other than specifying tha t the D-B co nt ractor must employ an exte rn al N E firm to provide design services, the o wne r has no way to insta ll persisten t checks and balances in the D-B system (as the y exist in the AGvl sys tem) o r to reduce the influence of ethics (as in the GC syste m). Conseque ntly, the success of a D-B project is de pen· dent upon the ethi cal performanc e of th e D-B contractor and the co nstruction and contract ing expe rtise availabl e to the owner.

6.5.3

Section 6.8

6.6 DEALING W ITH CONFLICT OF INTEREST Each form an d variation of the eM sys tem has un iq ue per for mance Charac te ristics that accommod ate speci fic o wne r needs. All can be acco mm odat ed by a broad spec trum of services provided by co nstructio n ma nagers.The forms and vari ation s of Clvl are co ntract ual departures from the ideal isticall y-conceived , ow ne r-oriented ACM form . One proble m owne rs ha ve with the eM system is a lac k of know led ge of how the form s and var iat ion s of C M funct ion . Precon ceived ide as and un will ing co mp arisons with gener al contrac ting prec lude a clear under stand ing of the CM syste m an d obsc ure

Dual Contr act Solutions

79

the pre cise role of the constru ction manager with in each form and varia tion. As a result. owners often lack the ability to reco ncile the CM services the y rece ive with the services they anticipated . To avoid such problems, constru ctio n ma nage rs and owners shou ld take sufficient time to fully underst and the pros and cons of a CM form and varia tion befo re a cont rac tual arrangeme nt is consum mated. The pote nt ial for conflict of interest genetated by dua l responsibilities should be underst ood . An evaluation of the resultant trade-offs sho uld be made, and then act ion should be taken to deal with the trade-offs during the project. Even with due conside ra tion, a po tenti al fo r conflict of inte rest will pers ist but ca n be pre vented if sufficie nt steps a re tak en. Owners can accrue the uniq ue benefits offe red by all forms of CM whe n they are thou ghtfully structu red and under stood,

6.7

TEAM A CTIONS AN D DECISIONS

The six service d em ents essential for pro jec t dcl iver y--design, proj ect managemen t, co ntracting. constructio n. con structio n coord ina tio n, and co ntract admi nistrationwere d iscussed in Ch apt er 1. A review of that chap te r would be app rop riate here . In the AC M form, the AlE and CM sha re respo nsibility for project and contract admi nistration; design respo nsibilities are not sha red. Th e o wne r do es the contracting with gu idan ce from the cons tru ction manager and tech nical inpu t from the AlE. and the con struction ma nager provides coo rdin ation of contractors during cons truction . This alignmen t of respon sibilities provides maximum o wner protection by elimin ating dual se rvices as we ll as providing checks and balances o n team decis ions. All oth er forms and variations of CM shift respon sib ility for service e lements, in part o r in whole. to ei the r the A lE or the CM . Shifting respo nsibilities intro duces the po tent ial for conflict of interest by influen cing team me mber decisio ns and diluting the synergistic team effort inherent to ACM . To compensate for this. the checks and balances th at prod uce o w ne t-ori ented decisions must so me how be pre served and more closely moni tor ed by th e owner.

Ethics in t he ACM System The ACM contracting structure uses bot h business and professiona l ethics to their maxim um advan tage by establish ing 3. system of checks and balan ces tha t precludes sale depend ence on e thics for project success. The AlE is bou nd by professional e thics and by the agency req uirement to aCL in the owner's bes t interest in all decisions.The Cvt is bound by an agency agree ment [0 do the same . All of th e six nec essary d e ments. except con stru ction, a n; vested in the Al E and CM. Con seq uently, the collective pe rfo rmanc e of the A lE rind C M is a major key to project success, Altho ugh CM firms are no t profession al firms in the sam e sen se of the wor d as N E firms. many CM firms em ploy pr ofessional ar chitects and engi neers (AlE peers who adhere to pro fessiona l eth ics commitments) [0 perform C;"1 serv ices. E thical perfor ma nce in the own er's beh alf and an agent's commitment to ac t in the owner's best inte rests a re analogous. Ethical pe rfo rmance is inspired by professionalism and agen cy pe rfo rmance is d ictated by a standard of care , and the goa ls of both are the same . Proje ct team checks and balances simply reassure the o wne r that all decisions mad e by the Al E an d eM will se rve tile owne r's best inter ests.

l

,

6.B

DUAL CONTRA CT SOLUTIONS

When eM forms and variatio ns a re used that assign d ual respon sibilities to either the CM o r AlE, steps sho uld be ta ken to preserve the synergistic composition of the team. Th e fact that a tea m member is pro viding combined se rvices doe s not mean that member's represe ntat ion o n the [earn can a lso be combined. To pre serve the checks and balances un de r dual service arrangem ents, separa te representatio n for each service being provided sho uld be a cont ractual cond ition. The best approach to separate rep resentation is to have separate co ntracts for eac h service being prov ide d. Ra the r than extending [he AlE's des ign services cont ract [ 0 include eMservices, the Al E and owner sho uld en ter into two se parate cont ract s. one for design services and one for eM services.

80

Chapter 6

Se ction 6.8

Co nstruction Mana g e m ent under Dual Services Ag reements

Instead of extend ing the CM '~ AC M contract with provi sions to include co nst ruction o r the hold ing of construct ion contract s. o wne rs sho uld ente r in to a sepa ra te contract for eac h servic e pr ovided by the CM. . Separatio n perm its each contract to speak (or itself with reg ard to provi ded ser vices, pre~ent s .the use. of cross over proced ures. and preclud es du al pe rso nnel assign. ments which might be inferred by a single ex tend ed -serv ices agree men t.

I

Prime Conlraclors

to

D-B /GC

Al E

I

I' )

between the independent D-B contractor and the age nt de sign p rofe ssio nal. The profess ional eth ics of an independ ent de sign firm have a bett er chan ce of influencing dec isio ns than a design entity thai is an integral pa rt o f the D-B con tractor's org anizati on .

6.8.2

De sig n- XCM Se rv ices There will be tunes when an owne r p refe rs a single-responsibi lity con tract for NE and eM services rath er 'han wor king in ::J. team situation with a sepa ra te NE and a eM. Th e D-B syste m sa tisfies this requi rement. pro viding the owner wants to hold the co nstruct ion co ntrac ts. lf the owner wants to use CM mult iple biddi ng and hold the co nst ruction contracts. Design -XCM. d iagrammed in Figure 5.4. is a eM alternative. If the owner is concerned about potential conflicts o f interest inhe rent in dua l respo ns ibility cont racts (eve n thou gh both are agency contracts), solutions similar to the one suggested fa r D-B in Figure 6.1 are available for De sign-XCM as show n in Fig ure 6.2.The owner has th ree Design- XCM optio ns available. Th e Design-XCM s truc tu re (Fig ure 6.2c). where the owner holds a n NE can tract and a C!\f co ntract with a single firm. pr ovides less po tential for con flier of inte rest tha n the struct ures in Figures 6.20. and 6.2b. Th e tea m con cept is presetved in Figur e 6 .~ c because the o wner hold s two age ncy con tra cts, altho ugh with o ne party.

6.8.3

[a]

(b )

FIGURE 6.2 Optional connact structures (or Dc s ig n -X C~I .

D-B

Sub-subcontr actors

I

1' 1

The D-B system combin es design se rvices and cootracn nwconstruciio n se rvices in o ne int imate ly connec t design co n.l r.act. ~is combi nat.ian pe rmits the D- B contrac tor decisions with contractin g/cons truc tion decisi ons. The q uestion o f who benefits Irom decisions mad e in a dual respo nsibility str uctu re. especially o ne wit hout posi tive check s and balances. always exists: who is the ultimate beneficiary. the owne r or th e D-B contractor ? One \vay to stre ngthen resu lts from e thica l depe nde ncy in th e D- D syste m is to structure the co nt rac ts so as to stren gthe n eth ical respo nsibility. Figur es 6.1 and 6.2 show cont ract str uctur es rhnr provi de the same ad vantages of the D-B syste m [ 0 the owner. However. one favo rs the ow ner more than the othe r with regar d to the pc ten rial tor conflic t o f inte rest. The best o wne r-orien ted con tract abilit y decision would be to use the str ucture shown in Figure 6.1a. Note that it cont rac tua lly separates the d esign entity tram th e construction enti ty but still pe rmits single-po int responsibility be tween the o wner an d D-B cont ract or . Sepa rat ing the d esrgn ent ity from the contracti ng/construction en tity offers a bet ter opportunity to obtain the che cks and balances provid ed by a phys ical sepa ra tio n

81

Owner

Owner

6.8.1 The Des ign-Bu ild Exa mp le

~ I t-01

Dua l Contract Solut ion s

Des ign- XCM Solutio ns Whe n the AlE also serv es as the Cl\-I, it is p rude n t to cont ractually separate the services-one co ntract for NE services and another for CM services. The contracts s ho uld stipu late tha t personnel assigned to o ne se rvice not be involved in the o ther. Dual services are usu ally suggested as an economic advantage or a benefici al e xpedien t from whieh the owne r will gain . However. the potentialloss resulting tram d iluted chec ks and balances heavily o u tweighs the perce ived savings in bo th time and in the cost o f se rvices. Dual personnel assignme nts are a blat ant invitation to convert potential co nnie: o f inte rest into re ality.

I

(b)

FIG URE 6.1 Op tional contract structures for the D-B system.

I

82

Chapte r 6

Sectio n 6.8

Construct ion Management under Dual Services Agreements Th e M E-eM

Level

eM Activities

AlE AClivili.:s

Execuliv c. Managem enl Adminult3li\c

Eaecutlve

Eaecuuve Project Archi~cc:JEnt!inee r FiddrVE

Project ~Ianager Fic:ldCM FIGURE 6.3

6.8.4

Execcnve Management Re presentative Field Represen tative

Project team rcpresenunio n (Dcsis n- XCM).

( o ntra et o r- XCM Serv ices There will be occasions when the owner prefers to use ACM but does not wan t to hold the co ntracts for construction. A n obvious solution is to assign the awarded contracts to the AC M. When th is occurs. the AC M bec omes a contractor with the accompanying legal responsib ilities to the trade contracto rs who are now subcont ractors. If the owner's reaso n for assigning the cont racts (0 the C:-.-tis to shed rcsponsibility for the cont rac to r's pe rformance. the AC M becomes a eM providing co ntract or XC~l se rvices. She/he also enters into an independe nt cont ractor relationship wit h the ow ner tha i eclipses the agency respo nsibility of an AC~1. When progress payments arc due. the cv.. . ner issues a single check to the C~1 to cover each total progress payment. TIle funds arc deposited into the Cxl 's account and then redistributed to th e individual subcont ract ors in separate checks. Th e eM has control over the disbursement of the funds because it holds the contracts with the subcont ractors, Th e paymen t situa tion is the same 3S if (he CM were a genera l con tractor in the GC system and exposed to the abuses poin ted ou t in Chapters 2 and 3. The CM repr esents (he interest s of the subcont ractor in any claims or disputes tha t arise under thei r contract with the eM. but the eM must also pursue their interests to the owner. II is difficult . if not im possible to serve both the owner and the subcontractors unde r this contractual relationship. However. if the owner's concern is simply the inconvenience of tracking so man y contracts and purchase orders and having the accounts payable department issue multiple checks on each progress payment da te, a simple solution is available. The owner can op en an escrow accoun t at a loca l bank. Th e amount of the prog ress payments due to each work-sco pe cont ractor and

83

supplier arc lis ted and sup po rt ed in the monthly financ ia l re po rt assembled by the AC M as described in Chap ter 13, In fo nnation Ma nag ement. The owner deposi ts th e amo un t of the -tota l progress pay me nts to the escrow account, enclosing a copy o f the ap plication summary foun d in the mon thly financia l report . The ban k issues checks for each applican t in the amoun t listed and forw ar ds them to the C~f for dist rib u tion to con tractors and suppliers. The bank is enti tled to a mino r se rvice fee for administe ring the escrow acco unt. An alte rnate solu tion tha t is available (b ut not reco mmen ded ) is to have the AC M act as an escro w ag ent instea d of se tting up an escro w acco unt in a bank. Th e AC M deposits the total payment check in its ow n account an d d isb urses pa yme nts to contracto rs and supplie rs accord ing to the applicatio n sum ma ry list. The ACM is entitled to a small service fee for mak ing the tran saction s. One proble m with using the A CM as the esc row age nt is tha t it involves the AC M as a pass -through payme nt age nt when it is no t necessar y. A n AC M should not be put in a position where it receives and disburses project funds. Although an ACM is a fiduciary agen t of the owner, it sho uld not be pu t in the posit ion of financi al agent of the ow ner. A n clement that sho uld be con sidered is th at by using the ACM as an escrow age n t. the A C ~l' s nam e will be ob vio us o n the progress pay men t disbursement chec ks. Some bel ieve thai contrac to rs an d sup pliers will coope rate be ue r with the AC M if they think that payment is coming fro m the ACM . Othe rs belie ve the opposite. Trade cont ractors should not be given the opport unity to relate the construction manager to a general contractor in any wny. Payments made on the owne r's checks re mind them that they are prime contractors with direct access to the own er, completely unli ke their sta tus in the GC system.

Th e Owner

Every precaution should be taken to contractually prevent this compromise . Eac h service should be required ccntr actually to provide an exclusive cadre to function on tne project team at the exe cutive. management. and administration levels in order to maintain the team structure and preserve the benefits of checks and balances. Figure 6.3 shows the composition of the project team whe n Design-XCM is used. lt can be compared to Figu re 13.1 (Chap te r 13) for clarificatio n of the minimum cadre. I! woul d be advisable. a nd certain ly wit hin preceden t, fo r the names o f the th ree project team represe nta tives and their back-ups to be writte n in to the approp ria te contracts to assu re the mechan ics o f separation as n minimum.

j

Dual Cont ract Solutions

6.8.5

,

I

Co nstructor- XCM Services Th er e will be occasions when a ge nera) co ntractor-base d C\1 who has an owner -AC M con tract will convince the owne r that he co uld construct o ne o r mor e wor k-sco pes mo re economically. or bette r in so me way, than another con trac to r. An owne r may have a close relationship with a GC·based CM and p refer 10 use the CM as a const rueto r o n certain parts of the project. When an ACM cont racts with the o wne r to co nstruct wo rk-scopes. the ACM becomes an independe nt co nt ractor which ecli pses the age ncy sta tus and turns AC M into Consrructor-X t.M . Th is du al sta tus of the CM sho uld be handled discr etel y to ret ain the confidence o f tra de co n trac to rs who are plann ing to submi t work-scope bids on the project. There are seve ral ways to han d le this situation: none have parti cular meri t fro m the bes t-use perspective of the C M contracting system. All requi re op en comm unica tion with potential wo rk-scope bidders to maintain as much of the credibili ty of the eM system and multiple bidding p rocess as possible. One option that can be used o n priv ate sector wor k but no t o n public sector wo rk is to inform prospective bidders that specific work -scopes will be negotiated between the o wne r and CM and will not be bid co mpe titively. A no ther is to info rm prospective

84

Chapter 6

bidd ers that the Cfvt will sub mit prices for spec ific wo rk-scopes in an o vert co mpe tition and will be considered for award on the same bas is .:1S the o ther bidders. Still anot her opt ion is to inform bidder s that the CM will review co mpe titive bids when they arc rece ived by the owne r. an d if the e M decides it ca n do the wo rk for a lesse r price. then the eM will be award ed a co n tract by the own e r fo r the work co vered in the selec ted wo rk -scope. On e final app roach is for the owne r to awa rd the Crvl services cont ract using a price-based se lect ion p rocess and parame trically includ e the cost o f constructing spe cific work-scopes in the fcc st ructure fo r Comracto r-XCbt services. As no ted. no ne o f the se ha ve merit. It is nearly imposs ible to cite a situation wher e the cons truction capability of a CM is so super io r to that of the available co mpetition tha t it would be to the ow ner's advantage to award or ass ign a specific workscope(s) to the p roject' s C M. It is eq ually impos sible to comp rehend how o wne rs might be lieve tha t a CM will cri ticize co ns truction wo rk done by the Cot's empl oyees as Impartia lly as co nst ruction wor k d one by othe r work-sco pe contractors. Th e dual resp onsibility role o f the eM which results fro m Co nstructo r- Xf.M de prives the eM system fro m o ne o f its prime rea son s for exist ing: cl iruinuting as much pote ntial for co nflicts of interes t as possible. Con sl ruct or-XCM and Cont ractor-XCM have the mo st pote ntial fo r genera ting debi lita ting conflict s of inte re st o f all the form s and variati ons. 6.8 .6

Sectio n 6.9

Const ructio n Management under Dual Services Agr eement s

85

co uld no t use in the d esign (beca use the eM was admi nistering the budget ) plus mo nies the Clvl incl uded as a sel f-serv ing cont ingency in the G MP. Th er e is no do ub t that on a p rojec t basis, a GM P figure will be highe r than a lump-sum figure. To prot ect the owner from und e rspeu ding the b udget o r relinqui shing desirable featu res not included in the d esign, " plus altern at es" shou ld be included in the bidd ing doc ume nts. The CM shou ld be as ked to pro vide the G MP on the base des ign o nly. When multiple bids arc rec eived from contractors on th e base bid docume nts. the differenc e between the to ta l of the bids and the G MP can be used to p urchase selected alternat es. Chapter 24. Acquiring CM Se rvices. d iscusses d iffer en t eM fee arrange men ts and explo res othe r face ts o f GM PCM .

6.9 THE CREDIBILITY OFTHE CM SYSTEM A p rime co nce rn du ring the develop me nt of the CM sys te m was the wan ing performa nce credibility of the co nstruction indu stry. Co nstruct ion users wer e loo king fo r ways to get be tter pe rfo rma nce . and con stru ctio n indust ry pra ctit ion e rs were looking for ways to sa tisfy cons truction users . B ringing owne r-o rie nted expe rtise into the con tract str ucture se emed 10 be o ne way to accom plish these goals, In th e earl y da ys of C M, many co nstr uctio n industry practit ioners cons ide red it a fad . Co ns truction manageme nt was a buzzword . a tempo rary practice tha t could nev er co mpe te with trad itio na l practices. ln spite of growing pa ins. eM ca ught the atte ntion of many use rs and deve loped in its o wn right. Many const ruct ion p ractitio ners felt that CM was a good th ing for the ind ustry. tha t its ben eficial prac tices wo uld be ad apted to the general and design-bu ild con tracting syste ms befo re it lost its po pula rity. Few indu stry prac titione rs be lieved eM wo uld become a popula r alte r na tive to the GC a nd D- B systems, As the pop ularity o f eM incr eased. traditional con tracting practitioners loo ked for ways to co mpete wit h the new syste m. Th e manufactu ring co ncept of to tal quali ty managem ent (TO M) was borro wed by GC and D-B co ntra cto rs to elevate their image in the eyes o f owne rs. Pa rtne ring was introdu ced as a mea ns of softe ning the adversarial rep uta tion earned by the GC system . New efforts to p rom o te the design -bui ld syste rn were made.The CM syste m proved to be a formid able owne r o rie nted com peti to r in the project-de livery ma rke t place.

GMPCM Ser vi ces Th ere will be time s when O\ v ner s need to esta blish the cos t o f co nst r uctio n prior to the comple tio n of design III or der to save time an d co mp ly with finance cond itions tha t req uire a guarant eed cost before fundin g is approved.The GMPCM form and its variatio ns accommodate these requiremen ts. GM PCM is really a unique var iat ion o f Conrra ctor-X'Ctd . b ut it sta nds as a form of CM because it has thr ee varia tio ns o f its own (Chapte r 5. CM System Forms and Variatio ns. explains the m in det ai l). G M PCM provides AC M service s but also ex tracts a guara nteed ma ximu m p rice fo r the total p rojec t cost from the CM providing services. Ow ne rs shou ld ad vise the CM that a G M P will be req uired be fo re entering a co ntract with the Ct-LThe agreem ent used can be ei ther a sta nda rd G MPCM co ntr act fo rm. or a standa rd ACi\'t co nt rac t for m su itable for a G MP am endment shou ld be ente red into before de sign begins. One approach to establishing the GM P is to have th e ACM det erm ine its am oun t during the latte r stages of de sign , at the time when the ACM is s ufficie ntly co nfident in providing a G MP for the work to be done. Whe n the GMP becomes part of th e co ntract. the CM converts from an ACM to a Contracto r- XCM. Th e p roble m with the veracity o f the GM P is th at the CM is the o ne who cstabIishes the am ou nt. and it is very likely tha t the GMP amount will be set high en ou gh to pro tect the eMfrom loss afte r final costs have been establi shed.Thi s situa tion presents a pote ntial conflict o f inte res t- will the CM p rovi de a budget that benefits the owner's interests or the C M's inte rests ? Alth o ugh the owne r o nly rei mbu rses the eM for the costs exp ended. the "sav ings" betwe en the COSI expend ed and the GMP am ou nt represent mon ies the A lE

The Credibil ity of th e CM System

6.9.1

Credi bility Prob lems CM is no t withou t pr o ble ms o f its ow n. most o f which are connecte d with the pe rforrnanee of its p ract itioners. At its o utset , CM .....as a syste m loo king for acceptan ce fro m co nstruc tio n use rs. Cfvl practitio ner s di ligent ly searche d for ways to improve thei r prac tices to be tte r se rve owne rs. Ea rly p ractitione rs especial ly con trib uted to its success by growing wit h the system. experiencing its growing pains. and progressively imp rovin g its prac tice an d image. Later entrants into the CM mar ke t place. firms getting into eM to get the ir sha re of the business, offe red wha t the y pe rceived to be CM se rvices bu t wh ich were in fact sha llow emula tions of se rvices provided by vete ran Cfvl practitione rs. Unfo rtuna tely, lat eco mers had no othe r choice.

! I I I

86

Chapter 6

Construction Man agem en t under Dua l Services Agree men ts

Effective CM pract ices were developed by trial and erro r and we re propri etary to the firms that develope d them. Alt hough a lot of texts had "Clvl" in the title, and many articles were written on the subject. none provided a compr ehensive how-to scenario that could create overn ight CM competency. Consequently, the average C:-'1 perform ance in the la te 19705 and early 19805 was much higher than in the late 198Os!early 1990s. Competition for projects by underqua lif ie d CM firms and qua lified CM firms who compete by providing minimum services. has lowered the cred ibility of C~1 practi ce. Efforts by societies and associations. both professional and trade or ie nted. have focused main ly on the pro liferation of the eMsystem and not the qua lity of CM services. Sta tutes and laws have focused on wh a t consti tutes CM serv ices and which construct ion industry group can practice C:-'1. a nd not the technical pro ficie ncy of CM practitioners. 6.9.2

C H AP TE R

7

ACM Procedures The previous chapters dealt with the contracting str~ct u re, philosoph~ and origin of the eM system: all of which must be fully understood In order to appreciate CM procedu res and the profou nd level of detail necessary to ensure that each procedur e achieves the positive results which the CM system has to offer. This chapter will cover the ma nagement procedures in the ACM forI? of t~e .CM system. The reason for targe ting ACM rath er than its subforms and their v~n atl on s should be evident at this point. A CM performance is the key to performance In every CM form and variat ion.The added services that convert ACM to XCM. GMPCM. and O CM are traditiona l construction indu stry se rvices and requ ire no ment ion here. O ne point that should be me ntioned is that many CM practices will seem tedious and perhaps unwarranted to construction indus try veterans.This is because traditional project-delivery practices do not normally use the de tail and attention on which the CM system depends. Reade rs unfamiliar with the construction industry [students and most owners) have no pe rspective from which to form an impression one way or the othe r. Only readers who are vetera ns of ACM practice can appreciate the value of the details in each practice: described. The ACM procedu res are structu red around the CM Body of Knowledge a nd its twelve CM Area s of Knowledge cove red in Chapters 9 through 21. Performance policies and procedur es in each of the areas must be devel oped. recorded. and periodically reviewed to zuidc team members and thei r resource pe rsons during the execution of activities t h a~ compr ise an ACM project. The CM's manage ment level or Second TIer team member should be respons ible for organizing and maintaining these procedu res. The last few pages of Chap ter 4 contain a broad-scope list of ACM activities; a cursory review of that list would be app ropriate before reading on .

Credibility an d Dua l Serv ices The original fou nding ph ilosophy o f CM- the prote ction of the owne r 's bes t inte rests-has been eroded by CM practition ers who are not satisfied with earn ing an AC l\l fee and conspire in many ways to supplem ent it by providing dua l serv ices. D ual se rvices increase the potential for conflict of inte rest in the CM contract structure a nd. with the exception of Design- Xf. M. co ntract ually combine agen ts with inde pendent contractors. a combina tion tha t is difficult to control if the owner's best interest is the objective. Dua l services should only be provided when they benefit the owne r. not sirnply to enhance the CM's fee.

7.1

STARTING SERVIC ES If CM is to be used. Ihe CM should be hired as soo n as poss ible after the feasibility phase indicate s a decision to construct.The idea l sta rt-up situation wou ld be to engage the services of the C\1 and AlE con comitantly.This facilitat es the coordina tion of contracts and provides the"best oppo rtunity to confirm the compatibility of the owner. AlE. and ext. Tea m member compatibility a nd synergistic team effort are essential. Consequen tly, team members should ha ve respect and high regard for one another as techn icians and individuals.They will be wor king very closely together throughout the entire project. Selecting a eM is a more detailed process than selec ting eithe r a contractor or AlE . Informa tion on app rop riate pro cedures for hiri ng a eM is give n in Chapter 24. 87

88

Chapter 7

7.2

BRAINSTORM ING SES SION

Section 7.5

ACM Procedure s

89

o n the agen da is the responsib ility chart. Th e sensitivity of the topic unde r discussion re q uires-that the facilitato r be very well prepa red and sensiti ve [ 0 team member co ntribut io ns. Th e facilitator sho uld never use a comple ted responsibility chart from anot her projec t as a base for modificatio n.Th e matrix: may ha ve a suggested list of activities and he adings indicating the tea m mem be rs involved , but filling in descript ions of each team me mber's part icipation sho uld be developed exclusively a t the o rganizational mee ting. The execut ive-level peop le at the meet ing sho uld provide in put to team and project policies and . along wit h the owne r's att orn ey (if present ), mo nitor the co mmitme nts tha t are affected by polic ies alre ad y made in th e o wner-A'E and owner-Cxt agree ments. It is possible tha t some of th e language and the responsibilities in the two agree ments will requ ire mod ificatio n. The exec utive- level perso ns should be auth orized to do this at the meeti ng. The facilitato r sho uld brin g ea ch listed tea m activity to the meeting's att ention . Th e management-level people sho uld discuss each activit y an d come to agreement on the detai led actions each team me mber is respon sible for durin g th e project. TIle end result is a mat rix-st yle document that precisely describes the part icipation o f each team memb e r in e ach act ivity that is a pa rt of the AC:-..t form at througho ut the proj ect. The docume nt can be filed as an agreed -to working: agreement or become a n amendme nt to each team membe r's co nt ract with the owne r,

As soo n as possible afte r the AlE and Cxt have been selected, a meeti ng sho uld be held to introd uce: resou rce and suppor t tea m member s to each o the r and to discuss the projec t and its ram ificat io ns. Th is is commonly called a brainstorming session. Its purpose is to align project goals. become familiar with owne r requ irements an d mode of c peraricn. an d extract as much informa tio n on inte rfacing management activities as possible. The eM sho uld organize, se t the agenda and chai r the meet ing, passing the cha ir ( 0 eac h team mem ber when pres enting and discussing their ne eds. As man y per sons as possible from each team member's o rga nization who will interact with one ano ther du ring the proje ct should be present. This meet ing will set the to ne fo r future team interaction. It is critica l thar the Al E and C ~'I unde rsta nd the o wner's projec t-related business policies and proced ure pre ferences befo re the meet ing adjo urns. Sufficient time sho uld be allotted [ 0 prese nt each tea m member's per spect ives and lea rn the pe rspec tives of othe rs. It is not unusual for a bra instorm ing meet ing to co nsume the bette r pa rt of a day anu involve live to ten perso ns (ro m each team mernber o rganizatio n. Thi s is especially true if it is the first time thai team membe rs have worked toget her o n a project. lnform ati on gene ra ted from brainsto rming allows tea m mem ber s to form ulat e procedur es for co mmunication and interaction dur ing the project. TIH:se procedur es sho uld be reco rded in th e CM project manual for fut ure usc. Furthe r info rmat ion pertain ing to the brai nstorming sessio n a nd the CM project manual is provid ed in Ch ap ter 16, Project Managem ent.

7.3

The eM Project Manu al

7.4

CM PARTNERING

The brainst orming and o rganiza tio nal meetings and the formu lat ion of the responsibility chart are the fore run ne rs of th e "p arm erin g" concep t pro moted in genera l contracting. Th e difference be tween G C and CM partn ering is in the docume ntat ion. GC pa rtnering produc es a volunta ry bro ad commitment to coo peratio n by the project's majo r stakeh olders tha t is docu mented in a non con tractual pa n ncnng agre ement. eM par tnering produce s a voluntary co mmitment to coo peration. and a detaile d contractual commitme nt to coope rati on that clarifies and expand s many of the vague standard clauses contained in the cwner-A'E and owner-A CM agreements. Cooperatio n re qui rements arc documented as well as develope d and agreed to in eM partnering.

ORGANIZATIONA L M EETING

Assuming that CM and AlE contracts have bee n signed by the owne r and the brainsto rming meet ing held , the next ste p should be the orga niza tional meeting. Th is mee ting brings the executi v e a nd ma nagement le ve l representat ives of the owner. NE, and CM Iace to face and is critical e noug h 10 ha ve the owner's legal rcpresentative in at ten dan ce 3 S well. The purpose of this mee ting is to es tablish learn membe r responsibilit ies in the individual procedu res that co nstitut e the CM form a l. The AlE- owner and CM-owne r agreements assign per forma nce responsibilities indi vidu ally to the A lE and eM but do not provide the de ta ils of mutual involvement in te am activities.Th e re is no agreem en t between the AlE and eM regard ing inter action . so o ne mus t be created by conse nt of the team members. This document can best be prod uced in the ma tn x form a nd is appropriat ely referred to as a responsibility chart. Chapte r 16. Project Man agement, provides mo re informat ion on this doc ume nt an d has a list of act ivities and an exa mple to revie w.Th e responsibility cha rt will be replaced some day by a gene ral co nditi ons documen t when ACM team interactio n is unive rsally codified . The organizati ona l meeting sho uld last as lo ng as it ta kes to co mplet e the respo nsibility chart . The owner should be the host and the C ~ t the facilita tor. The only item

7.S THE CM PR OJE CT M ANUA L

From the informat ion o bta ined a t the bra instorm ing and o rganizationa l meet ings and the responsibility chart . the eM is in a position to doc ume nt the many proced ure s to be used by team mem be rs du ring the project. All info rmation pertaining to team interactio n and tea m mem ber perfo rmance sho uld be record ed in a eM project manu al. a living documen t th at sho uld be reviewed period ically and modi fied by team action as necessary, Each team member sho uld have a copy of the eM projec t manual. The con tents of the manu al and the procedures described will vary from project to project because they are individua lized to reflect specific owner needs and prefere nces.

1

90

Chapte r 7

Section 7.6

ACM Procedures

CM Manual Co ntents A s a min imum . the

eM proj ect man ual sho uld includ e:

Ar chit ect's agreeme nt with the o wner Construct ion Ma nager's agr eem ent wit h the owner Oth er team mem be r ag reements with the o wner • Responsibilit y Chan • Budget Manage ment Plan Contract Management Pla n Decisio n Manage me nt Plan Info rmation Man ageme nt Pla n Material/Equipment Man agemen t Plan Project Management Plan Q uality Management Plan Reso urce Man agement Plan Risk Mana gemen t Plan Safety Management Plan Schedule Mana ge me nt Plan Value Man agement Plan

7.6

MANAGEMENT PLANS

The developme nt of the ma nagemen t plans includ ed in the man ua l s ho uld be a team ef fort led by the con struction manager. Expe rienced CM firm s will have "standard" pla ns o r pla ns used o n ot he r pr ojects wh ich CJn be used as a beginnin g poi nt. U nlike th e delicat e, interactive developme nt of the responsibi lity cha rt, the ma nagemen t plans are expected to be th e p rod uc t o f the co nstru ct io n ma nager. Wh en eM se rvices we re first offered , constru ction ma nagers were ind ispu ta bly the kn owledgeable party. Owne rs ha d litt le knowled ge of CM o r [he scop e of e M services. It was comm on for con struct ion managers to se ll the ir servi ces as a self-de ter mined package of se rvices in co mpetitio n with o the r CM firms' self-determ ined packages. TIle CM wou ld tell the o wne r wha t se rvices wou ld be provided if they we re 10 be select ed, and the owner wo uld selec t the C:-'1 that ap pea red to have the best

91

pac kage of serv ices. By the lat e 19805. the process was rever sed : o wners starte d telling con struction manage rs wha t se rvic es th ey want ed and selected the CM on its ability to provide the specified services. Con seq uently, most eM firms sho uld now have the ca pability to provide serv ices tha t can satis fy the ne eds of all o wne rs. with the exce ptio n o f eM firms that exclusively provide ACM or des ign-XC M se rvices. Puttin g management plan s together sho uld be ro utine. Ea ch Managem ent Plan sho uld doc ume nt its p rocess and proc ed ures in de tail and clea rly stat e the inte ractions of each invo lved part icipan t du ring its execut ion . Ac tio ns and inte rac tio ns mu st com ply with ap plicable co n trac t req uire ments and sho u ld. in the case of team me mbe rs. ag ree with the assignm ent s made in the responsi bility chart. Plans mus t ho nor proc ed ura l requi rem en ts and p refe re nces of the: o wne r and includ e the prefere nces o f the C ~I and N E team mem ber s as mu ch as po ssible . As the knowle dgeable party, the eM has the respon sibi lity to e xtrac t requirem ent s and p refe re nces from bo th the owner and A/E and s ho uld lead the team in formulating an d doc ume nt ing man agemen t pla ns. To rei ter ate, the C.\ll sho uld not impose a plan o n the ream . Plans should be co l. lectively de veloped by the tea m. agreed to by the CM and A/E. and approved by the owner. Ea ch plan is a living docu men t tha t shou ld be adj usted and modified if expe rtcncc duri ng thei r applic a tion indica tes revision wo uld be help ful. To this e nd, manage · me nt pin os should be o n the agenda of all seco nd -level management meetings un til satisfacto ry pe rforman ce o f each plan is achieved.

The CM 's management -level team representa tive is res pons ible for maintaining the manual based on the policies set by the executive o r First Tier project team represe ntatives and upgraded informat ion gat hered a t the brai nsto rming sessio n. Copies o f the initial. an d all subsequent upd ates of the manual sho uld be organ ized in a loose lea f binder. Th e e M project manual serves as a ref erence: fo r exe cutive- and ma nage ment level tea m members. a record of policy and pr oced ure developme nt. and a procedural guid e for admi nis trative -leve l team mem bers and C:-'I operations, reso urce and support pe rsons who cyclica lly se rvice the pr oject.

7.5.1

Manage ment Plans

7.6.1

Developin g a Management Pla n Each Management Plan co nta ins procedures fo r accom plishing the seve ral pro cesses which fall under its title. One o f the p rocesses und er Material/Equipment Manageme nt wou ld be the proced ure for acqu iring mate rial and eq uipment for the project. Exactly how this is to be ach ie ved m ust fit the o wner's re qui rem en ts and the form o f eMbeing used. Co nside r the cons tructio n o f a n eleme ntary school for a pu blic school dist rict controlled by an elected sc hool board . Sta te laws stip ula te th e mann er in which schoo l d istric ts may acq uire co nstruetion se rvices and pu rch ase ma teri als and eq uipme nt, an d school boa rd policies modify and add to the state law re quiremen ts. A fter discussions with the eM co nsultant they hire d, the bo ard deci d es [ 0 use AC M and m ultip le trade contracto rs and hires an ACM , U nde r the proce d ures of the already written Cont rac t M ana gem ent Plan . mult iple work -sco pes a re de cided upo n by the te am and wri tten by the A CM . Design is in pro grcss and the contract docume nts have been cus to mized by the A/E a nd ACM to facilit at e mu ltiple bidd ing. Fr om th is info rmation, a pr ocedure for Direct A cqu isition of Construc tion Se rvices. Material and Equipmen t ca n be de veloped as part of the Matc rial/ Equrprne m Managemen t Plan . Th e p lan mu st be reviewed and a pp rove d by the team to beco me pa rt o f the eM Project Manual.An exa mp le pla n is sho wn in Figu res 7.1a. b. and c. Co nst ru ction Sen ices: The procedu re fo r acq uiring construc tion se rvices is simply a narrow-scope ver sion o f the b road-scope assignmen ts agree d upon in the respon· sibility chart. Managem ent Plan assign me n ts shou ld be na rrow scope. They should

92

Chapter 7

FIGURE 7.1a

Section 7,6

ACM Procedures FIGURE 7.1b

E um ple Ma nagem..:: nl Plan (o wner requ iterncnu j.

L Materia l and equlpm~' nl pu rchases ever S:!500 and ccru uucuon se rvices O\'C( SSOlXlshal l be: ad verti sed and c:ompelilivd y bid. L The Advertise ment for BIds shall be published in Jt least on e 10.:31 are a newspa pe r with a daily crrcula rion greater tha n SO.OlXl.

B Ad n :f1is.;mcnls shall be puhlish.:u in rne local nc ...spapcr rC!:Jnlkss of ilS cuc ul.nion. L Adverli:iCmcnlu hall ap~Jr (w ice. at least 10 da~~ apar t. wilh the last atkast 10 days befor e the date bids ale l B L L B B B B

l B B B

B B

rece ived. The crite rion used ( 0 q ualify scppberszcootracrces fur biddmg o r award shall be ob viously obj ective a nd incapable of subjecl h e inte rp re ta tio n. Eu her perf ormance o r presc rip tio n spectncano ns may hi: us.:d tor :u:q uisit;o n pu rposes.. A ll bidde rs must receive iJ e nti"al bidd ing informur••l :l to he deemd eompeuuve. A mimmum of 3 sealed comperiuve b.ds must be recei ved to make an award. Bids ma ~' be snp utated 10 be rec eived as ei the r un it pr ice or lump "urn propvs.1ls. Guara ntee d maxunim price pro pos als may only be used for conurucucn SC f\' I ~S less th an $5000 . Expirc uc n lime for cont ract se rvice s bids shall be st a re d 3 5 nOI ks\ than ; O,;a!clldar dars or mo re than 90 ca len da r da ys.. Expir at ion lime fo r ma teri a l and equipment bids shall be stated as nOI tess t ha n 30 ca le ndar days o r mo re tha n 60 cale ndar day s, Bids sha ll be ope ned a nu read .u ..n n ui..:ia l ml.'l:! lH ~ cf the Board of Education . Bid (l lll.'nin~ dares and lil\ l ~' \ \h~llI be adve rtise d ;Il1J open tothe public, Bilis receive d after the )1.ltI.'J lime and da le )halll1t'l be: o pened and sha jl bc retu rn ed 10 the bidder u nopen ed . Co ntracts fur cons truc tion ~c: nicc: s for portions of the total pr oje ct nuy be a ..... ur de d ~ e r :l ra t e l y pro vidin g awar d rcquiterncnrs are met. Contracts for co nstruction serv ices shall no t be:a warde d it the low com pe titive bid e xceed s 5",:" of the budge led amount. Purchas es of materials an d equipme nt shall not be cons ummate d if th e row com petitive bid exceeds J % of the

Ma/lagrmt nt flo fl

Ow ner

X O wner AlE

X X Owne r X X

X NE. CM

X

O wne r Al E.CM Own e r

eM

X

X X X

CM CM CM X X X

X

NE Owner AlE X

C~1

X X

NE

CM

X X X X

CM

NE. CM

NE Own er

AlE, CM

X X X X

N E,C M AfE ,CM Owner

X

Own e r

B Time PrrformlJ/lu Guill,'

budgeted amount.

01

B All constru ction servi ce cont racts. and th ose m.uc nn l ant.!c qurp mcut rOl.;;h,l~S ove r S2500. shall ha ve: Board app rova l prior to awa rd . S Material and equipment parch ..scs less tha n $~500 may be con summated by Ih.: S upe rin te ndent o f Schoo ls prior to Board appro va l.

provide more det ail to facilitate the activation and execution of a procedu re. In the example (Figure 7.1b) the responsibility chart covered 10 of the 27 listed actions. Th e 17 actions added in the managemen t plan clarify the procedure. Mate rial and Equipmen t: The procedu re for acqui ring materi al and equipment can be prescribed from owner req uirements plus addi tional infor mat ion extracte d from the owner.This format is simpler than the constru ction services form at. Material and equi pment purch asing is an ongo ing owne r funct ion which already complies with school board policy and state laws. Th e owne r is the knowle dge able party. and the proce dure adopted by the team must conform to existing owner procedures as closely 3S possibl e.

Responsibilitv Chari

A Process Sum mary: Write the acverusemem De termine publicatio nslfrcquo:ncy Arrange to pub lish advertisement Pay for the ad vertisement Determine conrractc r qualific a tio ns write q ualificatio n Q uesilon n:!ire Qu alify contractors Suggest bidd e rs lis! Compile bidde rs list De velop proposal terms Prin l pr oposal fo rms Distribute proposal fonns Print bidding d ocuments Pa y for bid ding doc ume nts Dist ribute Bidding Doc uments Arrange fo r pre-bid mee ting site Prepare: pre- bid me eting agen da No lify comractc rs of pre-bid meeting Co nduct pre- bid mee ling(s) Write biddi ng document adde nda Dist ribute biddin g d oc ument addenda Rec e ive r ro ~ls als Prnposal re view for compliance Pro posa l review fer co nle nt Suggest propos als lor acce ptance Sel ect coruracuns for award Award contracts

1. O wner R~q14irtm~n ts: Slate Law, amended or :1l.!gmc nleJ by Boa rd Polie-y_{Related requirement s may be found under other maaagemenr 1'13.05.)

93

Ex ample Managemen t Pla n (co nstruc tio n se rvices).

Z. A cqu isilion Orcon\tfUclion Service s Pr oced ure AC/lons designalt d by:

:o.t ;' le riaVEq ulp mO:lll ~h n.J~"m ...nl Plan r.., the A cqui~ilion u r C u.ul nu:liun :'o llll(' r ... I..... E ~ui pm o:"tl C U"S lru \:l iun 5 ... r ' ices

Mana gement Plans

Auc erusemcru Con tr actor qualification Bidde rs list Bid ding doc uments Pro posa l fo rms Pre-b id mc e ting(li) Bidd ing document addenda

05

10

15

20

15

30

JS

> - - -- - - - - - - - --

Receive prcpcsals Proposa l rev iew Award co ntr acts BIDDI NG PERIOD ( 15 ....·o r1:ing days)

7.6.2 The CM's Proced ures In addition to the team procedures reco rded in the eM project manual . the eM should determine in-house procedures to be used by eM personnel to accomplish the assigned actions.These procedures must dovetail the lea rn proced ures and should be

i

I

94

Chapter 7

Section 7.6

ACM Procedures

Management Plans

95

cons eque nces of misdirection could negati vely affect the credibility of the C~l as a team member and jeopard ize o ppo rt unities for future e M work.

FIGURE 7. 1c Exa mple Ma nag ement Plan {ma terial/e q uipme nt}.

3. Acquisili on or M:.I terial si Equiplncnt Proce dure Determining purchas es: The CM a nd AlE shall selec t the ite ms 10 be d irectly purchased b y Ihe o wne r. Selection sha lt be bas ed on co ns tructio n sche d ule requireme nts (to ng-lead ite ms) an d local comr acring pr actices (items where ins tallntlon-only contractors a rc available ). Purchasing p rocedur es: The NE and e M shall assist the o wner in purchasing lo ng-lend ite ms for the construction or the proje ct. The Al E shall provide to the owner wrlue n tec hnica l sp e cification fo r Ite ms to be purchased by the o wne r. The CM sha ll pro vide to the ow ner written logistic information cov ering tra nspo rt. unlo a din g, and storing owne rpu rchased items. The e M a nd AlE shalt assis t the o wne r in de termi ning vend or s 10 be solicite d. The o wner will issue the req uest for q uotatio ns including t he terms or pu rchase . delivery, payment :mJ war ranticssguarar nees, with the assis ta nce or the NE and CM . The AlE shalt review vender quotations fo r compliance to the technical specificatio ns Th e CM shall review vendor qu ot at ions fo r compliance to lllgis tk requirements, The: o wne r will scte ct :1 su pplie r and issue the req uired purchasing agree men t (purchase o rde r). The CM shall arrange fo r rece iving. unloa din g. sto rin g. and installation of owne r purchases, Th e CM shall check owner-purchased ite ms for condition an d qu a ntity within 24 hours alte r delivery, The: A l E shall inspect owner-purchased ite ms fe r technic a l com pliance within 4 calendar day s afte r dcJi\"l~ ry. The o wne r will pay Icr direct- pur chase ite ms accordi ng to the te rms of t he pu rchase agr eem en t with the vendor. The owner will maintain the dir ec t pur chase files acco rd ing 10 the standard o pe rati ng proc edure uf the schoo l d istrict. Original 0 Upda te 0 Upd a te No. _ _ Date :_--:-:::-_ Fo r Owner. Managemen t Level Rep resentative For AlE : Ma nage me nt Le ve l Representative For C M: Management Lc vet Re presenra uve

inserted in the CM's copy of the CM project manual as a refer ence for all CM per sonnel who will be involved thro ughout the projec t. Afte r involveme nt in several C M projects. in-house procedures that are frequently used and wo rk bes t emerge as stan dar d ope ra ting procedures (SO P) and become part of the Clvl's oper ational menu. Most should be ab le to be used on all pro jects without change : some will require modificati on to accomm od ate the proced ures in the eM Project Manual. The impor tance of docu mented in-ho use procedures increases in proportion to the work load of the eM, part icularly the size and numb er of concurren t proje cts in process.When handling severa l projects simul tane ously. the CM·s sup port and reso urce perso nnel, and eve n some op erat ions person nel. switch thei r day-to-day effo rts from project to project depe nd ing on what must be done . Few persons are assigned full-tim e to o ne project from sta rt to finish. especially in reso urce and support areasBecause each project has unique owner requ irements, CM personnel must adapt to each project's requi rements and execute procedures accordi ngly. The CM project manual's procedures and the cr-.rs adapted in-house proced ures expeditiously direc t CM person nel o n a proje ct basis, bot h in the init ial phase of the project and late r when periodic involvements are requ ired. Without the manual, resource and support pe rsonnel co uld be misdirected. resulting in wasted lime and more importantly. failure in the ser vices prov ided . The

7.6.3

In-House Proced ure s Many in-house proced ures take the form of a pa per trail which lead CM personnel th rough the activity the y have bee n assigned and produce a record for the actions of others who follow.Although this proc ess is more ob vious in other management areas, such as budget and information management. there are some uses in resource management . In the acq uisition of co nstructio n services proced ure, the CM is genera lly designated as the team 's liaison with bid ding contract ors,This can be assu med from the fact that the C M is the kno wledgeab le pa rty in the area of cont ractor relati ons. One of th e maj or efforts of the CM prio r to the bid date for co nstruc tion contrac ts is generat ing co ntin ued interests amon g trade contrac tors to submit bids.The effor t is time consurning and interm ittentl y involves severa l o perations and support persons. In the GC system. it is the responsibility of the genera l co ntracto r to locate trade contracto r and suppli er offers for co nst ruction. materi als, a nd equ ipment. In the ACM system. the construct ion man age r doe s th is task in beh alf of the owner.The CM's effort is more demanding than the GC's because of the CM's agency Obliga tion. Un der ACM multip le bidd ing, the CM must generate co mpe titive trade cont ractor bids in each of as many as 50 o r 60 sepa rate work-scopes. If the CM is not successful in locat ing at least three bidder s in e ach work -scop e (accord ing to the o wner criteria we assumed in the Figure 7.101) those work-scopes must be re-bid. The total cost of the project cannot be de term ined unt il the re -bidding is compl et e. The G C, on the othe r han d. has no set criteria. The GC would like to have seve ral offers in each tr ade con trac to r are a , but if it do es not happe n, the GC can develop csumates for missing trade ar ea s. ration alize single offe rs, and submit a prop osal to the owner anywa y. If dete rm ined the low bidde r. the G C can nego tiate missing trade contracts after an award is made by the owne r. Alt ho ugh not the best way to commit to a bid price, this often happe ns in GC bidding. Not receiving a sufficient numbe r of bids in each work scope area is a risk tha t must be man aged when using ACM with mult iple co ntracts.Th e value of this risk will diffe r acco rding 10 the crite ria set by law o r policy.Th e cons eque nces of the risk are not so much mo netary as time consum ing beca use of the re-b id req uirement. However. the cred ibility of the Cl\t is so me times q uestioned when team biddi ng goals are not met. A proven in-house procedu re that precludes a shor tage of tr ade contractor bids on bid da y is esse ntial to successfu l CM ope ratio ns. An example in-ho use SO P to assu re ade quate trad e contrac tor competition o n mult iple bidd ing projects is shown in Figu re 7.2, Th is procedure would be pa rt of the Reso urce Man agement Plan.

' ".

7.6.4

Oth er Proc.e du res This rep resen tat ive example o f the acquisit ion of ccn strucuon services, mat erials. and equipment procedures provides a framework for other procedu res to be included in the CM proj ect manual .The po int made by the example is the exte nt of deta il necessary

96

Cha pt er 7

ACM Procedures

Section 7.7

to adequately describe a simp le proced u re if it is to be appl ied cons istently by all per sons involved in the proje ct. Proce dures shoul d be firml y based o n co mmo n sense an d good managemen t practice s. Consistency is a prime req uirement when pro viding man agem ent se rvices for a fee and can o nly be ac hie ved fro m a com mo n refe rence when sev eral perso ns are invo lved . Th e procedures should prov ide a documented course o f action for all o pe ration s. resource, an d sup po rt perso ns as they switch thei r input from on e projec t to anot her.

FIGURE 7.2

Examp le in-ho use C \\ proc edure

10

7.7

List of Management Plan Procedure s

97

LIST OF M AN A GEMENT PLAN PROCEDURES

It should be understood that procedures inte rfac e within a management area and also between management areas. The location of a procedure in the list of manageme nt plans is a matter of cho ice but con sistency of locat ion will make them mo re accessible from project to project. It is advisable to establish a maste r index (similar to the Maste rfcrmat for C51 specificat ions) fo r location o f pr ocedure subject mat te r within ma nagement plans that can be used o n all projects as well as within the CM firm. Cross-referencing Interfacing procedures in the manu al ma ke it ea sier to use. The follo wing is a list o f the procedures that sho uld be included in [he CM projeC I manual under the t wel ve plans. The list is for AC M and is no t represented as allinclusi..'e.

cus urc biddi ng co mp e tition .

Bile/gel Munugemcnt Plan: Procedures that pr escr ibe how all p roject COS lS are crea ted. ma nage d, track ed, and re poned IOthe o wner. Procedur es sho uld begin with the orga niza tion of the o wne r's project's budgeted cost and end with final pa yme nts to con tract o rs. fn add ition to their use in co ntro lling costs, proced ures sho uld det erm ine and ce rtify pr ogr ess pay me nts. tra ck desi gnated owne r expenditures. and pr odu ce J de tailed recor d of fiscal acco unta bility. Contract Management Plan: Procedures that lead 10 a con tract ing stra tegy and plan; and the dev elopment, rev iew. coo rdi nat ion an d docu mentation o f the projee l's con trac t and con trac ting doc uments. Procedu res s ho uld spa n fro m the brainsto rmi ng sessio n to proje ct completion . Th ey sho uld incl ude co ntractabil ity revie ws. gathe ring economic/stra tegic dat a o n the cont rac ting. co nstruc tion, mat eria l/equipmen t and labor , market place. docu ment coordi nation, and contract ing ap prova l proced ures d uring the pr oje ct. Decision Managrrnent Plan: Pr ocedures that ensure synerg istic deci sion -making, pro vide chec ks and ba lances. and document all dec isions. Procedures sh ou ld cover all pha ses o f the project. Th ey should establ ish and docum ent each team membe r's decision-ma kin g hie rarchy and prescribe the limits of deci sion-ma king authority. The y sho uld preassign titula r team lead ership and explicitly SIJte th e respon sibilities attached to it during specifi c pro ject ac tivities and phases. Information Management Plan: Procedures [hat com m unica te information 10 and betwe en team membe rs. covering all act ions. in approp riate fo rmats . Procedures sho uld cove r cor respondence. meetings, tcl ecc mmunlca tions. an d the project 's day-to-d ay activit ies. They should spe cify the use of agendas. meet ings. me eting minu tes, reports, lett ers. memos. and rep orti ng forms. and deal with frequency. format. and co nte nt. Material/Equipm ent Management Plan: Procedur es fo r biddi ng. or der ing. expe dit ing. rece iving. ha nd ling. and sto ring ma ter ials and eq uip ment purchased d irectl y by the o wner. and , if possible. exp editing mate rials and eq uipme nt purchased by con trac to rs hired by the owner.

Resource ~ b ll41 l( e" ..:n l Pbn fA C~ lln·h .. u..(', Bidders and Bided s LUlS 1. As soo n as ...-c rk-scc ce s ( Bid D i \'is i ~l n s or BOs ) a rc ide nnfied. ope ra tions shall assemble a lisl ot po te ntial bidders for each BO. 2. The number of con trac tors listed for each BO sh.:all be at least ~, Inc n UII~ I~r of bidders req uired by the owne r 10 make an award . 3. The cont ract ors snail include con tractors who ha ve pe rfor med we tl on pr ': ~' io u ~ projects in the area of the: project. 4. Both the owner and the AlE shOlIl hi: ccr uacted to de ie rmln c if the re e re a ny co ntrac to rs Ihey .... \ ~h to hnvc included on the liSI. 5. As Ihe BO list is developed. th e contractors on the bidde r' s list sha ll be cc m actcd ..nd tok! of the upco min g proje ct. 6. Cont racto rs on the hst shall be contacted no less lII..n e vcr v ~ wee ks J he r the initial co nta ct tc co nlirm the ir mrer est. 7. A list of bidden by BD shall be rnarn ram ed ~t;,uh n g with the fin t contact.The list snail include pho ne numbers and contact name s. 8. The lisl of bidde rs, includ ing weekly updates. shall he included in all c~lr i e~ of the C~l Project Manual . 9. Contractors on the list shall be advised when and ....he re the A dve mseme ru lor Bids is publi shed (iss ued) . 10, Con tacting poten tial bidders s hall become mor e freq ue nt. aeecrdm g to need. aft er Ihe Advertise ment is issued, II . If qual ification is a req uire me nt. a Q ua hfica rlo n Fnrm sha ll be sent to e ac h bid der, whethe r requested or nOI. 12. Assistance shall be offe red to the comractcrs w he exp ress problems with Qu alifica tion Fo rm s. 13. All conuacrors on the list shall be contacted J da ys pri or to the d ue da te fo r Quali fica tion fo rms 10 rem ind the m o ( the due: da te. 14. Ou r goal is to assure atleast ::!x the numher or biJJ t"fS rc,,!uirt"d hy the owne r to ma ke an a ward will submu bids. 15. Every effor t sh::lll be made :0 pro mote the impor tance u( u ad e cornractors 10 the CM eOnlrac ting process. The )' a re prime corurruciors,

B id Lisl Reeoras 1. O pe ra tions personne l shall mamt a in bidde r lists on trade contract or s for use on futu re proje cts, 2. Bidder lim shall include dcm ogr upluc info rmation MI J commen ts o n e uch bidd er's hid ding per for mance and con structicn pe rformance. J. Bid lists shaU be filed by tra dc(s) and crcsaindexcd by business location a nd operations area in te rms of Stale. City. and Ar ea Code . 4. Each contract or on the list shall be rate d on bidd ing pertormace and con srrucricn pe rformance on a scale of i (low) to 5 (high). S. Bid lislS shall be upd ated alte r each bidding experience as .....ell as eve ry year in areas w here this eM frequenl ly provides servic es.

J

98

Cha pter 7

ACM Proce dures

Procedu res sho uld includ e those items to be inst alled by cont ractor s and those to be installe d by the o wner. Th ey shou ld provide positive means for tracking purchases from o rder to installation (in the case of co n t racto r- p u rc~as e d items. be twee n purchase an d delivery) a nd provide for securi ty and prot ectio n of ite ms. Pro ject ,l/llllag el1lenl Plan: Procedures which im ple ment the select ed CM format and prescribe the team act ivities tha t guide the projec t fro m sta rt to finish. Procedu res sho uld cover all team actio ns requ ired to move the projec t fo rwa rd, between the bra instorming sessio n an d the expiration of co ntracto r warranties after o wne r occu pancy. 11H': plan se rves as an inve nto ry and guide for actions req uired to comple te t he project, so me of which arc fina ncing. permits, ap prova ls and the actio ns covered by o the r ~ 1 :H1 a g.c m enl Plan s. The proje ct man age men t plan procedures prov ide the ac tivities a nd du ratio ns for the project 's overall time sched ule. Quality Mallagt'f/Ient Plan: Procedures \...·hich protect the o wner's best inte rest in the selection. specific ation . and installa tio n of const ructio n mater ials an d equ ipment and the co nforma nce of contrac to rs to the technical specif ica tions. Procedu res sho uld cover the te am' s coo rd ina ted e ffor t that e nsures thut the owner's req uired le vel of quality is designed into the project and tha t co ntracto rs unde rsta nd and con for m to the q uality require me nts d uring constructio n. Q uality procedures sho uld be proac tive. Resource Jlan agem t!nt Plan: Proced ures which are used to acquire co nst ruction indus try resources for the project. Proced ures must pre cisely fo llow owner req uirements a nd confo rm as much as possible to con struction ind ustry practices, Procedures sho uld sp ecify each team member's involvement in the acqu isition and ma nage ment of reso urces Ju ring the projec t. Resou rces are co nt ractors. co nstructio n eq uipme nt, con s: ruc tio n sup po rt items. and co nsultant s hire d by the owner. Risk Mw w gel1lerlt Plan: Procedures which add ress the sta tic and dy na mic risks inhe rent to a construc tion projec t. with the goa l of minimizi ng the ow ne r's potential exposu re to them. Procedures sho uld be put in place that identify and handle th e risks thro ugh d isposa l. assignment, o r management. The list of risks is subs ta ntial and extends from con trac to r defa ult a nd da mage to const ruc tion !O insufficient bids at bid time and the engaging of incom petent trade cont racto rs. Risk- management procedu res sho uld be pro vided fo r all possibilities. SaferyManagement Plan: Procedures to secu re t he safety of te am members when on the proj ect site and to assist con tractors in unde rstandi ng and obse rving safe site prac tices. Procedures sho uld neither acce pt nor inte rfe re with contractors' legal responsibilit ies to provide safe working conditions for thei r employees. They sho uld req uire tea m members to obs erve site safe ty practices an d encou rage co ntrac to rs to comply with safety laws. Schedule Management Plan : Proced ures to effectively use sched uling and scheduling tech niqu es to their maximum prac tical capaci ty throughout the project.

Section 7.8

The Imp ortance of CM Procedure s

99

Procedures should cove r the use of projec t time from the brainstorming sessio n to owne r occupa ncy. Seve ra l schedu ling techniques and seve ral levels of scheduling prese ntatio n are avail ab le. All should be used as appro pria te to control and track the project th rough each o f its phases. Va/tIe Managem ent Plan: Procedures to cover the interaction s of the team (essen tially during the des ign pha se an d to some exte nt during the cons truction phase ) in the areas of designabiliry, co ntractability, con st ructa bility. value engineering. and life-cycle costing. Proce dure s d uring desig n begin with conceptu al design and end with completion of draw ings and technical specificatio n. Th ey con sist of team reviews of the project's syste ms bei ng de signed . the mate rials a nd eq uipment being spcci f icd. and the con stru ctio n me thods requir ed to ensu re project goa ls art: mel. Procedu res d uring construction con sist of team re views of contrac t changes. 7.8

THE IMPO RTANCE OF CM PROCEDURES

When the eM system is exec uted to its full pot enti al. it is tnc resu lt of well-fou nded. re liable man agem ent plans an d the timel y, co mpete nt per fo rmance of their procedu res.To app roac h CM from any o ther pe rspe ctive rarely prod uces satisfactory results. It is the timely executio n of coo rd ina ted strateg ic procedu res that puts the " M" in Cr-.L The const ruction manager's controlling area of respo nsibility and practice is ma nageme nt. Expertise in con stru ctio n. contracting. and design prov ides credence to a CM's performa nce. bu t proficien cy in manageme nt makes the system work. This is not to say that technical competency in contracting. const ru ction , and design is no t necessa ry. It is necessary as e videnced by the twelve areas tha t com prise the eM body of knowledge: howeve r. man age ment abi lity is J higher priority. While managing, the eM relics o n the technical expertise of team members an d contr acto rs as a resource; the added techn ical compete ncy of th e CM enhances tha t reso urce a nd raises the CM's standard of perfor mance. 7.8 .1

.

t

eM

Perform a nce Standa rd s

Currently. ther e is no univer sall y accepted sta ndard of Clvl pe rforma nce for ACM se tvices.Thi s ca n be attested to by the inconsiste nt result s of court de cisio ns where standa rds of pe rformance influe nce decisio ns, and it is highly probable that a unive rsa l sta ndard will not be ge nera ted in the nea r future. There is no consistency bet ween CM firms in the services o r the level of the services they pro vide. Cur rentl y, each C M firm es tablishes its o wn menu of service s and its own standard of per formance for those services. It ca n be said witho ut argume nt that ACM has found its definitio n bUI is stiJllooking fo r its stand ard of pe rforma nce. Pe rformanc e standards are es tabl ished from repet itive expe rience . What co nsistently wor ks to owners' satis factio n an d acceptance beco mes the standard. It is reaso nabl e to assume that impro veme nt will occur with eac h repet ition of an action . providing that consiste ncy is practiced fro m one action to an other. The constantly improving proced ures recor ded in CM project ma nua ls will eventually se t the standards because CM is essen tially a pra ctice of proced ures.

Section 8.2

8.1

C H A P T E R

8

Philosophical Transforma tion

101

CM STARTER ORGANIZATIONS

CM practitio ners did not exist until the 1960s. By the 1990s.thou sands of firms offered

,•

CM services. How did [hey mult ip ly in such num bers. and so q uickly ? There are two answe rs: one adds credence [ 0 con structi on industry practice. the

The eM Organization

othe r ad ds crede nce to co nstr uc tio n users suspect image of co nstr uctio n ind ustry practice in the 1960s. The second an swer is best disposed o f first. Many N E firms. general contractors, and construction consultan ts sim ply added CM capability to thei r lette rheads and business cards ..... ithcu t co ncern for what C;\l services consisted of or how to funct ion in the eMco ntrac ting structure.They felt ju stified by falsely ass uming that consrrueuon mancgeme ei was a magnified rendit ion o f the manageme nt of con stru ct ion . som ething they did in thei r existing industry involveme nts. Th e demand for CM serv ices was increasing and many wanted a sha re of it. Firms that en te red the CM marketplace with th is attitude were impr uden t to say th e least. Their impulsive and unprepa red entry into the: CM arena created credibility co nfusio n tha i prevai ls to some deg ree: toda y. The emergence of authen tic CM firms was less simple. Th ey took the time to distingu ish the: dif ferences be tween co ns tructio n man agem ent anti the management o f co nstruc tio n. and developed forma ts and procedures to set eM apa rt from magn ified traditional con struction industry ma nagement practices. Con tract ors. consultants, and A l E firms who under stoo d the requirements of eM re alize d the expert ise of their existing staff had to be augmented by add ing d isciplines that the y didn't have . ~o n t rac tors needed t o gain de s ign experti se : Al E irms had t acquire c nstructien and o ntracti ng expertise. Augmenta tion crea ted a unique erga niza uo n st ru cture, differen t from all existing ccusuucricn practitioner firms.

Previous chapters discussed the structure o f the eM co ntracting syst em an mtr cd uced the act ivities in which a construction manage r becomes invo lved . Thi s chapt er

will identify the expe rtise required of a eM practit ione r and provide on organizational

structure fro m which e M serv ices C'1n be p ro vided. Firs t and mo st importan tly, a co nstruction manager is not a pe rson. A con struction man ager is an o rganization st affed by personnel who collect ively possess the man age ment. design. co nstruc tio n. a nd co ntrac ting ex pertise necessary to credi bly ex ec ute the C ~ t cont rac tin g for ma t. T his doe s not mean tha t one: perso n canno t be suf ficie ntly kno wledgeable to Prvvide CfI.! se rv ices: it simply point s out the unal terable fact that o ne perso n has neith er the lime nor the ph ysical capacity 10 execute the CM format effect ively, The s ta ffing of a C:-.t o rgar uzunon o r firm has no mod el in the tradi tio nal con struction industry. Neith er the sta ffing of a general co nt rac ting nor tha t of a design firm ca n fulfill the need s o f a co nstructio n ma na ge r without e xte nsi ve sup plem enta tio n. The missing disciplines of these two organ iza tio ns ar e o bvious. and alth ough the disciplines are available in a design-build firm. the co n trac to r phi loso phy o f th e D-B syste m cou nters that of the CM svstern. Th e basic dcpa rt rncrns and the ope rati ng. (p rima ry func tions arc ool d) an d con. . pa ny suppo rting functions o f a typical eM firm ar e as follows :

8.2

1. Exec utive-c-Ch l Pulley. C \ I Philosop hy. Firs t T ie r Proj ect Inv ol ve m e nt. Market ing. Sales and company ope ra tions. 2. Admi nislrat io n-R isk. Co ntract. Bu dget an d Info rmation ;\b nagcmcili. pe rso nnel. payroll, accounting. finances. et c. 3. O pc ra rlons-c-D eclsto n, Pr oj ect. Q ua lh y, Re source. Sa relY. and A ll Other Managem ent Areas. Seco nd an d T hird Ti er Pr oj ect Invo lvement

PHILOSOPHICA L TRANSFORM ATION

The origin or a uthenticity of CM firm s no twithstanding. the change in operating philosophy from con tractor to age nt was a major hurdl e that had to be successfu lly cleared. The ope ra ting philosophy of construction management is so d ifferent from tha t of contracting thai contradictions can surface lon g afte r a person with a contract ing bac kground has become parr of a funct ioning CM organization. While this may seem a frivolo us co nce rn. expe rience has sho wn thai so me very goo d contracting pers on nel ne ver become eq ua lly good CM personnel. A con trac to r's position as an indepe nd ent cont ractor allows it to make all decisions in its own best interes ts so lon g as those deci sions comply with its con tract with the owner. A gency turns that position ar ound ; all de cisions mu st be made in the best in te rest o f so meo ne else (in this case , the owner) . Those with lo ng expe rie nce in tr ad itio nal co ntracting sho uld be: awa re o f a backslidi ng poss ibili ty. Unwi tting revers io n can se rio usly affect dec ision s made durin g CM format execution and des troy credibi lity with team members and possibly the CM firm . eM firms spawned from NE crganiza ticns and consul tants are accus tomed to agency and are not faced with this problem to the same ex tent as contractors, Philosophical tra nsformatio n from con trac tor agent is accomplished onl~. when all perso nnel in the GM o rga nization (hin». react. an pe rform as agen~ by hoiding the best-inter ests o f the owner-a bo ve all -othe c sirlera tio ns.

4. R c ~ our c c - Bu d ge t.lnronn a l i l)n . i\1alcriaVEqui plllcn t. Sche dule. an d Value Mana gem ent .

5. Suppn rt-Comm un icat io ns. transporta tion. cle rical. word processmg, dat a processing. records a nd o the r support functio ns. TIle executi.. . e area pro vides company leadersh ip, establishes CM phil osophy and pol icy. and is direc tly in volved in CM op eratio ns at the start o f each pr ojec t and thereafter if exe cuti ve (Firs t li er ) interventio n IS requ ired . The: op erations and reso urce areas are where d uties and responsibi lities ar e to tally C ~'1 oriented. Th e: ad ministratio n a rea is typical for a ny business o rganiza tion but . thro uz h its bus iness re lated acum en. contribu tes La eM ope ratio ns and reso urces as a reso urce o f its own. 111e support ar ea has no prime CM re sponsibility b ut co ntributes significan tly to the product ivity of the ot he r areas. 100

•

I

102

8.3

Chapter 8

A BASIC CM ORGANIZATION The staffing o f th e five basic departmental areas determines th e s ize o f a n in -house CM orga niza tio n. In a sm all C~'I firm. indi viduals can perform more than one CM functi on and ope rate in mo re than o ne de pa rt men tal area. Th is reduces the size of th e organization but limits the: number and size of p roje cts that can be undertaken . A n ideal eM organization wou ld be o ne with sufficien t in-house personnel so that funct io ns and roles would no t have to be dupl ica ted. This organ izat ion would have to have sufficient work-in-progress to warrant the an nual payroll expense. This type of organiza tion sh ould be the goal of every CM firm. It has the capa bility [0 provide CM services at an o ptimum level and a full cadre to expand when necessary. A less accep table but often necessa ry W3Y to ope rate a Clvl firm is to use o utside sou rces for some of the resource requirements. The operations. ad m in istra tio n. and su pport a reas can be in-h ou se, and the executi ves can be pa rt o f th e o pe ratio ns person ne l. One pro blem wit h this arr angem e nt is the loss o f positive co ntro l o ve r tim eframes. Out side serv ices an: not al ways sensi tive 10 the timely needs o f C!\.l operat ions.

8.4

Sect ion 8.5

The CM Org an ization

103

Executive

Ph ilosophy

Markel ing

Policy Finl Tier Ops.

Sates Public Relations

Leadership

Prcx"!;d ur!j1lE 3s:c uljon Decision Budget Project lnfo rmaric n !l.l.:1lerials Q ua llly Reso urce Schedule SafelY Value Risk Cont ra,l

ORG ANIZATION FUNDAMENTAL S The cor e o f the eM o rga niza tio n is the opera tio ns and resou rce de partments. Th ere is little oppo rt un ity for du al ro les in th ese are as beca use of time constraint s in the ope ra tions area . and the re aliza tio n that the re qu ired resource exp ertise usuall y does nor overla p. However. as we will see later. the re is som e oppo rtu nity for overlap with in resource d iscip lines. Dual roles are pr actical in the support and administra tive are as wh ere d ay-to-d ay activities have re duced time co nstrain ts an d ex pe rtise has overlap . It is also advantageous to have per son s in these arC3S a pp or tio n their effort s be tween the two : it pr ovides a feel ing of to tal invo lve men t in thc eMo rganiza tion 's ende avors. The o nly dep artm ent with no du al role co nst ra in ts is th e executive are a. In fact. most in an executive ro le will function in one o r mor e of the o the r four areas in an ideal Clvf orga niza tio n. There is a re sponsib ility to ope ra tio ns and to running the company, but neither is sufficiently time con suming to prevent involvement in othe r areas. A CM organizati on by depar tment and func tion is shown in Figure 8.1. A s mentio ned. the s ta ffing of the ideal CM o rga niza tion is co ntro lle d by three factors: the a bi lity 10 p ro mp tly p rovide re qu ired se rvices. and the n umb e r and size of project s han dled co ncu rre ntly.The o rga nization cha rt in Figure 8.2 sho ws the ex pe rt ise o f personn el assign ed to th e five de partments.

An Opt imum CM Organization

Budg el Informat ion Materia ls Schedu le vatue

Participation

Comrnunic auo ns Tran sportation Clerical Word Processing D al a Proc c: !>.~ i n g Records

Risk Co ntract Budget Infor matio n Perso nnel PayroU

FIG URE 8.1 eM o rganizatio n by area and function.

can no t conve niently incre ase a nd de cr ease the size of their o rganizatio n in response to a fluctuati ng market place. eM o rga nizatio ns also have to keep more personne l on staff because of the wide varie ty of expertise re q uir ed and th e pace at wh ich serv ices mu st be provided. A s mention ed previo usly, alt ho ug h o ne pe rson ma y have the req uired expertise 10 pe rfo rm all required C~"I services. th e pace of projects makes it phy sically impossib le to satisfactorily acc omplish tasks in a reasonable time.

I

(Level I Managers)

I-- - -- - {

Sales persons

8.S AN OPTIMUM CM ORGANIZATION Ea ch ind ividual CM firm sho uld opti mize its o rga nization from th e pers pe ct ive of se rvices pr ovided and the mark et are a se rved. Th is is necessary to earn pr ofit as a CM pract itione r. Op timizing a CM organ iza tion is not an e asy task . especia lly whe n CM is a new business venture, or when o pe ra ting in a m ar ket are a that constantly fluctu ates in construc tio n volume. Unl ike contrac to rs, who d o no t requir e a high ove rhead o rga nizatio n in pro portion to the d ol lar vol u me of wo rk they do. e M o rgan izat ions ha ve high ove rhea d and '

Level 2 Managen

Coordinaton Level 3

M ;Jna gc: ~

Val ue Man agen Va lue Enginee n Es timators Sched ule rs Pla n ne rs

FIGURE 8.2

Office Man age rs Secre tenes Word Processors D,lla Proces sor s Progra mmers Reccp lionisls Cle rks

0.1 c rganizauon by area and perso nnel.

Accountants Bookkcc:pcrs

Payroll Oe rks Person nel Mana gers

104

Sect io n 8.5

The eM Orga Olzation

Chap ter 8

Consequently, an optimum Cxt org aniza tion can be easily visualized b~t ~o.[ so eas ily rep licated. Each practitio ner should approach org anizational make-up individu.. ally.The re is a limit to the number o f hats a person can wear at o ne ~ime:. Figure 8.3 illustrates an optimum eM organization with to tal in-ho use capability and which limi ts performa nce in more than o ne ar ea to exe cutives o nly. An optimized o rganization is a bala nced organ izati on. o ne from which the work load capaci ty of the Operations departmen t is de te rmined by the size o~ r~sou rce. s up­ port and admini strati on staffing. In th e diagram. staffing is set at a mi nim um for an ideal o rganizat ion (minimum, beca use each disciplin e must be represented by at lea st one expert: ideal. because: all disciplines are in-ho use).

The staffing o f the orga niza tion as shown can be red uced in size from 51 to 48 if the high pr ior ity prac tical expe rtise of the elec trical. mec han ical. a nd archi tectu ral value mana ge rs includes lesse r priority de sign expe rt ise as well. Co mbined Value Ma nager (VM ) and Valu e Engin eer (VE) expertise is common in these three areas. The civil VE position co uld be cove red by o ne of the exec utives, red ucing to tal staffing to 47. the probable minimum in this o rga nizat ion. Toe: ope ra tions depa rt me n t consists of four tea ms, ea ch capab le of handling three p rojects a t one time. Th e wo rk load of the o rga niza tion is ther e fo re twelve concurren t p rojects. all in diffe re nt stages o f completion. These pr ojects are considered optimu m projects-projects of a size and co mplex ity tha t can be acco mpl ished by one full-time third level manage r. o r Fie ld CM. pe r proj ect withi n a twelve mont h period. Proj ects larger or sma ller than the op timum project will decreas e/increase the n umber of p rojects tha t ca n be: hand led co ncurren tly. Th e to tal do llar work load of co ncu rre nt pro jec ts is not a ffected.

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A n optimized

8.5.3

Example Ass umi ng annua l sala ries will be $2 mill ion. a burden/profi t factor of 1.7 and an ave rage CM fee of 7%. {he req uired ann ual volume of co nst ructio n wo uld be $48.6 million and the op timum proj ect value $4.05 million over the cou rse of one yea r. Th is type o f exam ple will ass ist in de term ining the po tenti al o f a eM orga nization in the marke tplace. A variety of possible project size and complexity combin ations can be substi tuted, and experie nce -based burden/p rofit factor s and salaries ca n be used to inject reality into the calcu lat ion. Each organization must de te rmi ne its own sala ry bu rden facto r o r multiplier that converts employee wages to compa ny direct personnel expense. and a compa ny's p rofit req uirement is a ma tter of choice mod ified by competition. The ave rage eM fce percentage doe s not depe nd on compe tition beca use the example is based on providing full services as represented by the staffing. Howe ver . the fee per centage includes all mon ey paid by the owne r to the CM for serv ices. inclu din g those incurred a t the site tha t a re sometimes paid as rclmbu rsa bles.

8.5.4 Opt imizing Small eM Operations

• Intl" :"l'" E1n:,"iwe Dual A.c d (II Onc ol lllc'lta luc E!!pn >'C n .. OuI~nalal Chicf (2) ()ftC of 1M ScIIc.;u1en Ii DcW~lal Chic l I)) The Off" .. !lot.. n.lfer ... ,be Penonnc:l Mana~~r

FIGURE 8.3

The Opti mu m Proj ect The dollar value o f an opti mum p roje ct ca n be the oret ically de termi ned by summing the annual sala ries o f the to tul o rga nization: mu ltiplying by a salary-bu rden/p rofit facto r to d etermine requ ired gross re venu es, dividing gross revenues by the average proj ec t CM fee. and dividi ng by twe lve projects. Both the salaries and burden facto r will vary geog raphically: fees will vary accordi ng to pr oject size and complexi ty.

nu. "",..•

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I

8.5 .2

D"~~l'"

105

8.5.1 Further O p ti mi za ti o n

, E.\c('1l1" n

Lc.~ll "'l ~n~~e' • Levd 2 ~bl\~~. '· Lcvel ) M .. n.. t ~ ' •

An Optimum eM Organization

eM or ganiaaricn .

Th e optimum ideal eM organiza tio n (Figu re 8.3) utilizes Its in-ho use resources. sup po rt, and ad minist rative personnel at full capaci ty wh en uti lizing the ope ra tions pe rso nne l shown in the d iagram at full capacity. It is highly unlikely that a newly formed

106

Chapter 8

The CM Org a nizat ion

Sect ion 8.7

eM organization, or a n existing con trac ting. consulting. or AlE

firm just ente ring the mark et. will have the oppo rtu nity to begin CM se rvices with a project work load large enough to warrant the assem bly o f a compl e te in-house organizatio n. It is probable that such organizations will start up gradually. acquiri ng new per· sonne t. borrowing personnel from thei r prima ry business endeavor, and using outside sour ces on a fee basis as experience is gained and ad ditional proj ects a cquired. Gradu al eM organiza tion start-up is a crit ical time for ne w practitio ne rs. It com bine s a commitment to provide unt ried se rvices for a fee with a learn ing experience direc tly involving those services (a co mbina tion that experience has shown to be problematic rega rdless of the type of services involved). The only cau tion that can be o ffered is to accept the situati on us it is nod proceed with the owner 's best inter ests in mind. Again , the ma nageme nt o f con struction is not construct ion management, and the difference should be clearly understood and foremost in mind when accep ting a fee from an owner for el\'I services. Unfo rt unatel y. too many owne r-Cr-t agreements have bee n hastily en te red into when the owne r was nO I suffi cien tly knowledgeable about e M and the 0 \.1 was not prope rly staffed to provide full-value scrvices. In 1110st of these insta nces, the eM is responsible for any disappoint ing project conclusions. II is wort h noting that eMorganization start -ups, past and presen t. acco unt for a signiticanr sha re of the dissati sfaction that owners. A lE firms. and trade con tra ctors have express ed ab out the perform an ce of the contract ing syste m. 8.5.5

Opt imizing la rg e eM Ope rat io ns To increa se: ope rations. eithe r by num ber of projec ts or to ta l volume, additional resource. suppo rt. and administra tive pers onnel must become involved. Sometime s organization expa nsion can be as difficult as organization start-u p: the need to balance resou rces to opera tions is still a probl em . However . functioni ng. CM firms hav-c the advan tage of learning-curve experience: they know the capacities of the ir resou rce. support. a nd adm inistrative people and the dem an ds of the projec ts tha t consti tute their wor k-load .Th ese knowns provide positive dire ction for e xpa nsion. someth ing new organizations do not have. Every CM firm should have an e ntry-level training program to help new emp loy. ees ease into the firm's CM philosop hy an d proce du res. Procedure manu a ls me a big help. bUI ment or re la tionships co mplete the job . If a t all possible. staf fing struc tures within depart ments should provide for ongoing traini ng and developm ent for adva ncernen t.If the firm is large enough to abso rb the cost of an Interde pa n me nt train ing program. that will undoubtedly produce the best results.

8.6

MARKETING AND SA LES

Opt irnizaticn should be the goal or every compe titi..-e eM orga niza tion: it produces cons istent high pe rforma nce. good reputat ion . nnd profitability. However , for continuo ing success. at whate ver work- load level the CM firm decides to se ttle into. mark eting and sa les are import ant factors .

Quality of CM Personne l

107

E ven the smallest CM firm must sustain a proactive sales effo rt to ge t work. C~f firms. like AlE firms, get mos t of the ir work by solicita tion. locating and contacting owners who are antici pat ing pr ojects. Even though many CM projects today are adve rt tised and openly invite propos als, eMse lection is usually (and pro pe rly) based on per formance abili ty. not fee. Consequentl y. a CM 's na me and reputat ion should be made known to owners prior to involvemen t in a selection proce ss.The support department of the CM organization in Figure 8.3 lists one salesperson and assigns responsibility to an executive level manager. As an organiza tion expan ds. add itional salespe rsons are needed to proportionat ely increase work loa d. Mar ket ing and sales a rc covered in Chapter 23. but because general co ntractors are not accustomed to having salespersons on staff. the impo rtance of this func tion is noted here for added e mpha sis.

8.7

QUALITY OF eM PERSONN EL

E very business organiza tion want s to hire the best person for an open position. A proven way to reduce the chances o f hiring the wrong person is to anticipate and document the requirements for each position. A job descript ion and a list of responsibilities not only helps in the personn el search process. it serves as a remin der to those already on the payroll and as a measure . for periodic perform ance reviews. Job descriptions and lists of responsibilities shou ld be living documents. reviewed a t least yearly and updated as the requirements of a position change or new positions ar e added. Firms that are pla nning to en ter the eM field should co nsider planning the organization on pape r befo re making in-ho use pe rsonn el reassignmen ts or hiring ne w pe rsonnel. The potential of a CM orga nization can be summarily evalua ted by reviewing its organization chart . job descript ions. and lists of resp onsibilities. However. to mea sure the potential effectiveness of a eM organization . the competence of the persons filling the positions must be evaluated as well. The followmg are examp les of se lected job descript ions: the generic title s First. Second. and Third Level Perso ns should be replaced with the pre ferences of the individual CM practitioner.

Level 1 Person (Executivej -c-Joh Description Gcncral:The purpose of this position is to supe rvise the eM operation. to initiate project direction , to formulate each project. and to guide each project through the Level 2 Person (Ma nage r). Comple te respon sibility for use of the eM form at on each project is impli ed. Background: Proven ex per ien ce as a Lc..-e l 2 Person (Ma nager ). The position calls for exten sive knowled ge of the constructi on. design. and co ntracting aspects of the industry and the ir relationship with the eM for mal and its techniques and

108

Chapt er 8

Sect ion 8.7

The CM Organizat ion

capabilities, Expe rien ce as a man ager and ad ministra to r at a high business leve l is required. Skills: All o f the skills req uired for success ful performance as a Le vel 2 Pe rson . plus the ability to work effec tively with owners, archi tects. and enginee rs du ring all stages of a projec t at the highest level of responsibi lity. Supe rvision: Per fo rmance in this pos ition is und er the direc tion of the Pres ident. Fun ction :The position is one of individual authority and action pe rformed within the par ameters of corporate direc tio n. Th e position is resp onsible fo r programming and supe rvising each projec t from the ini tial intervie w with a prospec tive client thro ugh occ upa ncy. The pos ition de mands ingenuity and innova tion plus ad ministra tive/o rga niza tional abilities in working with clie nts a nd in the op eration of the C M program. Fo r all practical purposes. this pos itio n is sel f-mo tivating and au tonomo us. w oek Day: As requ ired to adeq uate ly perfor m the requiremen ts of the posit io n. Compens ation: This is a classification 0 posit ion and the co rre spo nding pay run ge is applicable. Benefits: A ll of th e standard employee benefit s.

109

the ability to call upon and use th e req uired reso urces. both within the organization and beyo nd. For all practical purposes. this position is self-motiv ating. Work Day: As required to adequate ly perform the requ iremen ts of the position. Co mpensation: This is a classifica tio n 1 position and the corresponding pay range is applicable. Benefits: All of the sta nda rd employee be nefits.

• • •

LC\'c1 2 Person (1\1:m ager)-Juh De script ion

Ge neral: Th e pu rpose: of this posi tio n is to prov ide the management function o n one or mor e eM proje cts throu gh the use of o rganizatio nal resources, a Coordinator, and the on -site representat ion of a Level 3 Person (Ad ministra to r). Complete respo nsibility for the conduct of the project from sta rt to finish is implied. Backgrou nd: The position calls for exten sive kno wledge of con struction means. methods, and techniques and expe rience in construction/contracting procedu res, Knowledge through expe rience with cont racting, eq uipment. estima ting, specifications, bidd ing procedu res. labo r relat ion s,contracts. insurance. bonding. sched uling. billing. custo mer re lation s. an d construction mat erials is mandatory. The de gree of kn owledge and expe rienc e in the above ca tegories is a majo r ke y to per fcrmance in this pos ition. Skills: Plan reading . value enginee ring. surve ying. cost estimat ing, sched uling. cost accounting, exped iting, computer literacy. and efficient. accu ra te cornrnurucations a re so me of [he skills requi red to ade quately per form the positi on . Supervision: Performance in this positi on is under the directio n of a Leve l l Person. Fun ction: The position is one of individual authority and action . pe rformed within the parameters of the CM progra m. The projects assigned to this position are to be carried out expe ditiously ana accurately in a ma nner acceptable to the client. The position demand s anticipation in the orga niza tio n of all aspects of the projec t, plus

Qua lity of CM Personnel

• •

Level 2 Person's R esp onsi bil ities Prepare for and a ttend organizational meetings De velop the responsibilities of the team mem bers ' resp on sibility chart and the CM proje ct manu al Devel op activities and timing of th e program (program sched ule) Determine the available basic param e ters of the project Co ordinate progr am activity da tes with budge t man agers Assis t in de velop ing the program sched ule Review the responsibility chart and CM project man ual with the Level I Person (executi ve) Ob ta in all required budge t informal ion from the owner Est abl ish the preliminary budge t Provide the construction budget to the value management ( VM) peopl e Provid adequa te de sign concepts and informat ion to chief VM Provide value management informati on to value man agers Decide whe ther o r not eac h phase of the project is ready to bid Rev iew (ra nt end specifica tio n with Level 1 Person prio r to issuance to team Co mply with and e nfo rce the prog ram sched ule Es tab lish bid division (work-scope) index Write bid d ivision (wo rk-scope) descript io ns Ensur e adeq uate bidder part icipati on Conduct pre-bid meetings Conduc t pos t-bid interviews Provid e ade quate cove rag e of bid openings Advi se the team of bidding procedures Make awa rd reco mmen da tion s to A/E Formulate and prepare pro posa l for ms Assist in de velopmen t of the de tailed constructio n sched ule Review and approve the milestone sched ule Modify detailed schedu le (or use as the initial Sho rt Term CAP. Conduct precon struction mee tings Es ta blish o n-site liaison with team and cont ract ors

110

Chap t er S

The CM Org ani zati o n

Assist the NE and owner in con trac t pr epar ation Ad vise the owner of pr oje ct insurance requirement s • Mon ito r expirat ion dat es o n insu rance policies • Conduct monthly project meeti ngs • De velop project completi o n schedule Deve lop and update owner ca sh flow req uire ments Generate and app rove co ntrac to r's contract cost b reakdo wns Re view the billing summary perce nta ges a t project meetings Review payment boo k for co mple teness prior to release to NE Kee p p roject information boa rd current Assist in interviewing Le vel 3 Pe rsons (adm inistrators ) and coo rdin ator can didat es Recognize pro ble ms and bring them to the Level l Person 's (execut ive) att ention Visit the site as d eemed necessary • Manage and mon itor eM pe rforma nce throughout construct io n Attend owner mee tings and team mee tings Administe r the bulletin an d cha nge order procedu re • Pro mo te performance th at adhe res to the co nditi ons o f the con trac t d ocuments Be involved in a con tinuing public relatio ns effo rt • See that a satisfactory quality control program is in effect Ensure that Short Term CAP is properly uti lize d and updated Provide final budget and schedu le statistics for co mpilatio n and the reco rd Review the con str uction bud ge t wit h the tea m p rior 10 bidd ing Provide continu ing review with the team o f the proje ct budget Advise owne r to o btain legal re view/advice o n co ntact d ocumen ts Maint ain own er co nt act duri ng warra nty pe riod Coord ina te con tractor call backs du ring warr anty pe riod Generate finaliza tion of owne r accep tance o f the project Assist Levell Perso n (executive) according 10 his d irec tion s

eM Coordina to r-Jo b Descripti on G eneral: Th e pu rpos e of th is position is to provi de suppo rt a nd back-up for the Leve l 2 Person . It is int en ded that this position will eventually lea d to a positio n of Le vel 2 Pers on .Th ere is no se t resp on sibilit y othe r than to acco mplish the roc tine wo rk ass igned by Lev el 2 Pers on's, and there is no time requirement in the position prior [ 0 pro mo tion to a higher position . Backgr ound: Th e positio n calls for suf ficient knowled ge of construction methods and co ntracting pro ced ure s to relieve the Level 2 Person s o f routine duties and to take on additional tasks tha t cause an ove rload on the ir time.

Section S.7

Qua lity of CM Personnel

111

Know ledge of su bcontrac ting. equipment, estimating. specificatio ns, bidd ing procedu res. labo r relation s. contrac ts. insurance, bo ndi ng, scheduling. billing. and o the r constructio n and contract ing relat ed aspects is mandatory. Th e deg ree of kno wledge in the above categories is the key to prog ress in this position. Skill s: Plan reading, qua ntity take-o ff, estimating, scheduling. technica l knowledge of construction ma te rials, cost accou nt ing. d raft ing, expediting, computer literacy, and efficient co mmu nica tion are so me of the skills required to ade quately perform the wo rk involv ed in th e positio n. Supervision: Perform anc e in this pos ition is under the direction of a se nior Level 2 Persons. Work assignme nts shall be accepted from any Level 2 Person desi gnated by the senior Le vel 2 Person. Function: The positio n is one of supp o rt and assistance. The various duties assigned by the Level 2 Pe rson s shall be carried o ut according to their instruction in both a timel y and efficie n t mann er . The position requi res nea tness, organizatio n and perceptio n in o rde r to accomplish the daily demands of the work load . Handwri ting must be legible. Day-to-d ay re por ting sha ll be automatic. com plete and time ly. Special ass ignme nts o n othe r than rout ine work will be the ru le and no t the excep tio n. Work Day: As required to ad eq uat ely pe rfo rm the responsibilities of the pos ition . Co mpensation: This is a classificat ion 4 position and the co rre spo nding pa y ran ge is app licable . Benefits: All of the sta nda rd employee be nefits.

Coordinato r R esponsibilities Basic (Ent ry Level Position) • Lea rn ing the eM format • Comp lete familiariza tion with the projec t assigned Receive and record project phone calls Establish an d mai ntain job files Handle ma ilings Assemble bidders lists Confirm bidders Plan distribu tion coor dination Asse mble co ntract documen ts Enc o urage co ntrac tor attendance at pre-bid me eti ngs Take minute not es at pre- bid meetings Pr ocu re bidder p requalifications Clerical handling o f bonds, insu rance, and con tracts Sort , reco rd, and file bids, bonds, and insurance A ssem ble final bid tabulation

112

Cha pte r S

The CM Orga nizat ion

A rrange time and place for po st-bid meetings • As sembl e project info rmation list Take minute no tes at pre con str ucticn mce u ngs • Initia te the field files Expedite and co llect Financial Management Co ntrol System tion Expedite res po nse to bulle tins Check and assemble monthl y p;ly book Be awar e o f the proc eed ings at every month ly mceung Visit pr oject sites :H lea st o nce each month

Sect ion S.7

( F~ 1CS)

intor ma-

Read and react to daily job repo rts Coope rate with CM suppo rt persons Expe di te su bmission of final documents for final payment Assist the Level 2 Pers ons accordin g to their d irection s Advanced (E spen enced Le . . ·t'/) A ll of the above. plus

Q uan tity take -offs for change ord ers Bec ome knowledgeabl e with the pr ogram schedule Be co me knowledgeable wit h the respon sib ility cha n Become knowl ed geab le wit h the pr oje ct budge t Bec ome knowledgea ble with the CM -Owner A greemen t Follow de velo pm en t and become kn owledgeable with the co ntract documents Prepa re computer data entry shee ts fo r budget . billing. and ex pedit ing repo rt Ca rry ou t bidd er sol icitatio n proced ures Prelimina ry check ing of bon os and insu rance certifi ca tes Ass embl e co ntract packages for forw a rd ing to AlE Become famili ar with and remain knowledgeable of all project-related mee tings Ass ist [he Lev el 3 Pers on (Administ rato r) in develo ping the expedi ting list Ma int ain warranty tickler file Look after the wel fare o f a proj ect in the absence o f a Leve l 2 Per son. Fu nctio n as a Level 3 Pe rson on a temporary bas is when required Beco me kno wled geable with FMCS an d V M proced ures Read and become knowledgeable with the CM presentation boo klet info rm ation A ttend in-se rvice semi na rs and self adv ance men t meetings as requ ire d

Le\'cI3 Pe rso n (F ield C!\l , Fiel d Ad min istrat nr}-Jo b Descriptio n

C ene ral: The p ur po se o f this positio n is to provide the coord inating funct ion in the field o n a speci f ic CM project un der the d irec tion of a Leve l 2 Person .

~

• if •

Quality of CM Person ne l

113

Essen tially. this po sition serves as the ey es, ears. and voice of the team mem bers on [he project site. Backgrouudi Th e positio n call s for thorough knowledge o f construction means. me thods, a nd techniques, and experiences in con tracting p rocedu res. Kno wledge fro m ex perience of co nt racti ng equ ipment. construc tion materials. proje ct sch edu ling. progress pay men ts. billing procedures, q uality control. expediting techn iqu es, contractor pe rformance. and client re lati ons is man datory. The degre e o f kn ow ledge a nd expe rien ce in the above ca tegor ies is a major ke y to success ful pe rforman ce in this pos ition. Skills: Plan reading, surveying. scheduling. ex pedi ting. cost estima ting. o rganizing. inspecting. coo rdina ting. co m m unicating, co mp ute r lite racy. and planning are so me of the skills required to adeq ua tely perform the po sitio n. Supe rvlsio n: Perfo rma nce in th is posit ion is un der the ass ignme nt and di rection o f a Level 2 Per son . Func tion: The posi tion is one o f coord ination and co ntro l as presc ribed by the project sche d ule. drawings a nd spec ifications.This positio n represents the team in the field and is called upon fo r informat ion and action pertaining to the projec t. The posit ion can on ly be successful thr ou gh pla nning. coordination and surveilla nce on 3 persist e nt bas is, Tota l com mu nica tio n with the team members, especia lly [he Leve l 2 Person . is manda tor y. Althou gh the positi o n lacks [he bur den of major de cision mak ing. the pos ition assumes respon sibility for the proper and timely cons truc tio n o f the pr oject within the es ta blished bud ge I . Wor k Da y: As req uired to ade qua te ly pe rfor m the req uire ments of the pr oject . Most p roje cts o pe ra te o n an e ight-hour day /five-day wee k and all project s require on-site Field CM atten dan ce acco rding to the established work sch edu le. Comp ensuticneTh is is a class ificatio n 2 pos itio n and the correspo nd ing pay ran ge is app lica ble. Benefit s: A ll standard e mp loyee be ne fits. Special Req uireme nts : Pe rson s filling thi s posi tion mus t be cu rre ntly qualification in " Firs t A id to the Injur ed " as ce rtified by the Am erica n Nationa l Red Cross..

Level J Person (Field CAl) R esp onsibilities Field Cl\1 {Experienced Le vel) LC3rn the

eM ferma t

Become com pletel y familiar wit h the project assigned Adeq uate ly staff the p roject in co nform ance with the co ntract ors' wor k schedule • Info rm the leve l 2 Pe rson p rio r to any p lan ned abse nces Info rm the Level 2 Per son immed iately whe n unable to staff the project A tte nd meetings whe n required Present at all times as a me mbe r o f the CM team • Accept direction from the Le vel 2 Person in cha rge o f the project

114

Chapter 8

Recomme nd imp rove men ts o f what ever natu re to impro ve the ge nera l wel fare o f the project Perform dut ies in st rict co nformance with e M p rocedures Do not permit a con trac tor to work on -site with ou t valid proo f o f insu rance Call any dimension al discrepancies to the atte ntion o f the Al E as soo n as possib le • Keep a recor d of all proje ct d iscrepancies of whatever nature as they are d iscovered Keep an accura te and legible project d ia ry Adeq uate ly reco rd all significan t even ts and phon e Comple te and sub mit logs on a da ily bas is • Upd ate the billing summary percen tages just prio r to the mo nt hly meetings Obtain period ic compliance repo rts when required by the projec t See tha t all required legal not ices a re p roperly pos ted a t the job site Be compl et e ly fam iliar wit h the site su rvey and layo ut con trol Coo rd inat e surveys and co ntrol pain IS for the pr ojec t with all Contractors Chec k layou t. line. grad e. and qua lity o f wo rkm anship whenever possi ble Estab lish and con tro l site usc by con tracto rs Plan. co nduc t an d reco rd Weekly Progr ess mee tings Punicipatc in Mon thly Project meetings See tha t all p roject site security measures a n: p roperly implemen ted Coor d inate general co ndi tio n a nd con struction sup po rt items Coord inate co ntractor perfo rmance Obse rve and assess con tract or wor km ansh ip Ob tain qu ality co ntro l int erpretatio ns fro m the AlE Accumu late as -bu ilt info rma tio n Issue on -site safety "ci tati on s" 10 violating co ntractors Wea r a ha rd hat and avo id ex pos ure to hazardous co nditions Observe all safe ty regulation s as a co nstructio n pa rticipa nt Become thoroughly famil iar with the initial Sho rt Term CAP Becom e Ihor oughly familia r with the milesto ne schedule Review and confi rm o r revise the Sho rt Term CAP weekly Immed iately not ify Le ve l 2 exec u tive o f Short Term CA P failures Part icipate in Comple tion Sched ule mee tings Establish. maintain and upd ate the Ex ped iting Re po rt See that all activities can an d do commence acco rd ing to the Short Term CAP Genera te sufficient con tractor effo rt to maint ain sch ed uled progress Complete/submit ex tra work logs da ily when extr a work is be ing performe d Do not assume the resp onsibi lity to auth orize e xtra wo rk expenditures under any circumsta nces Verify the extent of labo r a nd materia ls expen de d on clai med ex tra work

{

Section 8.7

The CM Organ izat ion

Quality of CM Personnel

115

Value Manager-Job Description General: The pu rpose of this positio n is to pro vide au the ntic. timely cost information and alte rna tive app roac hes to proposed design co ncep ts" with the in te ntion o f contro lling the eco no mic factors o f CM proje cts. Thi s is a reso urce posi tion. Back ground: The positi on calls for extensive kn owledge o f co nstruction materials and equ ipme nt and the applicatio ns thereof, incl uding their values an d availab ility in spec ific geographica l arcus. Experie nce as a co nstr uction est ima to r is essent ial. Skills: Plan read ing, qua ntit y analysis" conceptual es timati ng. co mpute r litera cy. an d eco nomic fo recas ting. as well as 3 thor ou gh un derstanding o f co ns truc tion means, methods. and techniqu es is mand ato ry. E ffective communication sk ills are espec ia lly impo rta nt . Supervision: Pe rformance in this posit ion is under the assign me nt and direct ion o f the Ch ief Value Ma nager . Funct ion: To provide cost-ori en ted informa tion to all CM projects in the format requ ired by the Le vel I and 2 Persons in charge. To review d rawings and specifica tio ns. evalua te mat eria l. lab o r and eq uipment . sugges t alte rnative prod ucts and procedu res. and advise on eco nomic factors a ffect ing each specific pro ject. To provide sclf-mo rivurcd mon itoring of all projects with res pect to cos t-rela ted facto rs. Work Day: As req uired to pe rfo rm the require men ts of the posi tion . Co mpe nsatlo n: Th is is a class ificatio n 3 posi tion and the co rrespo ndi ng pay range is applicable. Be nefits. All th e stand ard emp loyee be nefits.

Value stanager R esponsibilities Have a conti nuing in te res t in the cost factors affecting eve ry pro ject Establish all constr uction costs Extract all pe rtinent in form at io n per tain ing to eac h project • Att en d brai nsto rming mee ting Develop a cost fo r the proje ct 's Co nstruc tio n Co ncept • Define and recor d the elements of the proje ct' s Co nstruct io n Co ncept Est ablish con s tru ction cos ts base d o n schema tic information Prov ide intense VM be tween sche ma tic and desig n devel opmen t d rawings Communicate value ma nagemen t possibili ties directly to AlE Establish co nstr uctio n costs based o n design devel op ment d ocum ents Atte nd des ign developmen t learn works hop En courage timel y A lE involvement/coope ratio n du ring design d evelopm ent stage

116

Chapt er 8

Section 8.8

The CM Organization

Assist in establishing long-lead items throughout design development Continue value management duri ng worki ng drawing stage Estab lish construction costs based on working draw ings and specs • Distri bute costs into Bid Division format • Review Bid Division descript ions Attend pre-bid meet ings when held • Review/comment on con tract doc ume nts as to cla rity and complete ness Att end post-b id intervie ws upon request of Level 2 Perso n Review bulle tins when requested to do so by the Level 2 Person Review all low bidders' proposals Review completed project costs Update value managemen t capabi lities on a con tinuing basis Establish cost cri te ria at specific project locations Establish cos t criteria for various project types Commu nicate pert inen t informa tion to the rest of the organization Make pe riodic visits to projects duri ng const ruction Main tain an ongoing interest in every project Provide inpu t to the expediting report

8.8

The Funct ion ing

eM Organi zation

THE FUNCTIONING eM ORGAN IZATION

During the progressive ph ases of a project . sho rt-term assignments (responsibilities given to CM personnel. within their a reas o f expe rtise, for the dura tion of one phase or more) are required of CM person nel. Ope rat ions. administra tion, or suppo rt persons are usually the ones des ignated. Figures SA th rough 8.7 desig nate assignme nts du ring various phases of the project. Sho rt-term assignments are ident ified with a "T" in the upper left corner of the cha rt boxes. Not all phases ha ve been dia grammed. Th e predesign phase is not complex enough to warrant an assignme nt cha rt. Predesign consists of the brai nstormmg and organizational meetings. each appro pria tely a ttended to accomplis h their purposes. O n projects where the team is in place d uring a feasibility phase. the assignme nts would be customi zed to reflect the owner's needs. A typical chart is nOI ap propriate, The pcstconst ructio n pha se is also not complex eno ugh 10 warr ant charting.The pos tconstructio n or warr ant y phas e consis ts of follow-up on owne r satisfac tion and la tent problems which must be corr ected by contra cto rs.

Own er. eM. AlE Te am (1.,1 LCH:II Person

The preceding job descriptio ns an d lists of responsibilities take time to prepare and maintain. but the ir value is significant and time spent on them is worthwhile . As stated. an organization cha rt plus job descriptions and responsibility lists provides a blueprint for the finn to follow. The variable conten t of eM services makes a blueprint necess <1 ry. An entry CM firm should dete rmine the services that are within its start-up capabili ty. design an organization tha t accomp lishes those services. and write the job desc riptio ns and responsibilities that will make the organizatio n function as pla nned. An orga nized eM firm expansion ca n be accompli shed in the same man ner. Pioneer CM firms cou ld not use this approach: they had no idea of what the blue print should look like, and their services fell far short of what eM services consist of today. However, they had no trouble adding services as [hey became obvious th rough experience. Sched uling an d value engineering wer e the fore runne r eM services. The original strength of the CM system was vested in these two a reas, It was only after repeated eM expe riences [hat man y other se rvice opportunities were recognized and became equally, if not more valuable. to the owner. What is currently refe rred to as multiple co ntrac ting, ccntractability, financial accou ntability. checks and balances. value management, parrne ring, qua lity managem ent an d risk sha ring arc ar eas not pla nned for in CM's original scope of services.

117

FIGURE 8.4

Schemat ic and design development phase assignments,

118

Chapter 8

The

eMOrgani zatio n

Level l Pen on

Sect ion 8.9 Own er, CM. ME Team

Schematic and Design Development Phase Assignments

119

Owne r. CM. AlE Te am

I e M Level I Person ~

e M Level 2 Person

CM Lc\·e12 Person

I

I

I

Chi"

Schedu ler

.,.

I r

I

Y MeChanic:!11 Liaison

T

Chief VM

(Civil VEl

I

l

r CoordeMinator

I

'". IY

Sa fety Liaison

I I Eleculcul Liaison

I

IT Architect Liaison

I I

I

I FMCS Ccorcinatcr

I

I Om Processor

I

I U'OIJ IIII (Fic:1d CMl

FIGURE 8.5

Construcnc n documents phase assignments,

rConll'~clonl C:'>-l t..:...c11 Per10n

O wner. e M. AlE T eilm

CM Level 2 Penon

FIGURE 8.6

8.9

Bidding phase ass ignment s,

SCHEMATIC AND DESIGN DEVELOPMENT PHASE ASSIGNMENTS (FIGURE 8.4) Team: The Level I Per sons for the o wner. AlE. Cfvt ar e prom inen tly involv ed at the outset of the desig n phase. gradua lly turning ove r res po nsibilities to Level 2 Per son s as design mov es toward the co ntr act docume n t phase. Th e C M's Level 3 Persons sho uld be involved as soon as available.

FIGURE 8.Ja

Co nstruction phase assignmcnls {optimum projec t]

Team act ivities er e directed to des ign and qu ality decis ions to ensure timel y des ign pro gress and contractability dec ision s which will facilitate the bidd ing pro ce ss. eM activities ar e th e responsibili ty of the Levell Person . Lever 1 Person: The Levell Person is responsible for orga nizing the proj ect and arra nging the prope r and time ly involvement of eM resources as required. Much of the respon sibility can be delegated [ 0 the Level 2 Person. Close contact with the owner and N E sho uld be maintai ned during the early part of the design pha se. Fl\ICS Coordinator: The ass igned is respo nsible for the d esign/adaptat ion and utilization of the fina ncial manageme nt cont rol syste m. Re sponsibility is achieved from tea m d irection an d with the assista nce of the computer pr ogrammer. dat a processor, chi e f sche d uler, chie f value ma nager, and pr oject plan ner . Compl iance Coordinator: A d esign pro fessio na l famili ar wit h the building codes, fede ral. state, a nd local desig n and p roced u re req uireme nts (such as the EPA . Fire Ma rsha l. Health Depart me nt and pe rmi t issue rs) in the ar ea of the project. The ass igned assis ts the AJE and owner in complia nce matters to minimize redes ign and delays. Chief Value 1\lau::Jgcr: A design professional who coordi nates value man agement input duri ng thi s formati ve ph ase o f design. Assis ta nce is p rovided by appropriate value enginee rs and man agers, The funct ion of the in-ho use VElVM team is to conver t de sign into cos t. mak e suggestions and provide alterna tives fro m a

120

Chapt er 8

Section 8.11

The CM Organ ization

i•

8.10

CONSTRUCTION DOCUMENTS PHASE ASSIGNMENTS (FIGURE 8.5)

Team: The Levell Per son turns the projec t over to the Level 2 Person. Activities during this phase focus on value management and budget management as the contract drawings and technical specifica tions are deve loped and finalized. Prepa rations for bidd ing include bidders lists. bidder qualification. work-scope descriptions, pro posa l forms, and docum e nt review. Level 2 Person: Ass umes a stron ger ma nagement role; responsible for guiding the project with the help of resource. support. and administration personne l. A major assignment is to kee p the project budget on [rack and preparing bidding procedures. C1\1 Coordin ator: Provides assistan ce to the Level 2 Person and assumes respon sibilities and assignments accordingly. Principal responsibilities include bidders lists. proposal forms. bidde r cont act and motiva tion. bidding procedur es, and keep ing track of progress as a pr oject moves towa rd the bidding phase. Chief Scheduler: Mainta ins the progra m schedule and prepares the detailed construction and mileston e schedules. Corupliaucc and D ocument s Coo rdina tors: These two coo rdina tors contin ue the assignments that originate d in the schema tic and design stage. Chief Value Enginee r: Conce ntrates on value management with the assistance of the value managers and the support of the value engineers.TIle construction budget must be assembled prior to issuing bidding documents to contractors.

Construction phase assignmcnu (larger /mo re co mplex than opl imum project)

value perspective.The VEN M team does not perfo rm design but rather critiques the work of the AlE as design progresses. Documents Coo rdinator: The responsibi lity of this assignment is to assure tha t all drawings. specifications. contract for ms. and other necessary documents are in process; that they are cre dible. accu rate. properly for mulat ed, and app rop riate ly reviewed . A major responsibility is to see that the eM format is properly integrated in to the contrac t docu ments.

121

P roj ect Planner. A pe rson experienced in contracting. the constructio n industry. construction equipme nt. and particularly in constructi on means, methods, and techniques.The respon sibility o f this position is to plan the physical construction of the project in a feasible way. The project planne r is assisted by the Level 2 Perso n and the Level 3 Person, if available. The project plan is subsequently used to prod uce construction sched ules and allocate work areas to contr actors on-site. Chicf Schcduler: Prepares/maintains the program schedu le. the first of five major schedules used, with input from the team. the project planne r. and Level 1 Person.

Owner, eM. AlE Team

FIGURE 8.7b

Bidd ing Phase Assignments

8.1 1

BIDDING PHA SE ASSIGN M ENTS (FIGU RE 8.6)

Team: Final bidding docum ent review. receive proposals. evaluate proposals. make award recomme ndatio ns. Lc\c1 2 Person: Conducts the pre-bi d. post-bid and preconstructicn meetin gs a nd contracto r interviews, assists with bid tabulati ons. leads the proposal evaluation team, and makes award recommendation s [ 0 the AlE .

122

Chapt e r 8

The

eM Organ iza tion

Sect ion 8.15

Level 3 Person: Must bec om e actively en gaged in the pro ject a t this time ; previously has been a contr ibu to r to the CM tea m as availab le. Assist s in pre-bid, postbid. and precon struction meetings.

Chicf \':lI u~ l\ l anagcr. Co o rdin a tes the involvement of value ma nagers at pre-bid and post-bid meeti ngs. con tracto r inte rviews.and prop osal evaluation meetings.

CON STRUCTION PHASE ORGA NIZATIO NS (FIGU RES 8.7a A ND 8.7 b)

Projects vary significa ntly in size and complexity, making it impossible to diagram a model organ ization that will fit them all. . When staffing a n optimum organizatio n, it was point ed o ut that an op timum size projec t had to be assum ed . figure 8.7a is a typical con struction phas e or ga niza tio n for the optimum CM o rga nizatio n dia gramm ed in Figu re 8.3. . Figur e 8.7b is ~ typical con stru ction orga niza tion fo r a large r, mo re co mplex. project than the op timu m: so large and complex that reso urce personnel had to be assigned to it full-time. When th is occ urs. the cons tructio n ph ase o rga nization is said [ 0 be field based. as o pposed 10 office based. as in the case of an op timum project. Resource personnel arc physica lly loca ted in the field office rathe r tha n the main office. at least fo r the time thei r expe rtise is consta ntly requi red.

.I

8.14 8. 13

123

Safe ty Liaiso n; Visits the site periodically, Distri bu tes pu blished safety infonnation to contractor s. Attends con tract or on-site safet y meetings when invited. Maintains a file of contractors ' project safety plans. Doc s not make safety inspections o r monitor co ntractor safety conformance . Chief Sche du ler: Monitors all scheduling activities. Confers with and advises manager s o n proj ec t prog ress. Does spec ial sched uling stud ies if reque sted. Attends and co ntributes to mon thly meetings. Monitors o n-site schedul ing. Maintains planned and executed schedule comparison s. Fl\lCS Coo rd inato r: Produces the project's financial mana gem ent report for each progr ess payme nt. Gathers the required info rmation from [he Level 2 Pe rson . CM coordinator. and team Level 2 Persons for each progress payment. Chie f \'M:Th e Value pers on. in this case the civil VE . assigned as the chief VM for the project. Utili zes the services of o ther value manager and value engin ee r disciplines as requ ired . Mainly used to review changes and estimate costs of Ch anges. NOT E: The assigned position s (those with the T in the uppe r le ft comer of the pos ition box ) ca n be filled by per son nel who are al read y part of the pro ject o rganization and ha ve capacity/expertise to sho ulde r assignment respon sibilities or by eM organiza tio n personn el with the req uired expertise, who currently have additi onal cap ac ity availa ble. When making assignmen ts. expert ise sho uld be the priority closely followed by capacity.

~oc~rnc~ts Coord inato r: Assigned to final review of bidding documents before dist ributi on to con tractors . Ass ist the ArE in form ula ting pre-bid and pos t-bid addenda .

8.12

Office Based vs. Field-Based Projects

CONSTRUCTION PHASE ASSIGNMENTS (OPTIMAL)

CONSTRUCTION PHASE A SSIGNMENTS (MOR E COMPLEX)

The assignments and responsibilitie s of a larger /more compl ex project are simila r to tho se on an optimum project.The exceptions accommodate the locat ion of operation s. resou rce. suppo rt. and administrati ve per sons in the field office. The supe rvisio n hierarchy change s due to the locati on of personnel. but the responsibility hier archy rem ain s the same; i.e.. the SChed uling coordinator is respo nsible to the chief schedu ler but functions und er the administrative control of the Field C ~1.

~C:.1I11: Level 2 an d 3 Persons ar e the principal team part icipa nts du ring co nstruenon. ~e vel 1 Per son s arc availa ble if nee ded . Prime concerns includ e progress. re po rtmg. contracto r payments. changes. and budge t co ntro l. Close co ntact is ma in ~a ined be tween team me mb ers by teleco mmun ica tion s. lett er s, rep ort s, and meeting s. Level 2 Person: Esse ntially ru ns the proj ect. De signates site respon sibilities to the Level J Per son (fie ld CM ): is assist ed by the CM coor din ator. Uses services of resou~ce, su ppor~. and adminis tra tive pe rsonnel as req uired. Visits site regularly. Stays m touch Wll~ A/E a~d o wner Level 2 learn count erpa rts. Atte nds weekl y, m o~th ly. an~ sp ecial mee un gs. Initiates mfo rmati on dissemination. A nticipates projec t req uirements. Pro vides liaison with con trac to rs' ho me ofti ces. Level J Person: (field eM): Essen tially ru ns all activities related to e n-site constructio n. Holds pre con stru ction, progress, and exit meet ings. Organi zes contra clor safe ty meet ings. Coor d inat es day-to-day contractor activiti es. Reso lves docum ent conflicts. Kee ps da ily recor ds. Re por ts to the Level 2 Person . C1\1 Coo rdinato r: Assis ts the Level 2 Perso n 3S directed. Serves
8.1 S

I

OFFICE-BASED VS. FIELD-BA SED PROJECTS

O ne type of eM fee reim burses the CM for all field costs; ano the r include s all field costs in the CM fee. It is easy to see how a reimbursed arr angement co uld influence where eM per so nn el a re located . The following comme nts do not take into co nside ration the type of fee the C M will be receiving for services. As an agent. look ing after the owner's best intere sts. the CM sho uld not let it beco me a con sider ati on . The CM sho uld provide the most effident organizat iona l structure possib le. Th e inhe re nt stre ngth of a C M o rganiza tion is located in the CM os main office. The expertise and ab ility of the Field CM notw ithstanding. it is the op e rations. resour ces. support. and ad ministrative personnel that ma ke the CM syste m work effe ctively o n a project.

124

Chapter 8

Sect ion 8.16

The CM Orga nizatio n

Constr uct ion Organizat ions in Ret rospect

125

A C~t organiza tion has a matrix mana gem en t structure. and the bes t avail able exce? t for Field e Ms. is locat ed in the main office: their exp ertise shou ld be d irectly available o n as many pro jects as possib le. Th e ir assistants sho uld be se nt int o t ~e field as an extension o f their mentor's expertise and to stre ngthe n the ir own ex pertlsc: Co nseque n tly. an office-based or gan iza tio n should be a priority o ptio n on every proje ct. When plann ing a hel d-based o rganiza tio n for a p roject . the min imum number of ser:ice:s s~ oul d be tra nsfe rred to the field o ffice. and onl y for the duration necessary. Th is requi res good judgment in selec ting se rvices and the per sonnel to provide them. Even though a matrix management struc ture and modern commu nications permit field persons to have quick. direct contact with ma in o ffice expertise. man y field de cisio ns will be mad e without contact. Conseq uently, assignment s to the field sho uld be made pr udently and no t (as many in the business wo rld are) on the basis o f co nvenience. t~lent.

8.15. 1

CM Orga nization Co ntro l In further suppo rt o f o ffice-based o pe ra tions. a loo k at co ncurre nt eM activities migh t help. A eM firm has se ve ra l pr ojects In proce ss at o ne time. Ea ch p rog resses o n its own schedule and (it can be sa fely assu med ) in varying st ages o f feasibilit y. design, bidd ing, award. construction and commissioning. or move-in. Th ey are pr ojects of varying size and comp lexity. so me req uiring field -based orga nizati ons and o thers. office- based organi za tions. A lthough it is possible to cont rol a CM firm 's tot al work load. it is no t pos sible 10 time-co ntro l eac h project 's acquisition or regulate the sched ule of each project 's pha ses. Each project has a time and p hase agend a which cannot be alt ered and smoo thly integrate d into an op timum Clvl orga nizat ion work load . Effect ively handling the: ope ratio na l peaks an d valleys is one of the maj or challe nges of a eM fi rm. (More will be said abo ut this in later chapte rs.) Howeve r. the resu ning dem ands a nd pressu res from the une ven projec t wo rk load. which is mai nly place d on reso urce pe rso ns, substan tia tes the fact that reso urce person s must not o nly be spe cifically tale nted. bu t tho se mos t talent ed mUS I also be co nsta ntly available. Figure 8.8 is a n example o f how a moder ate ly large and co mp lex project can be office-based rath e r than field-based, a lthough a hurr ied inclina tio n might be to d o o therwise. The project o rga nization in Figure 8.8 uti lizes two Level 2 Persons. two CM Coo rdinato rs. o ne Level 3 Person, and three assistant Field eMs. who are Level 3 Perso ns on assignment. A projec t plan ne r is assigned to assist in thi s area beca use o f the p roject's size. Size and co mplexity mandate an expanded o n-site org aniza tion bur only in the area of operation s, Altho ugh there will be more con structi on going on each day over a large r area . the number of contracto rs will probably be the same as for an optimu m project . Onl y the nu mbe r o f workers employed by the contractors will increase. Consequ en tly.co ntrac t administratio n activities shou ld not inte nsify.

FIGURE 8.8

8. 16

Moderately tergerccmctcx constru ction phase (office·bas ed) .

CONSTRUCTION ORGANIZATIONS IN RETROSPE CT

Th e organizat ional ma ke-up o f a co ns truction man agem en t firm is unique in t he co nstr uct ion ind ustrv, Nei the r a co nt ract or nor an A l E firm ca n match its functions or per so nnel. Howeve;. a desig n- build co ntracti ng firm 's o rganization co mes closest in many ways. Th e req uired con tra cting and cons tructio n expe rtise is present, but the design expe rtis e is mo re than required. Because of the way the y mu st be cons tituted (or their principa l endeavo rs. none of the three o rganiza tio ns can fun ct ion in the o ther's area withou t considerab le mcdificat ion. As previously sta led . a n A lE firm has th e pro per owner- se rving phi losophy but is sho rt in co nstructio n and co ntrac ting expertise. A co nt ractor is sho rt in design expertise and is hindered by a n inde pen de nt con tractor business philosophy. A desig n-build co nt racto r has more than en ough expertise to do wha t has to be done but. like the contract or . is hindered by an indepe nde n t con trac tor ph ilosophy.

126

Chap t er 8

Over the years. cons truction ma nage me nt services ha ve stab ilized with rega rd to what can be don e in the o wnet's beh alf under the ACM forma l. To conscio nably practice eM. a finn should obl igate itself to pro vide an or gan ization . in both numbers and expert ise.t o effec t all th at can be accompl ished for the o wne r.To do less would detract from the value of the system to the owner. Based o n the phi losop hy of construction man agement. the CM 's status as a n agent with fid uciary responsibilities. and the types of services eM firms provide . eM shou ld be a profession al practice. Howe ver, pro fessiona l status must be earned in addi tio n to having criteria that mark s a profe ssion. With th is in mind. construction manage ment firms should do all possible to pr esent themselves to o wne rs, the public. and the const ruction industry as profe ssion als. This will be achieved by creating an org anization of highly q ualified peo ple who know how to coo perate within the o rganizat ion and how to wor k with oth e rs. Tech nica l co mpe tency is extremely importa nt but no t eno ugh: CM pers onnel must be pe op le-pe rso ns with co mmunicatio n skills of the first o rder. No rmal eM activities place jXrso ns at all levels of the o rganiza tion in direc t co ntac t with owners, arc hitects, en gineer s, accountants, bankers, atto rneys.cons ulta nts, and other professional s, as well as with cont ract o rs and suppliers. Th is exp osure is unlik e the expo sure of any oth er con stru ction indust ry practi tio ner. When hiri ng pers onn el, personality, communica tion skills, appea rance, and the ge ne ral demeanor of prospects must all be conside red .

8.17

Section 8.18

The eM Organization

SPECIA L CONSIDERATIONS

Those in the CM o rganiza tio n whose job descript ion includes management require add ition al talents in this area . Managem ent me thods can be taught; management ability cannot be as easily acq uire d. A co mpe tent man ager is not prod uced by se niority. dec ree. or title. In addi tion to the qu alities liste d for a ll CM per sonnel. persons selected as managers must have the speci al abili ty to manage . The se perso ns must be sought afte r on a continuing basis. both with in the o rga niza tion if and when the y mature and outside the o rganization if the ne ed arises. Pro motio n 10 man ager is not base d on technical abilit y. A CM c rgaoizmicn must manage itse lf as well as the projects comprising its wo rk load . As alluded to earlier. internal management ability is a prerequisite for compet ent external managemen t abili ty. If the CM organiza tion is not well managed, it is probable that the projects will not be well ma nage d eithe r, and there are significant management differences between the two. The man agemen t of the CM o rga nization has the bene fits of continuity an d time on which to reflect and build an effective manageme nt structure; project s do not. Th e man agement structure of a project has to be right the first time: ther e may be time fo r minor adjustm ents but not for majo r ones. Th ere fo re. the as tut eness that shapes a C~1 organ ization ove r a peri od of lime could be totally differen t from the insight tha t must q uickly formulat e a uniq ue ma nagement stru ctu re fo r a projec t, Th is is where eM experien ce rather tha n expe rt ise is mo re impo rtant.

, ,

8.18

Designing a Project Management Structu re

127

DESIGNING A PROJECT MANAGEM ENT STRUCTURE

The management struc tu re must accommodate the project from design 10 occupancy; it should be base d o n the contract ability study made afte r the initial meetings of the tea m. Th e most critica l management design decisions rela te to the construction phas e. when the eM has major individual involvements bot h on and oCf the site. Preconstru ction phases are also critical. but the management structure du ring those phases is built aro und the program team and has fewe r interacting parties. A review of Figures 8,4 th rough 8.8 will help to establish manag eme nt de sign priori ties. The manageme nt structure de sign process is straightfo rward. Th e Level l Person assigned to the project and who led the tea m thro ugh the co ntr actab ility st udy sho uld meet with at least two Level 2 Persons and review the project pha se by phase. Experience will provide the answers for the preconstru ction pha ses; experience and innovat ion will even tually design a management st ructure fo r the constructio n phase. The organizat ion is charted by a rea and personne l (Figure 8.2) to assure tha t a ll of the functions are co vered and responsibilities assigned. Personnel are then des ignated to fill posit ions and o the r assignments made . When options a re availa ble. designating and assigning pers o nnel to the management team is critical. Co mpa tibility between eM pe rsonnel and owner and AlE personne l is extre mely impo rtant and sho uld play an impor tant role in managemen t assignments. Although gre at care was taken when empl oying CM pers onne l a nd a ll per sons sho uld be comp atible. the fact remains that owner and AlE person nel were no t part of any compatibility crite ria when CM pers onne l were hired . The Leve l I person should make the assignments based on his/he r observati ons of owner and A lE person nel dur ing the early mee tings. The final step is to d raw and dis tribute the organ ization chart for review and approval or modification by the te am. and include its det ails in (he various management plans which can no w be develo ped.

Section 9.2 9.2

CH A P T E R

9

Som e current o p inio ns and decision s no twiths ta nd ing, co ns truc tio n ma na gemen t

practice differs significantly from the licensed prucuces of engineering, architecture. o r ge nera l co ntracting. To assu me that de mo nst ra ted pr oficien cy in one o f these tra dit ional practices automa tically indica tes pro ficie ncy as a co nstruction manager is erroneous. In man y inst a nces. th is assumptio n is mad e simpl y because co mp re hens ive de fining criteria for eM expe rt ise is no t availa ble.Fn ot her instances. the assu mpt io n is sel fse rving. espe cially for N E fir ms and co ntracto rs who summa rily d ecide to be co me co nst ruc tion ma nagers. Per haps the the most seri o us usc o f the assumption has been by government units who have. fo r fH1C reason or anothe r. enac ted legis latio n to con tro l eM pract ice in the ir jurisdicti on s. Co nstruction management is an d will rema in to be for the foreseeable future a mu lti-faceted se rvice p ro vided by a va riety o f (1\-1 firms with d iffe rent op inio ns of what co nst itutes fu ll Cxt serv ices. Ho we ve r, d uring the past 20 yea rs. e M prac tice ha s subs tantia ted the fact that con st ruc tion man agemen t firms m ust be multi-discipline or ga nizations compa red to trad itional cons truc tio n indust ry p ractitione rs such as architec ts. en gine ers and general co nt racto rs. During [he past two de cades. CM has su rfaced a body of know ledge based o n the scope an d types o f se rvices provided by accompli she d CM p ractitioners. TIle bro ad ran ge o f expertise requ ired to prov ide those services co nfirme d the ea rlier mul ti-d iscipline assum pt ion an d surfa ced co mp onent areas o f know ledge that explici tly de scribe the various disciplines a nd esta blish specific expert ise.

Know ledg e

129

THE CM AREAS OF KNOWLEDGE

Budge t Managem e nt Con tract Manage men t Decision Manageme nt Informatio n Manage me n t Mat erial/E q uipment Manage ment Project Manageme nt

to

9.1 W HO IS TH E CONSTRUCTION MANAGER 7

128

eM Areas of

TWelve areas o f knowl edge ha ve been established in this chap te r which provide guide lines to tne expe rtise req uired of CM firms. It is very likely that add itio nal areas of knowledge will surface as eM p ract ice gains experience with the needs o f owners. CM 's flexible con tracti ng structure invites prod uctive inno vatio n. and its project team co ncep t guarantees perfo rmance credibility. The first of possible new areas o f kncwl edge coul d be capital financing and real estate. In this book . the eM bod y o f know ledge ha s bee n divided in to twelv e areas to be tter facilit at e an un der standing of the scope of CM knowledge and explain how each a re a fits int o the executio n of com p let e servi ces. E ach ar ea has a definition and descri ption . and eac h has a representative bibliogr aphy which loo sely spans the area o f knowledg e. The twe lve ar eas are clea rly iden tifiable. rep resent the cr itical thrusts o f CM services. an d are uni ts of exper tise that ca n be ta ught and learned in academia. in con tinuing educat ion and by sel f-stud y and experience. Some o f the areas ar e h ighly specific and technica l. such as sched uling manage me nt a nd va lue ma nageme nt: o thers te nd ( 0 be obsc ure and mo re ge nera l, such as dec ision man agement. Howev er . non e IS ma rc impo rtant than ano ther-c-each co ntr ibute s in its ow n W;ty [ 0 co m ple te performan ce. and o ptimum ex per tise in all twelve are as is essentia l to success ful eM pra ctice . Th e twelve A rea s o f Kn owledge which collecti vely comprise the eM Body of Knowledge are:

The eM Body of Knowledge

This chapter asserts a pre mise th at Individual eM practiti one rs perfo rm CM serv ices for a eMfirm. and CM firm s pro vide CM services to owne rs. The fun dame nta l su ppo rt for this prem ise is that the range of ex pert ise required 10 perform CM services and the demand for timely eM performan ce on p roject s preclude s performan ce of com plete: eM serv ices by an ind ividu al , ex cep t o n the simplest of projec ts. A CM prac tition er is a firm, not an indi vid ual. It follo w s that a eM firm o nly has access to the C~ 1 body of know ledge thr ou gh its pers onnel. each o f whom must be expert in o ne or mor e of the C ~·t arCJS o f kn owl edge. If a firm has personnel who collec tively possess expe rtise in all CM ar ea s o f kn owledge. it can be assu me d that the firm at least has the pot ential to pr ovide ow ner s with complete eM se rvices.

The

I

i

j

Qualit y Management Re source Managemen t R isk Managemen t Safe ty Management Schedule Mana gem ent Value Ma nage men t

C ha pte rs thro ugh 2 1 are d evo ted . singularly. to each area of knowledge. Th ey expand o n the requireme nts a nd p rovide examples of represen tati ve procedures and p ractices. Befo re view ing each area in de tail. howeve r. it is best tha t the reader acqui re a fee ling for the ex panse of t he com plet e body of knowledge by ab sorb ing the crux of its compo nen t pa rt s. Although the de finitions of the areas do not overlap , their descripuons and representati ve bibliograph ies may. When read ing the mat eri al in this chap ter, re memb er tha t future cha pte rs will am plify what is con cise ly sta ted he re and was alluded to in the ma nage men t plan s in Cha pte r 7. An ap propriate com men t here is that ther e are no area s of kno wledge which specifically co ve r com mu nicatio n sk ills. problem-solving skills. pe rsonal demeanor. and ethica l behavior . all o f which are esse ntial to CM pe rformance. (The au thor assume s tha t the impo rtant quali ties represen ted in the se four a reas would be automatically dealt with du ring the hir ing process o f any se rvice o rganiza tion.) Alth o ugh the se char ac ter istics are tea chable, they rep resent ab ilities which can be gleaned from proficiency in one o r more o f the twelve are as an d , in the bes t cases. a re inhe ren t to an individual's cha rac ter ra the r tha n acquired from a text.

130

Cha pt er 9

The eM Body ot Knowledge

Se ct ion 9.2

9.2.1 Bud get Managem ent

9.2.2

The eM Areas of Know led ge

131

Con tr a ct Man ag eme nt

Definit ion

Definit ion

The budget ma nagement area o f knowledge encompasses all project-related cos t aspe cts o f eM p rac tice . The eM has the respo nsibility to co nfirm, ge ne ra te. track. rep o rt. and substantiate all budgeted costs from the first estim at e to the final acco unting. Th e co ncept ual budget for the pr oject. prepared by the co nst ruction ma nager befo re design begins. becomes [he team's line-ite m finan cial guide as the design proc ess moves towa rd the bid ding phase . A fte r bids a re recei ved . the a mo unts of accep ted con tractor proposals re place estim at ed line-item am ou nts an d becom e the co nst ruction phase budget. As con str uct io n pr oce eds. pa yment s to co nt ractors. co ntrac t changes. and budge ted expenses ar e acco unt ed for in deta il. Eve ry aspect of proj ect COS I is estimated as early as poss ible a nd substan tiated as it occu rs.

Th e contract manage ment area of kno wledge e nco mpasses the involv ement o f the CM in the oper ational and ad minis trative p rovisions o f the co nt racts used on the project. CM ex pe rtise includes the recommend ation of sta nda rd cont ract for ms an d the per formance res ponsib ilities to be inclu ded in co nt rac ts. bu t do es nOI extend to the writ ing of co nt rac ts o r in any way infringe upon the lega l profe ssio n. This area is signally im por rant because the eM system is a un ique con tracting system. the success o f which depe nd s o n u wor kable rea lignme nt o f trad itional co ntracting role s and part icip ant res ponsib ilities. It is the CM's respo nsibility to est ab lish a cont ract ing forma t fo r the project and see that each co ntrac to r's o pera tio na l and administra tive req uirements nrc de finiti vely included.

Descript ion

Descriptio n

The eM must have the ex pe rtise to forecast p roje ct costs fro m prel imina ry inforrnation without the aid of d etailed dr awings and m ust acc u ra tely es timate co nstruction cos ts from com pleted co ntrac t docume nts. TIle eM must have the abilit y to progreso sively and accu ra tely tr an sfo rm a comb ined line ite m conce ptual budget into a detailed line-item constr uctio n budg e t and breakout estima tes for phased cons truction and fast-tr acking if requ ired . The CM must be able to identify and p redict project -related ex pense in add itio n to con struction COStS a nd deliver accurate budge t information to the client in a timely man ner and an acce ptab le format. The budget management area o f knowledge includes but is not limited to: co n. cep tual and const ructi on est ima ting. fe asibility stud ies. compa ra tive cost stud ies. co m. municative estima ting tec hniques: co ns tr uctio n labor, mate rial and eq uip me nt costs; eq uipme nt and la bor pr od uction rat es. material techn o logy. ind ustry stnnda rds.Iabor practices: cons truction mea ns. met hods. a nd techniques. cos t accouruing. gene ra l accoun ting. co nst ruction industry econom ics. a nd communication skills .

Th e co nstruction ma nage r must be ab le to evalua te ea ch project from J co nt rac ting per spec tive based on the un ique cond itio ns and req uirem ent s o f the project and local co nstruc tio n ind ustry practices.TIle eM mu st assess Ihe available possibilities. recommend a co ntrac ting struct ure to the client . assist in de.. . eloping co ntrac ts. review co ntract doc uments for su itabi lity. and coordina te their provisions on the project Th e co ntract ma nage men t area o f knowledge includ es an under standing of co ntracts. co nt rac t language. sta ndard co ntrac t docu ments. contract law, an d const ruction contracting in the area o f the project. A thor ou gh know ledge of traditional co ntrac ting proce d ures. Clvl co ntracting proced u res. and the reason able possibili ties for co nt rac ting innova tio n is necessary. Excellent co mmunicat ion skills are required.

Repre sen t ative Bibliogra p hy Collier. Ke ith. 1987. Construc tio n Contracts. NJ: Prentice-Hall. Hal tcnhof f C. E. 1936. "The For ms and Var iations of the eM System:' in the Proceedings. Constructi on Manogemou. A State-of -the-A n Update . ed . C. E. Holtenhoff I-IS. Bosto n.

Represe ntative Bib lio g ra ph y Beesto n. Derek T. 1983. Stwi suca t Ml:thOI!:r fo r BI/iltiing DO/d. Lond on and NY: E. & F. N. Spc n. Collie r. C. A. and D. A. Halperin . 198·t Cons sructio n F/lu di ng: Wht'rt' the /I.f Olrey CI)JI1 l'S F r OIll . 2d

ed. NY: John Wiley & Sons. Collier. Keith. 1985, FWII! amell wls of COIU"lmCtiOlI Emm,if/I/g and Cost Accounting. NJ: Prentice-Hall . Cost data sources such as published by R. S. Mea ns Company. Inc. Updated peri od ically. Kingston . MA: Co nstrucno n Consultan ts a nd Publishers. Halpin . Dan iel W. 1985. Financi al «uul Cos t Concepts [(I T CUl lSlTltCtiulI .\ f !JllIfg l"/lI t'1lt . NY: John Wiley & Sons. Neil. Jame s M. 1982. Construcsion CUH £.flimnrmg [a r Projt'cl Control. Englew ood Cliffs, NJ: Prentice-Ha ll. Slo ne. P. A. 1980. Bllihlirl g Dc~igll Evolu.uion: Con-in-Use. London and NY: E. S:. F. N.Span. Tumhlin . C. R. 191\0. CO/llltr lC/io ll Cost E.~t imaf.·t. NY: John Wiley &. Sons.

I

I

MA:ASCE. Lambert . Jere miah D. and Lawrence White. 1982. Handbo ok oj Modern Coostnuuon Law . NJ: Prentice- Hall. Loulakis, Michael C . c t al. 1995. CUI/.Wru ft Wf1 Munu gement: La w (//1(1 Practices. Colorado Springs. CO: Joh n Wiley & Sons. Report A · 7. "Contractual Arra ngeme nts:' The Construction IlIdus tTy COSt Effectiveness Project . 1982. NY:The Business Ro undtable. Standa rd Contract Documents, Upd ated peri odically. Mcl.e an. VA: Construction Management Association o f America. Standard Contract Ilocum aus. Upda ted per iodically. Washington . DC: Ame rican Institute o f Arc hitects. Standard Con tract Documents. Updated periodicall y. Washington. DC: Associated Generet Con tractors of Ame rican. S tandard CO II/flICt Documents, Updated pe riodically. Washington . DC The Eng ineer's Jo int Contract Documents Com mittee . NSPE, ACEC.

132

9.2.3

Chapter 9

Section 9.2

The CM Body of Know ledge

Decis ion Ma n a g e m e n t

9.2.4

The CM Areas of Knowled ge

133

In f o rm a t ion Management

Defi nition

De fin it io n

The decision management area of knowledge enc ompasses the development and handling of the int errelat io nship of the project and construction teams and the relationship of their respective membe rs. Th is area of knowledge is the leas t technical. bUI one o f the most impor tant whe n provi din g CM services. It is the Cbt's responsibility to con sistent ly ext ract decisi on s fro m the team which arc in the best int ere st of the ow ner without alienati ng any tea m members in the process. Team member s mus t appro ach decisio ns and make decisions coo pera tive ly. respecting each o the r's projec t function. expertise. and ope ra tional capaci ties. Decisions which beco me conten tiou s mus t have a prescribed pa th for reso lut io n.

The information managemen t area o f kno wled ge encompasses the collecti on. docu mentation. dissemination. safe keeping. and disposa l of ver bal and grap hic projec trel ated info rmatio n. Th e team st ru ct ure and the use of mult iple co ntracts significan tly increases the information available to the owner. The volume of infromation, gener ated for p roject acco untability purposes and by team member par ticipation in decision-mak ing checks and ba lances. requires a mult ilevel. ne ed -to-know rep o rtin g str uctu re and an efficient inform ation stor age and retrieval system .

Descriptio n TIle con struction man ager must effectively establish eac h team me mba's involveme nt in the tC:.II11 ::lS ear ly as possible an d gu ide the decision-making process thro ugho ut the projec t. The C ~ 1 must have a clear unders tanding of lhe services be ing provided by team me mbers and the ir business opera tion and st yle. ind uce a productive. low-profi le syste m of decision -ma king chec ks and balances, ge nerate syne rgistic team ac tio n on decision s. create a pr odu ct ive team managem ent hie ra rchy. an d sec that a fair pro ce ss is available when dec ision s are cont e nded. The decision ma nagement area of knowledge includes a genero us und erstandi ng of business structures. org anizations. prac tices. procedu res. mo tivations end philosoph ies. plus de tailed insight into the design pro fession and con trac ting business op eration s. High-level communica tion skills and ethical standards a rc requi red . and an understanding o f human reso u rce ma nageme n t and al ternat ive dispute resolu tio n p racti ces is importa nt. Re pre sentative Bibl iograp hy

American Arbitration Association. Upd ated per iodicall y Consu ucuon Illdllsu y A rbnrauon Rutes. NY: Ame rican Arbitration As sociario o. Bell. David E. 19S8. Decision .\lak ing. NY: Cam bridge Univers ity Press. Drucker. Peter F. 1967. The Effective Executive. NY: Harper & Row. Foxall. W. B. 1972. Professional Construction Mauagcmesu (l1Il1 Project Administration, NY: Ar chitectur al Record and the Am er ican Institute o f Arcbuects, Hirschhorn . Larry. 1991. •\Jmw gitIC in the Ne w Team Environment, MA: Addison -Wesley. Janis. Irving L 1977. Decision ,Hak ing: A Psy chological Analysis of Conflict. Cho ice, and Commitment . NY: Free Press. Lifsen. Melvin w.. and Edward F. Shaite r. Jr. 1981. Decision and Risk Analysis for Constru ction M anagemau, NY: John Wiley.1: Sons. Richards. Max De Vue. 1972, Management: Decisions lind Bdwl'lor. IL: R D. lrwin. Sweet. Justin. 1977. Legal A .tpt·crs of A rciutectnre. Engin eering und the Cons truction Process. St. Paul. ~ I N : West Publishing Co.

Description The con struction mana ger must be a ble to properly and effecti vely co mmunica te and ma nage th e inform at ion genera ted by the project. Th e eM must be familiar with all fo rms and me ans of communicati on s. es pecially co mp uter-based information systems: rec omm end and insta ll those which will be most appropriate in all areas where proje ct informa tio n will be communica ted. fo r each level o f management . The CM must be proficie nt in setting agendas. chairi ng me etings. record ing meet ing minutes. pre senting ora l and written repor ts. an d per cei ving the need-t o-know requ irem en ts of tea m me mbers at each managem ent level. Th e inform ation man ageme nt area o f kno wled ge requires high-level communication skills. including persona l conve rsation. co rrespo nde nce. technical writing. meeting lead ersh ip. note ta king. me eting record ing and repo rting. report form design. inform ation ma nagement systems. b usiness protocol. computer systems. and a stro ng sense of ethics. Re p re sen tative Bibl iogra phy:

Becker, Hal B. Functiona l Analysis of Informacion Networks: A Structured Approach to the Data Communications Environm ent. NY: John Wiley & Sons. Bernold . Leonard E. " Bar Code-Driven Equipment ami Materials Tracking for Construction: ' ASCE.Joumal o{Compming in Civil Engineeri ng 4 (Oc L 1990):38 1-395. Business Roundtab le. 1982. Repo rt A ·6. "Modem Management System s ," The Construction Industry Cost £ffeCli \'ell ~sJ Project. N Y:Th e Business Roundtable. Giannotti. Alejandro C. " Proje ct Information Mana gement System- A not her Approach," A SCE.Jomnal of Managemen t in Engineering 9 (Jan. 1993 ): 2-63_

Hort on. Forest W. 191$5. Information Resources Management: Harnessing Info rmation Assets fo r Productiv ity Gains inthe Office. Factory an d La boratory . NJ: Prentice-Hall. Houp, Kenn eth W. 1996. Reporting Techn ical Info rmatio n. Scar boroug h. Ontario: Allyn do: Bacon Canada. McCullouc h. Bob G. "Automated Construction Field-Data Manage ment Syste m." A SCE. Journal of Trans portation Engineermg 118 (July/Aug.I992):517-516. Shuman. Ch ester A. ~ [ s Your Automated Information System Ob solete?" ASCE. Journ al of MUlIog('mem in Engineering 10 (MarchlA priI 199.t): 24--26. Woodall. Jack. 1997. Total Ql/(tlily ill tnfo nnation S ystems un d Techno logy. FL: Sr. Lucie Press,

134

9.2.5

Chapte r 9

Th e

eM

Secti o n 9.2

Body o f Knowled g e

9.2.6

M a t e ria l/E q u ip m e n t Ma nagemen t

The eM Areas of Knowl ed ge

135

Proj ect Ma na g e men t

Definit ion

Defi niti on

The material/equipment area of knowledge e nco mpasses all ac tivities rela ting to the acqui sition of materia l and eq uipment from specification to insta llatio n and warranty, Th e CM forma t facilitates d irect o wner purcha se o f mate rial and equipment for the p roject. The advan tages (a nd d isa dvan tages ] of dire ct owner pu rchases mus t be evaluated an d decision s on direc t purchase items ext racted from the team in a timel y man nero Th e plan ning. speci fying. bidding. acq uisitio n. exp ed iting. recei ving. handling and storing o f direct purchases. must co nfor m [ 0 th e own er 's pu rchasi ng po licies and JCC Urarel y reflect the requirements o f th e projec t sched ule.

The pr oject management are a o f kn owledge encompasses a ll of the opera tions aspects o f project delivery. includ ing de te rm ining. formulat ing. develop ing. insta lling. coo rdina ting and adm inisteri ng the necessa ry elem ents from the beginning of d esign to the terminat ion o f warra nt y and gu ara ntee pe riods.The eM has the respon sibility to mak e the selec ted CM process work. to coo rdina te the efforts o f the tea m and the performing co ntr actor s in achieving the ir co mmo n goa l.

Desc rip tion Th e eMmust provide discree t leadership and expert ise in carryi ng out responsibilities, and eff ect ively o rganize the o the r five requ ired elem enrs-cd esign. co ntracting, co nstruc tion. co nstructio n coo rdination a nd con tract administra tio n-into a functioni ng manag em ent fo rma l tha t fully de velops the team's reso urce potential and pru dently o rchestrates pa rticipa tion through ou t the project. Proje ct management req uires a thoro ugh under standing o f the design process. the co nt racting process, the con stru ct ion industry, and all form s and variations o f the con struction ma nage me n t system: how the eMprocess works. what the requ ired acrivities are a nd what is req uire d of each activity and each tea m member. A goo d grasp of communicat ion s s kills a nd e thics is necessary

Des cript io n The CM must be able to iden tify mate ria ls a nd eq uipme n t which are in s hort sup ply. have lo ng-lead delivery times. or would p ro vide an economic ad vantage to the owne r for di rec t purc hase items ea rly in the desig n ph ase of the pr oject. Th e Cxt arra nges for their p roper procure me nt. timely delive ry. and physical disposi tion at the site. The eM must expedi te owner pu rchases fro m (heir de ter minat ion o f need to de livery at [he site. end must be fam iliar with pro cure men t procedures and strategies and understand the material and equ ipme nt ma rket place. The mate ria l/eq uipm en t area o f kn owle dge includes bu t is not lim ited to tech nical spe cifica tions . pu rchasing techniques, bidd ing and nego tia tions. tran spor tat ion , expedi ting. inspect io n. materia ls ha ndl ing. sto rag e: and wareh ou sing. th e Co mmerc ial Code . lien statutes. and mat e ria l and equ ipme n t cos ts a nd value s. E xce llent com mu nication skills ar e req uired

Rep res e n tative Bibliog ra p hy Ahuja. H. N. 1984. Proiea Mmwgmu:llt: Techniques ill Plm lll i /ig ond Contr olling Construction Projects, NY: John wiley & Sons. "Co nstruction Managem en t Re sponsibilities D uring Design." Committee on Co nst ruction Man agem ent. ASC E. Jou nral of C011SUIIClion Engineering and Ma nag eme m 113 (March 1987),9<>-98. Fisk, Edward R. 1992. COIISUIiCtio/l Proi ect A dmi nistration . -ttb ed. Englewood Cliffs. NJ:

Rep res e n t a t ive Bibliography Ammer. Dea n S. 1968. s taterials J\.tan"Kr!m t'm. Hcmewcod.HzR. D.l rwin. Bell. Lansford C. and George Stu kban . "A ttributes of Mate rials Manage ment Syste ms:' ASCE, Journ al of Construction Eng inee ring and Managem ent 112 (March 1986): 14-2 1. Charles. l A. 1989. Selection Gild Use of Engint'uillg Materials, MA : But terwo rth. Dobler. D. w.. L l ee, Jr .. and D. N. Burt . 1 9~. Purchasing anti Materials Managem ent . -ltb ed. NY: McGraw-Hill.

Pren tice -Hall. Foxall. W_ B. 19n. Profession al Co nstruction ....to nagem em and Projec t A dm inistration. NY Archite ctur al Recor d and the American Institute of Architects, Ha lpin. Dan iel W_1980. Construction M anagemou. NY: John Wiley & Sons.

Edgar. Carrol l. 1956. Fundam enta ls of Malluf actur ing PrOCt:SJes and Mu trnals, :-.fA : A ddisonWesley. Fabrycky, W.1..and 1. Banks. Procurem ent and Inv entory S.VSft'IIlS. NY: Van Nos tra nd Reinhold. Heinotz. Stuar t F. 1% 5. "mc!llmll!: I' rm ciplf:s ami Applirlllilllls. NJ: Pre ntice -Haft. Olin. Harold B. 1980. Construction Principles, .\l ulu ia fs and Methods. Ch icagccTbe Institute of Fina ncial Educaticrstr uerstate Print ers and Publishers, Pollock. Daniel D. 1993. Physical Properties of M aterials fo r Engi neers. FL: CRe Press. Tersin. Richard 1.1976. Mluerials M anagement. NY: No rth Holla nd . White. Philip D. 1978. Decision J laking ill the Purchasing Process: A Report. NY: AMACOM.

Haltenhoff. C. E. 1986. ··Th e Forms and Variation s of the CM System," in th e Proceedings. Co nst ruction ,I"f ll//agerllt:nt. A State-of-me-An Update. ed. C E. Haltcnhoff 1- 15. Boston. MA:ASCE.

Hen drickson. Ch ris. and Au Tun g. 1972 . Proiect Jf lJlwgellulll ! or Connrucuon. NJ: Pren tice Hall. Melvin. Tom. 1979. Practical Psychology ill Cons tructio n Manageme nt, NY: Van Nostrand Reinhold . Reiner. Lawre nce E. 1972. Han dbook of Cons truction Monag emeru. NJ: Prentice-Ha ll. Spinn er. Pete M. 1992. Elem ellts of Project Management, Eng lewood Cliffs. NJ: Prentice -Hall . j

I

136

9.2.7

Chapt er 9

Secti on 9.2

The eM Body of Kno wl edge

9.2.8

Qu a lity Management

The eM Areas of Knowledge

137

Reso u rce Management Definitio n

Definition

The reso urce management area of knowledge en compasses the selection, organization . direction and use of all pro ject resources, bo th h uman a nd ph ysical. The eM co ntracting stru cture places all consulting. design. managemen t. contracting. con struction and construction se rvices in a coope rat ive o r team envi ronm ent . focusing team coo rdin atio n act ivities o n the construction manager. Additionally. the CM's own multifaceted resources must be maintained in the flow o f the pro ject. The se ubiquitous obl igations make resource knowledg e and resource managem ent essent ial pa r ts o f succe ssful eM pe rfo rma nce.

The quality managem en t area o f kn owle dge e nco mpasses all elements of eM proje ct delivery that cont rib ute to the quality o f the end pro duct. Q uality is stipu lated by the clie nt . des igned int o the project by th e AlE, rev iewed by the team, and co nstructed into the project by con tra ct o rs. During design. q uality has varyi ng le vels from high to lo w. O nce specified . q uality mu st co nform to the levels specifie d. Qu ali ty ma nagem ent is a co ntinuing proc ess o rigina ting with client decisions and e nding with cont ractor co nformance. Description

Des cri ption

A eM must be capa ble of designin g. installing and d irec ting a q ua lity management system that fits the needs o f the pro ject. The eM must have know ledge o f co nstruct ion ma terials and pro d ucts. unders tand thci r use and capabiliucs. an d the avail able me an s.

The CM must have [he ca pability to proficient ly understan d. o rga nize, and mcnvare ~ h e project's resources in o rder to extrac t the bes t results. The CM must possess goo d j ud gmen t and excellent comm unica tion sk ills. and exh ibit lea dership q ua lities in oneon-o ne and team situations. The reso urce manageme nt area of knowledge includ es but is no t limited to an ~nderstand ing o f hum an resource d isciplines. physical resou rce capabil ities. organize~ I onal st ructures. human natu re. conflict management. mo tivatio nal factors. prod uctivuy facto rs. and overall huma n rel a tio nships.

methods. and techniq ues appl icable to their installa tio n. The eM must kn ow how to inter pre t co nt ract d rawings. tech nical specifica tio ns and shop drawin gs. unde rst and field and labor ato ry testi ng procedu res.and sta y current o n consrruction means. me thods. and techn iqu es a nd the lates t proced ur es for assessing material and installa tio n q uality. The quality man agement area of kno wledge i ncl udes technical specifica tio n writing. mate rials testing and mea surement pro cedures. prod uct and ma teria l cha ract eristics and capa bilit ies, manu facturin g tolera nce s. con trac to r installa tion capabi lities. b uilding code s. and de sign standard s. Th is ar ea also requires excelle nt com munucati o n sk ills and perfo rmanc e ethics.

Representa tive Biblio g ra p h y Adams.J. R.. and B.W. Campbell. 1982. Roles and Responsibilities 01 the Construction Mal/tiger. Drexel Hill. PA:Project Managcrncr nlnstiture. Business Roundtable. 1982. Report A-2. "Construction Labor Motivation." The Construction Ind ustry Cost Effectiveness Project. NY:Thc Busines s Roundtable. Day. David A. 1973. Construction Equipment Guide. NY:John Wiley & So ns. Dinsmore . P. C. 19S-l, Human Factors in Project Mmutgemf!lIt. N Y; A me rican Mana gemen t

Representative Bib lio g raph y ASCE. Qllalir.v III fh~ Consvucted Projec x, Proceedi ngs. Ed. A. J. Fox and H.A . Cornell. Ch icago, IL. Nov, 13-15. 198• . Clifton, Jame s R. 1982. ln-Ptuce Nondestructive Met ho ds lor QunUt)' Assl/rall L'~ oj Buildings. IL: u.s. Corp s of Engineee rs: VA: National Tecbnical l nforrnaric n Service . Crosby, Philip B. 1984. Quality witnour Tl'ars: Till!A rl 01 Hassle -Free Mtm ngeme m . NY: McGrJw-

Ass ociation . Haberco~.

Guy E. 1976. Construction Equipmt'llt: A Bi bJiogruph .\' With A bstracLS. VA: Nanon al Tech nicnllnformauon Se rvice. Helander. Martin. ed , 1981. Human Factors/Ergonomics for BIIUdillg and Construction. N'J . Juhn Witey& So ns, .

Hill. Crosby. Phillip B. 1979. Qu ality If Free. NY: New American Library. Gat ton. Thomas M. 1990 M efhod oiog)' for Development of Expen Systems Qua lifY Assufllnce in Construction. IL: U.S. Corps o f Engineers: VA: National 'Iecbnical In forrnauo n Serv ice. Jur an. 1.M.. and FranK M . G r)·na. 1980. Q uufily Plllll11;" K and A"alysis. 211 ell. N Y: McGraw-Hili. Lamprecht. James L 1992. ISO 9000: Preponng for Tegistrauon. WI: ASQ C Quality Press: NY; Marce l Dekker . Olin. Har o ld B.. er al. 1980. Cons truction Pr;"cip/~s. Materials a"d Methods . Chicago : The Institute of Financi al Educa tio n/I nt erstate Printe rs and Publishers, Rosen . Harold 1.. and To m Heinem an . 1990. Cons truction Specification Writiflg. 3d ed . NY: Jo hn

Melvin. Tom . 1979. Practical Psychology

Construction

MtmuK~IIl(:Ilt.

NY; Van No..tra nd

Neely, E. 1975. Const ruction Eqll ipmetlt Cost G uide. VA: Nation al Techn icalI nfo rmati on Serv ice. Nunnally. S. W. 1987. Construction Meth ods and Maflagr:mr:nt. 2d ed. En glewood Cliffs. NJ: Prentice-Hall. Sha piro. How ard I.. et al. 1991. Cranes and Derricks. NY; McGraw-Hili.

Wiley & Sons.

Shearer. Give. 1984. Practical Continuous Impro~·tmf!llt lor Professionals. WI: ASQC Qua lity Press,

ill

Rein hold.

I

Truskie. S. D. "The Driving Force of Successful Org anization s ," Business Horiz ons (May- June 198-1): H->8. United Stale s Ge neral Accounting Office. Health Ed ucat ion and Human Se rvices Division. 1996. /nformatio" Oil fhe Davis-Bacon A ct. r-. ID:Th e Office. Gaithersburg.

138

9.2.9

Chapter 9

Section 9.2

The CM Body of Knowled ge

Risk Management

Definitio n The risk man ageme nt area of knowled ge ~ ncomp~sses ~he .dyna~li: a~d static. ~isks tha t are pa rt of ever y capita l expa nsion program. Dynamic risks (rlS~S directly tied to team decisions) and static risks (risks simpl y inherent to a cons~ructl ?n e ~ v..r~n~e~t) must be ide ntified. evalu ated and disposed of in a ma nn.er :,,:hlch will rmr um tze economic loss to the owne r in the event a risk with auac hed Il3blhty occurs. Descr ip tion Th e construction manage r must be able 10 a nticipa te a nd ana lyz.c sl.ati" ;1I1~ dy n;lll~i.c risks as well as ident ify, evaluate. and recommend manncr~ o~ th~lr disposal m the best inte rest of [he owne r. Disposal C<J,n be acco mplished by eltml~ntlO n. as:<;lgnment , or by accepting and man aging them to minimize the conseq uences If they ~cl,::rue. . Th~ risk man age ment urea of knowledge includ.e s sure ty bondin g and InSUriln:c in the static risk area. and contracting and construc tion processes a~d proced ures In the dynamic risk area.The C~ I must understand cons t r~ctio n r~ l;ltcd insuran ce coverages. per formance bo nds. labor an d material bonds. bid securit y. and other forms of availab le: sure ty protection. . , • The eM must thoroughly understan d the dy n ami~ risks inhcre ~t to constr uction contracting. contracting proce dures, co nstruction planni ng, construcn on means. ~e ~h ­ ods, a nd t; chniques. and be ab le to eva lua te poten tial co.nse~ut: nc~s and o ~fe r a ~Ice for minimizing. This area also requires excellent co mmumcano n skills and high ethical standa rds. Repres entati ve Bibliography Ahuja. Hira N.. and A runac halam. Valliappa. "Risk Evaluation in Rt:SOUfCl': Alloca tion:' ASCE. l ournat o!CoflstrJIcriOl I Engineering t 10 (Sept. 1984): 32-1-336. CE J I ! .. .. 'I ki D · Construction" AS O ll fll(1 0 Ashley, David B.. et al. -Crni cal D CCI$IOn . :1 .mg un ng. . ", ' . COIlS/rJlctioll Etlf:i llt'l'li'lg and Ma llllgt'ult'llt 109 (June 1983). t ~6--16_. . . . k51 ,,, rlllg. . ~cc hni IR'port2"'O CA .'1l1cConstructl0n A shlev, David B. COlls/rll ction P I UJ.l ' (' / Risk: nJc~ ~ ~ .

Insritu te. Department of Civil En gineeri ng. Stanford Un.lve rslty. Jun~ I?77. Bond Associated G ene ral Contracto rs. of A merica . and Nat io nal Assoc ianon o f Suret y Producers. 1980. Tilt' 8"Si( 8 0m/ Buok. w ashingt on . DC. . Bram ble. Burrv E. 1995. R( so!lllio'l of Disp utes to AI'oill G mstf14 ctiu l l C laims. Washin gton . DC:

National Academy Press, Comes. David L. 19S3. Iresi gn LiubililY i l l tlu' Cm::HIllriiotlllldlts tfy. NY: G ranada. Dc:rk. Walll:r T, 1987. Insurance fVI Ctm /m elOn . 5th ed. Chic
The CM Areas of Knowledge

139

9.2.10 Safety Management De fin it io n The safet y mana gemen t area of knowle dge enco mpasses safe practices at the cons tructio n site in accordance with the prevailing regulations in the a rea of the project. Th e eM has the respons ibility to promo te safe site conditions by e xample and urge contracto rs to have organized safe ty procedu res in force. Alt hough each cont rac tor bears the responsibility for the safe practices of its own employees, the CM has the responsibility to coord inate safety requireme nts common to all contractors and to see tha t safety pro visions are included in cons truction cont racts, Des cription

The eM must be familiar with construction practices . safety programs, practices. procedu res. and admini strati on and safe environme ntal conditions at the cons tructio n site. as well as an under standing of the 1970 Occupational Safety and Health Act (OSHA) and the safety/he alth regu lations in the are a of the project. Excellent communications skills and high ethical sta nda rds are requ ired . Re p resentat ive Bibliogra phy Associated General Contractors of America. 1977. M anu al of A ccidmt Preventio n in COI/,S/ IIIC-

tion, Washington. DC. Business Roundtable. 1982. Re port A-3. "Im proving Construction Safety Performance." The Construcuo n Imltu/1Y CO~'I £ /Jt' l·ti llt:ll t'SS Pruj«I . NY:' lllC Business Roundtable.

Commerce Clearing House. Inc. 1989. OSHA Safery ond Health Standards for the Cons truction Ind ustry (29 CFR Pan 1926) with Amendments as of 61111989. Chica go.H; Gan s, George M. Jr. "Th e Constructio n Manager and Safety" A SCE ,Jo//lIlol of tne Construction Division 107 (June 1981 ): 219-22 6. Koehn. Enno, and Kurt Musser. "OSHA Regulations Effects o n Construction." ASCE. Journal of Construction Engineering and stanagm ent 109 (June 1983):233-244. Laufer. Alexander. and william B. Ledbetter. "Assessment of Safely Per form ance Measures at Cons tr uctio n Sites," ASCE. Journal of Construction £IJgi1lu rinK and Manu geolt'llt 112 (D. c. 1986): 530-542. Lee. D. H . K. 1964. II,,(/r (/Iltl Cu M Effects and Their Con trot ( Publ ic Health M onogr aph No. 72). wa shingt on . DC: U.S. Department of Health Education and w elfare. Stanton. William A.. and Jack H. Willenbrock. "Conceptual Framework for Co mpute r-Based Safety Control."ASCE.Jollrnal of Constructio n Eng;'l uring and I\-Ia"ag~m ent 116: 393-398_ u.s. Depanmc nr of Labo r. 1984. Code of Federal Regulat io ns , TItle 29, Part 192O-end. Washingto n. DC

U.S. Depart ment of La bor. 1983. OSHA Safety am i

H~alth

Standards: Construction [ud us trv

(OS HA 2207). Wash ington . DC

U.S. Department of Labor. 1983. OS HA Saf~ty and Health Stand ards Digest: Construction Industry (OS HA 2202). Washington. DC. United States OS HA . 19&0. OSHA Requirements ja r Construction Eq/lipm em and Operations Standards. CA: Equipmen t Guide-BookCo.

140

Cha pt e r 9

The CM Body of Knowledge

9.2.11 Schedu le Manageme nt

Sect ion 9.3

9.2 .12

Acquiri ng CM Knowledge

141

Va lu e Ma n dgemen t

Definit ion

Defini tion

The sche dul e ma nage m ent a rea o f knowledge e ncompasses all aspects of sched uling throughou t the pr oje ct. Sch edulin g is the man agement tool that best re presen ts th e

The value management a rea o f knowledge encompasses a project's cos t versus value issue. It has three va lue co mponen ts: designability, constructabilhy, and ccmractability. Dcsigna bility re lates val ue to overa ll project de sign. Co nstructa bility re lates va lue to co nst ruc tio n ma teri als. details. means. methods. an d tec hn iq ues. Comractability re la tes value to co ntracting op tio ns. cont ractual assignme nts. and co ntracting procedures, Th e eM is expe cted to extrac t maximum va lue for the owne r fro m th e co nst ructa b ility an d con tractability op tio ns whi ch are ava ilab le.

controlled ope ra tio ns phi losophy of the C~l co ntracting system, It com bines the element of time with th e pro ject's reso urces from the start o f design ro owner occupancy. Scheduling el iminates o r mitig ates potentia l time-resource crises by pre dic ting start and finish da tes fo r in te r medi ate proj ect m ilestones. The usc of schedu ling is a means to an end, no t an en d in itself. It is a fo rm of co mm un ica tio n tha t sho uld be pre se nt ed in the simples t fo rm with jus t enough detail to co nvey its messag e.

Description Desc rip t io n The CM must be a ble to ap p ly scheduli ng as a major man agement too l. proficient in its use and applicati on s. and sensitive to us a bility to pla n and p red ict. The eM mus t have the capab ility to desi gn tilt: scheduling management plan fo r the pr oject , selec t appropriate scheduling form at s an d techn iq ues fo r speci fic project ap plicatio ns. and extra ct infor ma tion from team members a nd co ntractors fo r sched uling purposes. The schedule managem ent area o f know ledge includes a tho ro ugh unde rstanding or scheduling techniqu es. from bar cha rts to p rece de nce dia gramming, inclu d ing their usc in planning. p redicti ng. analyz ing ami tra ck ing projec t ac tivitie s and even ts. TIle eM must be co mputer liter ate in th e are a o f sc hed uling, un de rstand the fu nd amen tals of modelin g, be profi cient in ma tching scheduling a ppl ica tion s 10 re qu irements, and possess excellen t communication s skill s. Repres en t ati ve Bib lio gra ph y Archibald. Russel D. 1966. 1967. Network Based Munagenvau Systems (P£R TICPM ). NY: John Wiley &. Sons.. Bennett. F. l awrence. 1977. Critical Path Preceden ce Nt·t Works..A Handbook on Activity-onNode Netwo rkin g l or tl,,: Const ruction Industry , NY: Van Nostrand Reinhold. Bertsckas, Dimitri T. 199 1. Linear N etwork: Opt imization: A lgorithms a"d Codes. MA : MIT Press. Callahan. Michael T., et al. 1992. Construction Project Scheduling, NY: ~'lc Gra w - H i lJ. Fcndahl . John W. 1962. A Non-Comp uter A pp roach 10 Critical Path Method fo r rhe Const ruction Ind ustry , Stanford. CA : Stanford University Department of Civil Engineerin g Kelly. F. P.. S.Zac hary, and I. Z ied ins, 1996. Stochas tic N etwo rks: Theory and A ppticuuon, Oxford. U.K.: Clarendo n. Moder. J. 1. C. R. Phillips. and Ed ward W. Davis. 1985. Project Ma nagement wail cn ,'!. PERT and Precedence Diagrams. 3d ed . NY: Van Nos trand Reinh old. O'Brien.Lf. 19$4. CPM III Construcuon Monagemau. 3d cd. NY: ~lcGraw ·HiII . Weist. Jerome D.. and Ferdinand K. Levy. 1969 A Jfa llagement Guide to PerrlCP,H. NJ: Prent iceHall. Whitehouse. Gary E. "Criti cal Path Program for a Microcompu ter." ASCE. Civil Ellgilll:ermg (May 1981): 54-56.

In the area of de sign ab ility. the CM mu st be capable of extracti ng th e op tim um overall design. In the area of ccnstructability, the eM mu st be capable o f sec u ring the owne r's prescri bed level of value fro m the design and co nstruction of the p roject. In the area of ccn tract abili ty, the eM must be capable of transla ting the owner 's goa ls and the project's cha racte ristics into a cont racting s tructure that will extract the mo st va lue fro m the co nst ruc tio n industry. The eM mu st co nsider th e four maj or areas of o wner co ncern (time. cost . qua lity. a nd busi ness in te rr up tio n) when re commending co urses of actio n to th e team. The value ma nage me nt area o f kno wledge include s an un derstanding o f co ntra cting structu res. Ior m uts, and procedures and the construction indu s tr y us a supplier o f serv ices. A thorough knowledge o f co nstruc tio n mate rials and eq uipmen t. value engine eri ng techniques. and life-cycle cost analysis is essential. Support kn ow led ge in the areas of desig n, materi als techno logy. es tima ting, scheduling. and procu rem en t is impo rta nt. Of major im portance are communicati on skills and ethics.

Represe ntative Bib liogra p hy Ahuja. Hira N. 1980.Successful Cons truction CQ~·t Control. NY:John Wiley & Sons. Co nstruction Industry Institute. Co nstructa biluy Task Force. 1987. Guidelines fo r lmpleme ming a Constru ctabilisy Program . Pub lication 3-2.A ustin. T X. DellIsola. Alcpnonse 1. 1973. Value' Engineering ill the Const ruction Industry. NY: Construcnon PUblishing Co. Jelen. Frederic C, and James H. Black. cd s. 1983. Cost and Optimi:.orioll Engineering. 2d ed . NY: t>,teGraw-Hill. Kleinfeld. Ira H. 19&6. Etlgille('rJll.t: 1/11.1 ,\l w lIlgaial Economics. NY: Holt. Re inhar t and Winston. Miles. L. D. 1961. Technique s o{ Vulue A llalysis tlnd £/lginuring. NY: McGraw-Hili. O'B rien. James J. 1976. Value Analysis in Design and Construction. NY: McGraw-Hill. O'Conno r. James Te et Ill. " Con stru ctc bility Concepts for Engineering and Procureme nt ." ASCE, Joumal of Construction Engineering and Management 113 (June 1987 ): 235-3-18. Olin. Harold 8.. et al. 1980. Const ruction Principles. Materials and Metho ds. Chicago: The Institute of Financial Education/Int erst ate Printers a nd Publishers. Stein. Benjamin.and John S. Reynolds. 1992. .\lechaniral und Electrical Equipm eru jo r Buildin gs, 8th ed. NY:John Wiley & Sons. Zimmerman. Larry w.. and Glen D. Hart. 19lt!. Vallie Engineering. NY: Van Nostrand Reinhold.

142

9.3

Chapter 9

The eM Body of Knowledge

Section 9.3

ACQUIRING CM KNOWLEDGE

9.3.2

Problem-Solving Abili ty

A m ajor functi on o f a CM is problem solving bef ore a proble m occ urs. The CM's man agement expe rt ise can be measured by the number o f cr ises which ar ise : the fewe r the problems, the better th e management. Construction managers mus t ha ve problem-sol ving ability to properly serve an ow ne r. and these skills canno t be acquired from a textbook. Th ey must be de velope d. From this perspective. civ il engineering programs that e mphasize cons tru ction prov ide a better problem -solv ing environment than sc hools of co nstr uctio n. Civil e ngineering studen ts spend a major portion o f th eir train ing solv ing techni cal problems. so th at the pr oces s of problem sol ving becomes sec on d nat ure . Construction schoo ls, on the o th er hand, dwell more o n contracting procedu res and con structi on means. methods and techniques, Pr oblem solvi ng is part of th e curricu lum but no t to the ex ten t it is in an engi neering program.This is not to say th at students from con struction programs cannot sol ve pr obl ems as well as civil engineers- it simply indicates that civ il e nginee rs have a better po tent ia l in problem so lving as a res ult o f their basic learning environment

So me Common Ground Many university construction p rcgrurns are titled "C on st ruction Managemen t" but sho uld more approp riately be tilled "TIle Management of Construction:' Con trac tually and philos cpbicatly.t hcy are simp ly no! the sa me. Ho wever. the re is eq uity be twe en the two in the technical aspects o f the managem en t tools used and the str uctu re and chnracterisrics of the construction industry. The technical knowledge of scheduling. estimating. value enginee ring.fife -cycle costing. cost accounting. general accounting. safety. quality. cont racts. specificat ions. materials. eq uip me nt, productivity, bonding and ins urance are interch ang ea ble be twee n th e sys tems.The manner in which this knowledge is appli ed in the two systems dif fers considerablv from one to the oth er. E xam ples of th e differences' can be found in est imating and cost accounting. Gener al contractors rely on cons truction est imating (estimating based on cons truc tion docum ents where quan tities and qualities are acc urately conve yed) . Co nstructio n p rograms teach construction es tima ting to the level required by const ruction managers but do no t teach co ncep tual es timating (esti mating based on preliminary informa tio n before design begins) to an acceptable level. 1:1 the CM system. both types of estimat ing are equally important. In the CJSC of cost acco unt ing. an ACM has no need to track unit costs during construc tion . Un it cos ts are d eveloped by and for contractors to d et ermine how

143

they are perform ing in re la tionship to their estimates for la bor. material , and eq uip ment. Construction man agers require expertise in budget track ing . where mo st co ns truc tio n costs a re lu m p sums, and predicting the e nd re sult is bas ed o n estima ted costs to com plet e includi ng changes and extras generated d uri ng the course of co ns tr uction . U niversi ty co nstruction programs dwell on unit price co st accoun ting rather than b udge t accounting. an d although construction managers m ust un derstand un it pric e cost accounti ng. budget accoun ting exp ertise is the import an t cost accounting re quirement for eMs.

Althou gh th e CM system has be e n widely used for more than 25 yea rs.a un ique source for acq uiring its body of knowledge hJS net yet eme rged. This text documents the eM system . exp laining its fu ndame ntals and practices. but only outlines the kn owle dge required to perform services as part of a eMfirm. Th e re prcse nta u ve bibliographies at the end of each area of know ledg e list so urces .....here eM knowledge ca n be found . Few sou rces relate exclusively to the eM system: most explain the methods and tools as lhe)' could be used in ilny sys tem. To acqu ire all o f the knowledge in anyone area . a pe rson must seek it o ut fro m se veral so urces end culmina te th e lea rning p roce ss wirh appropria te experie nce. It will tak e se veral more years before th e C~ 1 body o f kn owledge will be tau ght 31 the university level in a sim ila r fas hio n as gcn crJI contrac ting. O ne reaso n for this is thai the CM syste m WOlS a p roduct of informal and uno rganized indus try resea rch rather than un ivers ity resear ch . Conseq uen tly eM has no co mp rehensive fo rmal d ocu mentati on on wh ich facul ty can base J cred ible CM curricul um. With out doc umenta tio n . it will req ui re consid erable tim e for existing con struction faculty [ 0 gain sufficien t confidence and acquire enough knowledge of the eMsystem 10 be compe ten t in the co mple te body of knowledge. Anothe r re ason why the eM body of knowledge IS not yet available a t universities is th at m;.l ny existing uni ve rsity cons truct ion p rograms are su pported in o ne way o r another by gene ra l con tractors. eM is not the co ntracting system (Q which G Cs subscribe; the y co nsider eM a dub ious alternative. one to resort to only whe n an o wne r pres cribes it. As long as general contractors exclusively support construc tion education al universiti es. CM ed uca tion will be min im ized in the curri cul um.

9.3.1

Aquiring e M Knowledge

9.3.3

j

Gleaning CM Know ledge Without I n or ganized so u rce available. expertise in the m ul tidiscip line eM body of kn owledge mu st be gathe red wherever it is found. The vario us soc ieties and assoc iations con nect ed with the co ns truction ind ust ry are excellent sou rces. Severa l of them ~ave ce r tification programs co mp let e with sho rt cou rses and compe tency exa m ina tions. The Pr oject Ma nage men t Institute has a program lea din g to cer tifica tio n as a p roj ec t m anager. Th e Society o f American Value En gineers has a 4()"hour course of ins~ruc tion .which certifies a uen de rs as value man ager s. The Const ruction Sp ccificanons Inst itute has a certifica tio n p rogra m avail able in the area of specific atio n writ ing. Whi le most of these groups a re not spe cifically Cr-.·( orient ed. the un iqu e expe rtise and man agement too ls the y fost er a re dire ctly tran sferabl e to the eM system. Th e Co nstruction Man agement Association of America (C MA A) has a certi fication p rogram which is based on its ver sion of a eM sta ndards o f practice. This p rog ra m d~~s no t e x~m i n e proficie ncy in ei th er the tools used by con struction man agers in pre~ Id.mg se rvices or the tec hnic al asp ect s o f design en d construction . It does provide ins ight to procedural pe rfo rma nce wit hin the sta nda rds CMA A has estab lished.

144

9.3.4

Chapter 9

The eM Bod y of Know ledge

Asse ssing A eM Firm's Pro ficien cy Chapter 2-t, Acquiring CM Services, provides guidel ines for a n o wner to use when selecting a CM firm. In additi on to re que sting the usual demographic and experience info rma tion. it is sugges ted that an o wne r closely examine the techni cal q ualificatio ns of the firm's perso nn el. It is assumed that the serv ices of a CM lirm ca n rise no higher than the perfor mance of the indi viduals pe rfo rming the service s. Chapter 8. The C M O rganiza tio n. points out tha t a const ruction manager is no t a pe rson . A construction mana ger is an organization staffed by per sonnel who colle ctively possess the man agement. design, constructio n. and co ntracting expert ise necessary to cred ibly perform th e se rvices the linn is en gaged to provide. A mod el prog ram for the ce rtificati o n of constructio n man ageme nt firms and individ uals was de velop ed by a CMA A com mitte e in 1987. Th e stru ctu re of the model established CM as a se rvice prov ided by an o rganization of qualified individua ls. Al thou gh the model was rejected by CMA A for ce rt ificatio n purposes. it rema ins a provocati ve remind er of how C r-.'I is actually pra cticed in the indu stry tod ay. Th e essence of the 1987 model ce rt ification progr am has been included as A ppend ix B. The req uired tech nical abilities of ind ividua ls pro viding CM services a re not covered in this text no r are they poi nted ly listed in the bibliographies listed afte r each area of kno wledge. The acqu isitio n of these abiliti es is through educat ion and experience , preferably a co mbina tio n of both. It is le ft to schoo ls of engi nee ring, arch itecture. co nstr ucti on . and bus iness to prov ide the basics for even tual technical exp ertise. To acqui re a pe rspective o f the req uired techni cal abi lities that comp rise a C:-'1 o rganiza tion. refer to Ques tion 2.0 in the suggested Initial Req uests fo r Pro posals (C hapter 2..) and the list o f questi o ns in A ppend ix A . Currentl y. no single so urce fo r acquiring the comple te body of C ~l know led ge exists. It must be acquir ed from several so urces and galvanized with expe rience. Schools of engineering. architecture. construction, a nd bus iness on ly pro vide th e base o n which 10 build. Acqu iring the CM body of kno wledge is a gleaning process.

CH A PT E R

1 0

Budget Management Duri ng the co urse of a pro jec t. the re a re two po ints when the CM 's efforts will be stern ly evaluated by the owner. The first point is the opening of proposals for the work . If the cost of the project is with in the conceptu al budget. the owner will note that the C M firm per for med adeq uate ly with regard to its cost comm itment. The seco nd is the da te of complet ion . If the projec t is completed o n schedule. the owner will no te [hJt ~h c CM firm pe rform ed adeq ua te ly with regard 10 its time commitment. If either goal IS not met . exten uating circumstances o r changed cond itions notwi thstan d ing. the owner will no t be easily placated. Th is realit y must be understood by every e M thai unde rta kes a project for an ow ner. Cha pter 20. Schedule Man agement. provides insight to impro ve the CM ·s cha nce of completin g a project o n time . Th is cha pter provides info rma tion 10 enhance the CM's ability to compl ete the proje ct with in bud ge t. 10.1

GENERAL Budge t Management. Info rma tio n Man agem e nt . and Value rvIanagement are insepa rable CM ac tivities.The y are pre sented se parately simply because each has a unique area of knowledge, but all facto r into successful project eco no mics. Budget management contributes estima ting a nd cost co ntro l: inform ati on man agemen t. distributio n of cost informa tio n: and value ma nagemen t. tec hnica l alte rna tives to cost pro blem a reas, . A major d uty owed to the o wne r by the CM is expe rt estima ting and control of projec t cos ts. Of the priority item s of pr oject deli ve ry (cost. time. quality and minim um ? usiness i~l.e r ru pti on) . cost is the owne r's major conside ration. On most projec ts. cost IS the deciding facto r whe ther to bu ild o r not . and cost expansion is usua lly the pr ime o wne r conc ern through out des ign and con str uction . The CM 's cost con tro l goal s can onl y be ac hie ved by su pe rior es timating and compe ten t value decisions. Bud get man agement a nd value management ar e inseparable pr io rity activities.The q uali ty of the CM 's per formance of these services determines the financi al success of a proje ct. Every CM firm must have exceptionally q ualified esti ma ting person nel to ca rry o ut these resp on sibilit ies to their expected level. Alth o ugh CMs are expected to be skilled estim at ors. thev are asked to do no more than the ir peers who work for contractors or des ign professionals. what sets the m apart from thei r pee rs is their requ ired versatility-e-the ability to do bo th concep tual and co nstru ction estima ting and to do both equally well. Th is is a combina tion of esti ma ting expert ise that cont rac to rs a nd design pro fessio na ls do not requ ire and usually do no t have . Bud get man agem ent requires a eM to close ly monit or proje ct costs during the design phase. If a reason ab le budge t is ado pted 3 1 the sta rt of a project , competent 14 5

Sect ion 10.3 146

Ch a pt er 10

estimating and value ma nagemen t de cisio ns du ring th e de sign p hase can k,eep ~h e budget in line. Whe n a budget figu re is confir med as correc t. a fte r cons truc tio n bids have be en taken.the eM is oft e n ass umed to be :::I supe r-es tima to r. Th is is not a correct assump tion : th e Ct--l is actually J capable bu dge t manager and an expert but not supe r-estima tor. 10.2

147

Con ceptua l Budgel

THE BUDGET MANAG EMENT AREA OF KNOW LEDGE

The budget management area of kno wledge encom pa sses all project-related cost aspects o f CM p rac tice. Th e eM h:1S the resp on sib ilit y 10 confi rm. gene ra te. track. re port. and substantiat e :111 budge ted co sts from the first es timate to the final account ing. The conceptu al budge t fo r the project. p repare d by the construction m :ln a ~e r be fore design beg ins. bec omes the team's line-item finan cia l guide as the design pro cess mo ....es towa rd the bidding phase. Aft er bids are recc ived . the amo un ts o f accepted contra ctor p rop osals re p/act: estimated line-item amounts an d beco me the construction phase budget. A s con s truct ion proceeds. p<1y men ts [Q connector s. contra ct changes, and budgeted ex pe nses ure accoun ted for in deta il. E very aspect of p roject cost is es timated as C:1 r1y as possible an d su bstan tiat ed as it occurs. Th e eM must have the exp er tise to forecas t projec t costs fro m prel imi na ry in forma tio n with out the aid of detailed drawings and m ust accurat ely est ima te co nst ruct ion co sts from co mp le ted co ntract docum ents.The eM must also hav e the a bility to progressi....ely and accu rately trans fo rm a combin ed line -ite m co nce ptua l bu dge t int o a deta iled line -item construction budget and brea kout esti mates fo r phased cons tru ct ion and fast trac king if req uired. The eM is also called upon to identify and predict project-related expenses in addi tion to construction cos ts and deliver accu ra te budget informat ion to the client in J timelv ma nn er an d in an acceptab le for m al. TIle budget man agem en t are a or kn owledge incl udes bu t is not lim ited to con cep tual and con struct ion es tim ati ng, fea s ibi lity stu dies. compa rati ve cost st udies. com municative es timat ing techniques: co nstruct ion labor. material an d eq u ipmen t costs: equip men t an d labor productio n rat es. ma terial technology. ind ustry standards, la bo r practices: cc nstr ucric n means. meth ods and techniques. cost accou nti ng. ge ne ral accoun ting. co nst ruc tion ind ustry eco nomics . an d com mun icat ion skills. 10.3

Pro ject Budgets

Sudget Ma nagement

PROJECT BUDGETS

Gener ally speaking, e very p roposed p rojec t has a proposed b udget. We li..e in a cost o rie nted society whe re a ca pit al ex pe ndit u re mu st have justifica tion in the form of n return. The cost expe nded o n a m an u fact u ring plant must be returned thr o ugh the sale of the products produced. The cos t or an o ffice building or apa rtme nt com ple x m ust be returne d thro ugh rents and leases. Th cos t of court houses. public schoo ls. ran ds and bridges must be return ed thro ugh :1 public ben efit. To keep the cost o f man ufactured prod ucts co mp e titi ve. ma intain rental rates with in the market. or retu rn a public be nefit from a new courts building. th e capital investme nt mu st be :1 know n quantity, An assured re turn on inves tment o r a publ ic bene fit is dep ende nt upon accuratel y predic ting the COSts in..ol ....cd. and cons lr uctj,o n cost is 3 significa nt expe nse. thir d in line to financing an d ope ra ting expenses du ri ng the life of a facilit y.

FIGURE 10.1

10.3.1

COnCl:p1U3 110 construction es urnaung now cnan

The eM Budgeting Pro ce ss The estimating an d bud ge ting ex pe rtise o f the cons truct io n ma nager is expected to guide the project from its conceptual phase to its complet ion , Th e fo ur co mpo ne nts th ai contain the pr oce ss are: the Conce ptual Bud get . the Tra nsition Budget. the workScope Budger. an d th e Co ns truction Budget. (See Figur es 10.1 and 10.2.) Both esti ma ting an d budgeting ar e co n tinuo us CM ac tivities prior to construction: budgeting an d some est imati ng cont inu es to p rojec t com ple tion . TIle first budg e I 10 be developed is the Co nceptua l Budge t. The bre ad-scope costs. the products o f th is budget. a re refined to narrow-scope COS ts as design pro vides d efinite drawings and sp eci ficati ons. Estimating techniqu es switch from experien ced base d unit pri cing o f areas and vo lum es to q ua nti ty ta ke-of fs and deri ved lab or , ma teria l. and eq uip ment costs. Th e Transi tion Budge t is 3 controlled, step- by-ste p estimating man euver th at gra d ually reallocat es broad-scope conce pt ion al costs to narrow-scope co nstruction costs. One wa y to ma ke this transi tion is to use the CSI Mast cr forrnat 's Divi sions I th rough 16' :IS the depository fram ework for transition estimating. This ste p also provide s an opportu nity to check the con ce ptu al budget usi ng mode ling techni qu es in a : arc based on the 16 d ivisio ns. After the work -sco pe list is determined and the work-sco pe defi ni tio n is a v ail ab le. tbe CM ca n alloca te co sts from the CSI D ivision de posit o ry to the va rious workscopes Iha t will be b id by contract or s. Th e sum of the wor k -scope es tima tes. pl us an es tima te [or genera l condi tion o r co ns tr uctio n suppo rt ite ms. com prise s the wo rkscop e budge t-the botto m-line target cost for con structing the project. The final budge t the Construction Budge t. Is [he summation o f all accepted workscope proposals aft er biddi ng o r negotia tions a re com ple ted. It is impo rta nt for own ers to understan d tha t the summ atio n. not the cost o f indiv id ual wo rk-scopes. is the number to comp.1r e wit h th e wo rk-scope budget. (Th e est ima tes of each work-sco pe shoul d · Pu blish.:cl by Ih.: COlutruct;on Spcciticanons lnsnnne and Construction Sp.:t iflca lio ns Can3J.:r. ,

148

Chapter 10

Section to.3

Budget M anagement

Concep tual Est imate

Conv er sion Estimate

Site Deve lopm en t

CSt 2. Site ....ork CSI J. Co ncrete CS14 , Ma.'\Onry

Site U lilities C5 1 5. Me tals CSI 6. wood/Plast ics facility Arc hite ctural

CSI 7. Th erma l/Moisture Protec nons CS I 8. Doors/Win dows CSl9.Finishes

Facility Slruclur:ll e SII O.S pec ialtles CSI I I. Eq uipment

Facility Eleclric:ll

CSl12.Furnish ings C51 13. Special Con st ruction CS I I~ . Con veying Syste ms

Facility Mechan ical CSI 15. Mech an ical CS I 16. Ele ctncal

work-Scope Esumare Ea rth Work 10 ROIISh Grade Gra" c1Work 10 Final G rade As phalt Pavin g Sile Co ncre te Sile Utility Systems Wate r Well Building Concrete Pre-Ca st Concrete Masonry Hollow Me tal Doo r Frames Doo r Ha rdwa re Plast ic Cove red Doors Cerpem ry Gl ass a nd Glazing Structu ral Sled Fa br ica tio n Str uct ural Sled Erccno n Rooling allJ S hed ~ 1c ta l Plum bin g He 3IingNc nl ilati ngfA.C. Fire Protection Systems Balan cing Elect rical Communica tio n Syste m Lalh/Plash;:rIDf)'w:l11 Pain ting Rc silicnt lilc Floo ring G lazed Wall Tile Terrano Wood Flooring Carpeting Des ign Co nnngency Interface Cc nungcncy

Co nst ructio n Co ntingency

Cons tructio n Co nlingency

Cons truct ion Supporl h e ms

CS I I. General Requirements

Scope Change Con ligency Escalation Contigcncy

Figur e 10.2

Con ~ t nu: li(1 n

Sup port Item s

Conllc rlin g a Conc eptu al Con s truction Budget to a w ork -Scope Budge t.

not be considered as individually com pe titive.} However, work-scope est imates are very helpful when reviewing work-scope propos als receiv ed fro m bidders prior to awarding contrac ts.

10.3.2 Conceptual Estimates Budget man agement begins whe n the owne r establish es a maximu m project cost in the form of a conceptual estimate o r feasibility budget. How one is established varie s by project type: its cre dib ility depends on the available informat ion and the combined experience of an owner. A l E. and CM.lf the owne r has complete de finitive informa tion. the N E and CM should be ab le to estimate the proba ble cost of the project within 20

Project Budgets

149

[0 30% (10 to 15% above or below the to tal of work- scope propos als received from biddi ng co ntract ors). J( the A lE a nd eM ha ve bee n hired for the purp ose of conceptual estimating. information abou t the project is best collected through interviews between the Al E, CM and the owner. The owner sho uld be repre sent ed by a pe rson who unders tands the project and has a reasonable knowle dge of its eventual use and physical requirements. The AlE and CM should be rep rese nted by Level 2 Person s: the CM should also involve value managemen t personnel from the vario us constru ction discipline s. The informat ion extracted shou ld be recorded in writing and in ske tches as it is gathered and agreed to by the three parties as it is record ed . It is best if the CM and NE not bandy numbers abou t unt il they ha ve extracted sufficient inform ation from the owner to SUppOTt a 15% plus or minus range conceptual budget. Owners have a tendency to re membe r the lowest figure menti oned . rega rd less of context. If adeq ua te informat ion is not forthcoming from the owne r, the owner should be comple tely briefed on the pro blem and advised that an increased plus or minus ra nge will be ap plicable to the bud get. It is importan t to the success of the ven ture that the budge t be we ll done and well docu mented. Although theoretical, from everyone's pers pective it is the number that must be sustained throughou t the project-delivery process. Unlike the "probable cost o f construction" on a gene ral co nt racting project. the Conceptual Budget on a construction manageme nt projec t is fully e xpected to survive the design process and the co mpe titive bidding process. Th e secret of an accurat e con cep tual estimate is communication between the owner. AlE . and CM. Th e CM's value manager or estima tor must know the information required and the ques tions to be asked and cor rectly inte rpret the answers provided by the owner and AlE . It is not man dat ory that the CM be expe rienced in the facility type being estimated: the NE probably is. so design information is readily available to the CM from the AlE. Familia rity makes conceptual esti mating easie r. but no more accurate. Each project has its own inherent characteristics that influence constru ction costs. If the project is a school, the NE and owne r must inform the CM of schoo l operatio n. ad ministration. an d mainten ance. as well as the design criteria and construction require ments that influe nce cost. If the project is a condom inium. the A lE and CM must be informed of the cost-quality trade-offs the owner will accept to ensure the exp ected re turn on investment. If a manufactu ring facility, the owne r must convey co t he AlE an d CM production met hods and the en vironme ntal requir emen ts that affect the CM. prod uctio n costs. A lthough actual cost co mpilatio n is the responsibility credible conceptual estima ting is definitely a team effo rt. Typically. 3 Conceptual Construction Budget has sub-b udge ts covering at least six categories: site de velopment, site utilit ies. and facility architectural, stru ctur al. electrical, and mecha nical. The estimate for the facility ca tegories are de veloped using unit costs applied to areas and volumes of the various parts of the building. Site development and site utilities estimates a re deve loped as lump sums. based on site-specific needs, the typograph y of the site. and the project 's location on the site. If there are ot her majo r cost areas tha t can be split-ou t for estimating pu rposes (such as process

of

150

Cha pter 10

Budge t Manag ement

Section 10.6

piping. vertical tra nsport ation. a swimming pool or stage equ ipment), the y shou ld be included in the budget as sepa rate cat egori es.

10.4

Budgeting Othe r Costs

151

affect the budget when the later phases are bid.The team should manage these risks by studying the possibilities and prudently earmarking funds to cover the probabilities. When a custodia n deems that a contingency can be eliminated. the remaining a mount should be transfe rred to the owner's scope cha nge con tingency line item .The owner can use the bala nce rem aining for upgrading finishes. expa nding site develo p. ment. improving the quality of furn ishings and eq uipme nt. or simply retain it as an unexpended amount.

CONTINGENCIES

A conceptua l estimate consists of a detailed record of dec isions made . a few figures. and considerable thought. Concep tual estimates sho uld never be ad opted with unjustilied confidence: contingen cy dollars should be include d in every con ceptual budget. Contingencie s arc budge ted dol lars exclusively dedicated to compensate for unforeseeable costs. and there are two kinds of contingencies: one covers indetermi nate construc tion mark et costs and estimat ing infirmities: the other. unp redi ctable project conditions and circumsta nces. Both an: capa ble of analysis and close estima tion. The contingency for indet erm inate construction market costs an d estimat ing infirmities should be included 3S part of each work-scope est ima te line ite m.The se are costs that can not be definitively estimated becau se of the minimum information availab le whe n conceptual budgeting takes place. Cont ingency amounts for unpredic tab le project condi tions and circ umstances are estimates of probable cost increases that can not be logically allocated to construetic n cost line items. The y should be included in the budge t as individua lly accessible line items. The areas of unp redictabl e project conditions and circums tances tha t sho uld be assigned individual line item contin gencies are: design. work -scope interfaces, cost escalation. and scope chang es. The design con tingency belongs to the AlE. the interface contingen cy belongs to the C ~t the escala tion continge ncy belo ngs to the team, and the scope change contingency be longs to the owner.The amo unt of ea ch sho uld be set and used exclusively by the designa ted party withou t except ion. The design contingency should cove r the cos1of design oversigh t. It is prac tically impossible to documen t without err or a three-dimensional facility using two dimensions. The AlE is in the best position to det e rmine what the extent of oversig ht could be on a specific project. Alth ough the CM docum ent revie w process minimizes ove rsight in contract documen ts, some cha nce still remain s. The eM contingency should cove r work-scope interface gaps that cou ld exist be tween work-scope descriptio ns. Fro m a project cost perspec tive. gaps are certainly more desirable than overlaps, so the CM approaches the writing of wor k-scope descriptions from that perspecti ve. Consequen tly.when used, this contingency do cs not indica te ad ded cost. Th e owne r continge ncy should cove r sco pe cha nges.The owner may want a contingency to cover vague or uncerta in dec isions po inted out du ring co ncep tual estimating. Sometimes this is to cover manufacturing or process equipment tha t can not be fully specified duri ng the feasibili ty phase . Th ere will be scope changes, and a co ntinge ncy app ropria te to the possibilities should be included in the concept ual budget. Th e team con tingency should cove r escalat ion on projec ts with a long construction durati on. espe cially projects that ar e phased over a peri od of time. Inflation. increase d mate rial and equipm ent costs. a nd cha nging labor rates co uld adversely

10.S T HE CONCEPTUA L CONSTRUCTION BUDGET

To this point. only cons truction costs have bee n budgeted. Th e following chan of accounts consists of 10 line item s.The alp ha designations used here are for de monstra tion purp oses. As the budget transforms into a more defini tive format. an expanded codi ng system will be requ ired . A B C

o E F

o H I

J

Site Develop ment Site Utilities Facility A rchitectu ral Facility Stru ctural Facility Electrical Facility Mechanical Design Contingency Work-Scope Interface Contingen cy Scope Chan ge Contingency Escalat ion Conti ngency

As design progresses, the few bro ad -scope line items of the Conce ptual Budget will be divided. and in some cases combined . into a large num ber of narrow -scope line items with more definition. The responsibility of the CM is to effect this tra nsforma tion. using a logical process tha t can be unders tood by all team mem bers. It is safe to say that the only line ite ms tha t will survive intact from the conceptual budget forma t to the eventual constructi on budget forma t arc the con tingency line items,

10.6

BUDGETING OTHER COSTS

Before the Conceptual Budget is prepared. the owner should de termine which project costs arc to be included and tra cked in the bud get. The conceptua l esti mate customarily covers construct ion costs onl y: there arc many othe r costs co nnected with a project that could be mainta ined in a single budget. Items such as real esta te. utility se rvices. furnishings. equi pment. finance costs, lega l fees. and design costs may be included in an expanded budge t at the owner 's optio n. However, before Chan ging the construction budge t to a project budg e t. the format should be reviewed for compatibility with the owner 's accoun ting system.

I

152

Chapter 10

10.7

BUDGET ACCURACY

Budge t Managem ent

Sect ion 10.10

153

gene ra lly fixed. Mos t site deci sio ns have bee n made. and the project is deli nea ted at least in plan. Thi s is usu ally a co ntrac tual progress payment point in bo th the AlE's and CM 's agree me nt with the o wne r. Sche ma tic design do cumen ts and an updat ed b udget sho uld be prese nted to the owner for review and ult imat e appro val.To reach approval. the ow ner should be led thro ugh the d ocuments and budge t by the A /E and eM and no te their com me nts o n bo th. Th e conti nuous co ntact o f the seco nd level (earn mem be rs and resource person s d uring the sche matic des ign p hase makes surprises un likel y. Howe ver. the meet ing pr ovides the o ppo r tunity for first level own er per sons who have not bee n involved in day to- day de cisions to review wha t has be en do ne. With a pp roval o f the sche ma tics. the owner au thor izes the AlE. in writm g. to pro ceed wit h th e design de velop men t ph ase,

The acc uracy of the bud get . kn owns and unk now ns no twithstand ing. sho uld never be com prom ised. All ite ms in the Con ceptual Budge t mus t be est imated as thor oughly and accura tely as poss ible. Th e amount of the conce p tua l est ima te o fte n de te rmi nes the fate o f the projec t. Op timism sho uld be a co nstan t area o r concern. It is nOI uncommon for o wners (as well as AlEs and Cbts} to View the proj ec t in the most favo ra ble way d uring concep tional plann ing. Real ism be comes obs cu red when the though t o f a new facility to occupy. a new p rojec t 10 design. and a ne w projec t to manage loo ms ahead. Th e che cks a nd balances of th e projec t team will be se verely tested. especially if the Cost o f the project is just a bit bey ond th e rea ch o f available funds. Co ncep tual estimatin g must be an o pe n and fair excha nge of cos t informa tion. and Ihe team must co mmit itsel f 10 an accu rate an d re alistic conceptua l bud get. regard less o f the consequences o f a go or no-go decis ion. It is common for J pr ojec t to "grow" during design as a resu lt of decision concessions mad e to the budget duri ng con ception a l planning. If the budget is to be mai ntained thro ughout the projec t gr ow th must be effec tively co ntrolle d du ring design. Many fringe items tha t were no t dee med necessar y when establishi ng ec onomi c feasi bility will sudden ly bec ame d esira ble after the project is. fund ed. A deta iled list o f ear ly design. mat erial. and eq uipmen t deci sion s will help co nta in the urge [0 gro w.

10.8

Design Develo pmen t

10.9.1

Schematic Budg et Th e bud get provided at the schema tic re view meeting is somewhat prob lema tic bec ause it is a combination of area/vo lum e numbers and qu antity/cost n umbers; budget review occurs ea rly in the transiti o na l estima ting peri od. Most o f the Schema tic Budget is de rived fro m upda ted previous concep tual estima ting- the rest is based on co nstructio n est ima ting. Howe ver. the credibility o f the budge t has impro ved somewhat. as a res ult of the c r..rs ma.ure insight into the proje ct and the A/ E 's interprcta tio n o f design par ameters.

CONTINUOUS UPDATING 10.10

As design de velops and is gra phicall y d efined. the team must main tain a Close rein o n scope a nd quality. Thi s requi res ongomg value manageme nt by the eM. Spa ce eq ua tes to dollars. and it is the respon sibili ty of the learn no t 10 expa nd the buil ding area if at all possible. When design passes the sch ematic ph ase. an assessme nt of o rigina l space accuracy can be made. Howeve r. ar ea ca n st ill grow until the de sign de ve lopmen t is compl ete. Refineme nt of the budg et co nt inues as the var io us cleme nts of the projec t p roceed through design de vel opme nt. Cons truc tion line items beco me more de tailed as drawings and technical specifications arc finalize d. Quantity surveys arc no t accurate enough du ring the schematic phase. and the estima tor must rely on area and volume calcula tio ns. As design development proceeds. budge t refineme nt is .epr cu rre nt using d rawings and o utline specifica tions. With more de finition co mes mo re refinemen t. until all cos ts o riginally based on areas an d volumes are co nve rt ed to costs based on quanti ties and derive d labo r. material. and equ ipmen t. A t tha t time . th e Wor k-Scope Budget is com ple ted .

DESIGN DEVELOPMENT

The de sign de velop me nt pha se is the most produ ctive step in transi tio n estimating. Horizo nta l and vert ical dime nsio ns a re fixed : the stru ctural system has been selec ted; wall sec tions ha ve bee n decided upo n; a preli minary finish schedu le pe rmits quantitative estimation of finish trad es; and wit h the excep tion of mechanical and elec trical . mos t schematic budget lump sums can be de tailed. El ect rical and mechanical d esign is so dependen t o n architectural and structura l design de velopment th at little det ai l is sho wn in these syste ms unt il the contract documcnt pha se is und e rwa y. Additio nally, the y usua lly ex pe rien ce the la rges t cos t grow th of all systems d uring design anc rep resen t an incre asingly large r po rt io n of the con st ruction budge t than in the past. Th ese two condition s shou ld be allowed for when estima ting during the conceptu a l and sche ma tic p hase s. The de sign develo pmen t p hase p ro vides construction defi nition tha t allo ws many line -items to em erge. Credible transition from are a/ volume nu mbe rs (Q quant ity/cost nu mbers mak es this po ssible. 10.10.1 Design Development Reviev.

10.9

SCHEMATIC PHASE

In addition to the cons tant updaun g of the estimate during the flow o f des ign informatio n. speci fic teem meetings sho uld be sched uled fo r budget upda te decisions.Th e first meet ing sho uld be held at the co mpletion o f the sche ma tic ph ase. A t th is poin t, the area o f the buildin g o r s truct ure is essen tially set, and the relat ionships of space have been established. A pproxima te gra des have been de termi ned and o verall d imen sions

I

Th e co mple tio n o f the de sign d evelop me n t ph ase is ano ther milestone in the A lE progress pa ymen t requireme nt. Design conti nu ity is tem porarily inte rrupted to provide a docu me nt and budget revie w by the owner . Th e re vie w o f this phase replicat es the schematic review. the differen ce be ing that mo re de ta iled docu me ntation is available fo r th e owne r to review and ult ima tely ap prove before authorizing th e A/E and C M to proceed with the co ntrac t doc ume nts phase.

154

Chapt er 10

Section 10.13

Budget Management

RATED ESTIMATING

During the contract docume nt pha se, the tr ansitio n fro m area/volume es timating to qu ant ity/cost es timating of work- sco pes must be finalized . Budget reponing to team mem bers is important. To facilitate this. a form or rate d estimat ing sho uld be introduced when the contract document pha se beg ins (if it isn't already in place) as this phase provides the last opportuni ty to econ om ically em ploy va tue manageme nt techniques for budget adjustments. Severa l people in the AlE and eM lirms and the o wner's o rganiza tion will be intereste d in the sta tus of the estimate as it is develop ed, esp ecially the C M's value mana gers. II is helpful for them to kno w the esti mato r's perc eived cre dibility of each line item. to be able 10 quick ly ident ify th e existence ~Il1J exte nt of line ite ms st ill subject to cost fluctuation. Rated esti mating is a simple ap plica tion tha t provides tha t

Line Item

Budget

Estimate

Rating

Rated Estimate

Mass Excavation Building Excavation Roads and Parking Drainage Structures Site Mechanical Site Ele ctrica l

s SO.fXXl

S 86.000 21,000 122.000 25.000

U

$ 111.8~

Estimate'Rating:

26,000 120,OIx)

22.QIX) 48.000 13.Otx)

\.0 1.0

1.2 45.000 1.1 1.1 22.00u 13\ 9.000 $32I.00J (358.soo + 321.000) =1.1171

"111.: M al'S Excavauon eSlim ate tlas a 1I;,h potenual fur ctlan ~e J.nl.l

21.00:t 122,000" 30,000"

49.500" 24.10ti $358.500

10 .1 2

CO NTRACT DOCUM ENTS

Th e completi on of the contract docum en t phase is yet an ot her mileston e in the AlE progre ss payment requ iremen t and. mo re impo rtant ly.in the for ward movement of the projec t. T his review of do cum en ts and budget by the o wne r is the final requirem ent before issuing bidding docume nts to con trac to rs.The re view replicates th e two pre vious ones excep t the delin eat io n and documentat ion is in its fina l form for bidding purposes a nd includes the genera l and specia l cond itions. pro posal forms, and instructio ns to bidders. Th e owner 's lega l coun sel sho uld be invo lved in this review.

mU~ 1

be rcllu<;cl.l sn .fO'l.A valu e m3na~"men l rev,e w ma ~ be: re q u;l etl l>c: r" rll Ihe u lin,: ChJ ngc l I" 1.0 ~e BuilllulJ: EU:lvali(Jn u limal ': ral ing I)f 1.0 inl.llcalcs Ihe bul.lllc i has :l cu n e OI S) .I~XJ un<.lcrrun ,In.! can lu n en rJcr c~ l i mli l e tlo llJrJ. 10 line , ICnl~ eSllnlJ ICS Wil li \,vcrru n~ "The ROOId. anrJ pJ.rkll\~ estimate ntlln J:u f 1.0 in,Jicall: Sl h:lll he budgcl ha~ a $2..1 • • 1 o vc rru n Iha l coul d be e hmmate d by I val ue miln3gcmcnl revte..... rrb.: Dra lnJ!>eStructu res e sumate h:u a medium potenual (o r chJ.n,c an.! m Ulol be reduc cd by SJ .tHI. A valu e managem en t rev iew may be: nec essa ry te rore lhc ra lln ~ cha nl es 10 1.D. "The Sue Mech an K"a l Clohm ,lI C ha lo 10.... pot cnllal fo r ch.l ngc. .In d .. he n Ihe flIling is 1.0 coul.:! h.;'·c J SJJ).O umle rn lll; .;nl! al l h:o.l ume ca n loUlren,Je l eloilln ale doll.:lrl 10 hlle nems .....llh uti male oYerruru. 'Th e Site EleClrical esumate has a lo w po len lial ror c1u nrc . an d .. he:'l lh e ral in ~ is 1.0. coul d have a S I J). )(l undc:nun: In.:! 'II lha l 11m.; u n su rre nde r .."imale dolla " l.~ lone: Ite m. ",,11 « I;mate overr ...ru.. 'llIc cslll nolle has a le w poIcfll ial for chan,.:.

FIGURE 10.3

155

informa tion. A n examp le of a Simple rate d estim atin g form at is shown in Figure 10.3. O ther more so phisticated form a ts are availab le or can be devised. At som e poi nt. all line-items ......ill cons ist of quantity and cost units. A rating should be assigned to the qu ality or accuracy of these estimates. The rating is simply the est imato r's opinion of th e accuracy of q uantity and value units. How accurate is the qua ntity survey for masonry ? How accurate is the mat erial cost used as the mult iplier ? Is the labor rat e firm'? How re al is the produ ctivity factor ? A computerized syste m. using nominal spreadshee t software. could rate estimate line item s on an accuracv base ,...( unity.Th e extent of each estimate e le me nt [quan tity, ma terial cost. labor ra te. and prod uctivity} deemed uncert ain by the estim ator is reduced to a scale of 0.1 to 0.3 end added to the base o f 1.0. A line item considered by the estimat or to have a high potential for change would be rat ed l .-t. by the est imator; o ne ......ith a med ium po tentia! would be rat ed 1.2. and o ne with a low pot ential would be rated 1.1. When the estimate line-item cos t is mult iplied by its ra ring, the result is a rated value of the est imate line item . The sum of line items in the rated estimate column divided by the sum of line ite ms in the unr ated est imate column pro duces the rated value of the es timate.The goa l is a rat ing o f 1.0. Unit y rat ed estim ate line-item cos ts that ar e less than their budget counterparts can surre nde r dolla rs to unity rated est imate line items tha t exceed the ir bud get counter part s. Unity rat ed estimate line-ite m costs lh'll exceed their budge t counterparts sho uld be subjected to value m mageme nt revie ......s befo re receiving dollars from ot her estimat e line items. At no time during the project sho uld the original bud get line-item costs be chanced. TIle key to success of an ~ ratin g system is co nsiste ncy by the parties doi ng the rating. With o ut consistency, the syste m would be cou nterproductive and could be serio usly mislead ing. When the Cr-. : decid es 10 usc rate d estim atin g. a commitment of de dication to the system o n the pa. i of the CM's estimating resource pers on is absolutely mandatory.

On fast-track projects. the init ial work-scopes to be bid are developed in the design devel opment phase and prio ritized d uring the early part of cont ract document phase.This allows the eM to develo p their work-scope est imates as soon as the y have adequ ate definit ion, which could be d uring de sign de velop ment. There fore the design developm ent budget could be a combina tion of refined conce ptu al and schematic lump sums based o n area/volume es tima tes and a few wo rk-scope lump sums base d on quan tity/cost estimates.

10 .1 1

Work-Scope Estimates

10 .13

WORK·SCOPE ESTIMATES

The ultimate goal of eM es timating is to prod uce a co nstruction budget tha t can withstand Ihe test of competitive bidding in the co nst ructio n marketplace. Work-sco pe estimates will provide a compariso n budge t fo r the pro posals received in each bid division

A n eX;lmple of rateJ estimating.

I

156

Chapte r 10

of the project. It sho uld be u nde rstood by the owner and the N E th at the construction budge t is only competitive in its aggre gate am ount and is s ubje ct to the plus/m inu s accuracy established by the co nceptual estima te. Individual Work- Scope Bud gets were no t esta blished by the eM as co mpetition for bidding cont ract ors. Howe ver. they shou ld be wit hin a rea sonable ra nge of the work -scope proposals recei ved (rom bidding co ntractors. TIle pr op osals recei ved from the lowest qua lified bidders in all work -scop e division s will esta blish the minimum co mpetitive price for the projec t. In essence. the fu nctio n of the CM estimator is to es tablish costs as accurately as possible du ring eve ry ph ase of desig n. 50 Ihat the financial di recti on of the project is clea r to a ll team mem ber s. and the value management proce ss can be applied in a time ly and effective man ner . Althoug h the C M's wo rk-scope esti mates ar c assembled by th e es tima to r using the same techn iques that con tract ors use. it sho uld be under stoo d that the CM is no t a bidd er. D uring the bid opcning and a fter bids have been recei ved. work -scope estimates can be extremely useful. For examp le. if onl y o ne bid is rece ived in a part icular work scope division and it is perm issible (or the o wner to award on the basis o f a single bid. the estimator 's figu re for the work-sco pe can determine whet he r the single bid sho uld be opened or if a re -bid o f that work-scope is pre fer red. It sho uld be handled discreetly. Befo re opening the single pr o posal , it is suggested that the owner ann oun ce a maximu m am oun t tha t wou ld be acce ptable for award ( pe rhaps the wo rk -scope estimate pius 5%). If the prop osal is with in the range. the bidd er coul d co nsent to having the bid ope ned or ask that it be re tu rned un opene d. This is a fair and equi table way to hand le a single prop os al situa tio n: if an own er can not ma ke an awa rd. bids should not be expo sed to anyone for a ny rea so n. Additionally, the estim at o r's qua ntities. p rices. and perso n-hour allocatio ns are valuab le data during post-b id interviews with appar ent lovv bidd ers. Comparing the bidder 's calculat ions with tbe est imato r's ca lculati on s pr ovides cre d ibility to the bidd ing process. Comparison s confi rm the interpre ta tion o f th e wo rk-scope as well as the q uant ity su rve y and the labor costs. E ven tho ugh es tima ting (es pecia lly rate d estimating) has a high pote ntial for acc uracy, erro rs somet imes occur. Com pari son s can se t the reco rd stra ight befo re award ing co ntr ac ts. 10.14

Section 10.15

Budget Manag ement

10. 15

I

157

Each Const ruction Budg e! line ite m is subdi vided by a listing called a Sched ule o f Values (a breakdown o f each work-scope int o ide n tifiable units of work that are mea surable in te rms of quan tity a nd cost). Sched ules of value are no t new; the y have been used o n lump su m co ntra cts for progress payme nt determi nation (or many years . See Chapter 11. Contract Ma nage me nt for more o n Schedules of Value. Con verting the q uan tity o f wo rk done to date by a contractor o n a subline item in the sch edu le of values to a per centage of th e total q ua ntity of work in the s ubline item. and multi plying it by th e bu dget ed a mo unt in that sub line item, pr oduc es the do llar value of work done as of the end dat e o f the accoun tin g per iod . by the contract or on that line item. Thi s amount is call ed the ' cos t 10 date: ' Subt racting the cos t to d ate of the previo us accounting pe riod fro m tne curren t cos t to date provides the -cost fo r the period -- the dollar valu e o f the wor k do ne by the co ntracto r du ring the current accounting period. SUbtracting th e cos t to da te from the to tal value of work in the subline item provides the "c ost to complete: ' providing no changes have bee n made or are planned (or the line ite m quantity. Because cha nges a re always a possi bility. the cost to complete is usuall y listed as the "es tima ted cost to com ple te." The to tal for the subline-item is th e "budgeted cost." However. du e to the fact that there coul d be changes, an addit iona l head ing is included for the "es timated fina l cost"- the cost to da le plus the estimated cost to co mplete. A basic spreadsheet prog am can be used to pr oduce these figures. one for each Sched ule o f Values and one fo r the tot a l project. A lth ough bo th sprea dshee ts work the sa me. the head ings for each shou ld be as descript ive as possible for better commun ica tion. The informat ion ex trac ted fro m the Schedu les of Value makes it unnecessa ry to use all thc head ings needed in the to tal pro jec t spreadsheet. Typical budget maint enance sp readsheet headings a rc s ho wn in Figure lOA. Schedu les of Value a re also covered in Chap te r 11. Co ntrac t Man age me nt. All o f a contracto r's Sch edule o f Value subline items mus t be manually updated fo r each progre ss payme nt period. and the line item s produced by the su m o f the subline items for each contract or sno ul d be automatically transferred to the Tot al Projec t spreadshee t under the matching he adings. Th e only ot her manu al input to the b udge t maintenance progra m sho uld be the estimated cost to co mple te. Th is data ca n be ente red to ei the r co n tracto r schedu le of values sublinc Items o r to tal line item. whichever is prefe rred.

I•

CONSTRUCTION BUDGET MAINTENAN CE

Prio r to the award o f co ntracts. th e budge ting precess was essen tially an estimati ng p rocess. The Co nceptu al Bud get was prese rved throu gh th e co mb ined use o f estima ting a nd value manageme nt. Once co ntrac t awards are made and the Co nstruction BUdget established. comp rehens ive construction estimating is on ly occasiona lly needed. The sum of all cont racts awarded establishes the constr uction budge t. Th e budget line ite ms a re the indi vidual lump sum contract amo unts of the wo rk -scope co niraeto rs.The o nly line item s that rem ai n estima tes are the co ntingen cies and the con struction suppo rt ite ms. Co nstruct ion es timatin g is o nly needed to price or verify change s when and if they occu r.

Schedules of Values

SCHEDULES OF VALUE S

Each cont ractor's Schedule 0:" Values sh ould be meticu lou sly assembled by the eM and ulti ma tely approved by the tea m.The breakdown o f the lump s um cost should rep resen t the true value o f each subline item as close as possib le. Th e CM's work -scope estima te should be the so urce o n which the su bline items arc estab lished. There is no need for co ntract or input as there is when using the GC sys tem . Because the Sch edule of Va lues is p rima rily a sou rce docum ent and seco nda rily a rep ort document. so me o f the column he adi ngs requi red for repo rting p urposes in the

158

Chapter 10

Bud get Management

Typical

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FIGURE 10.4 Spreadsheet headi ngs an J rel alion ships for bud !=o.: l mainte nance.

total line item spreadshee t can be omitt ed in the schedule of values. The information in the Schedule of Values is the option of the team . Its main purp ose is to det ermine contractor payments. A typical comprehensive Schedule of Values is she w.n in Figure 10.5. A more common fonn of schedule is shown in Figure 10.6. Column (1) lists the subline item's mark numbers. Conside rable thought should be put into the numberin g system, (Q permit different printout sort s for transferring information within the system and for reporting/record purp oses. The subline item mark numbering syste m should be tailored to meet an individual CM's cost accoun ting and reponing: requ irement s (and man y times. to meet the owner's req uirem ents). In the illustration. the first pair of digits is the work-scope division. The second pair is the type of line item (1: contract, 3: chan ge orde r. 5: owne r pur chase, 7: owne r supply, 9: extra work) . The next pair is the subline item number. The last pair is reserved for internal C~I cost-tracking purposes. Column (2) is the description of the subline item. Column (3) is the Cha nge: Order column where Change Or der amou nts a re listed as they are include d. Column (4) is the percentage comple te used on the previous assessme nt of work done . Column (5) is the manuall y ent ered perce nt comple te, as det ermin ed by the CM and NE. by visually evaluating the wor k don e by the contracto r as of the period end-

ingdale of 0-06-96. Column (6) is the team 's breakdown of the cont racto r's lump sum co ntra ct amoun t. The allocations to the sub line items include hous ekee ping, final clea nup. an d punch list (item s that must be perf ormed to receive paymen t). The total of the column is the contractor's contract amo unt. not including changes. Column (7) is the amou nt earned to dat e by the con tractor. Th e subline item amounts are the product or the per cen tages in column (5) and the budget amounts in column (6). The credi t for the vinyl tile deduct is take n when the C O. is ente red.

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Chapter 10

Section 10.17

Budget Management 10.16

Schl;!d ule or Valu es R ep ort

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10 .17

TH E BUD GeT REPORT

BUDGET CREDIBILITY

The credib ility of the budget dur ing format ion a nd maintenance depe nds on estimating expe rtise and timely co mmunicatio n. Th e most difficult part of budge t management occurs prior to the star t of cons t ructio n. when construction knowledge. estimating experi ence. and co mmunicatio n skills are the only too ls to accomplish what must be done. Shelf-cost models and prop rie tary cost records are helpful but only if used and inte rpreted correctly. \Vhe n a budge t fails. it is a lmost always due to human miscalculation or delinqu ent cor nrnunications. However. multi ple co nt racti ng with in the CM syste m generat es co nstruction cost data to an extent and degree a t accura cy never befo re availa ble. The eM is privy to authen tic constructio n qun utitics and costs that ha ve the: pc rcruio! for making conceptual estimat ing a lmost as accurate as construction estimating. If the eM accum ulates cost records in a produc tive uniform format from ever y project. it will not take long ior a depe nda ble conce ptual cost modeling syste m to eme rge.Th e pote ntial in this area is almost unlimited .

X $27.302

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161

The Schedules of Value lint: ite m rep ort for all wor k-scopes. including Change Order sta tus and estimated co mpletion costs. pro v ides the curre nt cost status of the Const ruction Budget. The budge t re po rt is the prime budget maintena nce docu ment. A n example is sho wn in Figure 10.7 on page 162. If a com prehensi ve Schedu le of Value s (Figure lOj) is used. the estimate: for the cost to comp lete (S96.S07) can be transfe rred from the bottom line. Col umn (9). to the budge' re port. Column (6). work-scope 15. If 'he Schedule of Values (Figure 10.6) is used. the esti mate of costs to com plete must be calcu lat ed and e ntered on the budget report for m. The budget report form also provides tracking for the three contingencies as well as other noncontracte d costs. such as construction suppo rt. eM fees. or any ot her project-re lated costs the owner choos es to include in the budge ting process. Infe rma rion on the budget report C:lO be expanded to the exte nt required by the owner. However. care should be ta cen to keep the tracking syste m as simple as possible. As with sched uling. budge t manage me nt system s can be ove rdo ne. The computer is a powe rful tool. and the re is a te nde ncy 10 usc its power to full capacity whe ther the task at ha nd requires it or ne t. The schedule of values and the budget reports shown here are simple sprea dsheet ap plications: kee p the m that way.

w ork-Scope: Floors. Walls.. Ceilings

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Column (5) shows 100% comple te and Column (10) shows the deduct in the esti mated final earn ings. Column (8) is the subline item amount paid to the co ntracto r previously. Column (9) is the estimated amo unt the con tractor will ea rn to complete the work-scope and changes. Column (10) co nta ins the sublinc item a mounts the con tractor will earn when the work of the work-scope and changes IS comple ted. The sum of the co lumn is the curren t value of the contra ctor's contract. Column (11) shows the vari ances from the bucaet for each subline item. The change order amounts are identifie d by not ations. The-sum of the column equ als the change order amo unt. The more commo n form of Schedule of Values in Figure 10.6 can be compared to the comprehensive form in Figure 10.5. h co nta ins less detailed informati on but is sufficie nt for paym en t purposes. Colum ns (9) , (10) and (11) have bee n elimin ated and a new column (9) hea ding ad de d that lists the curre nt period earn ings by sublin e item.

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C H AP TE R

1 1

Cont ract Management "0

Con trac t management in the eM syste m extends far beyond the tra ditional rcspo nsibilities o f cont ract ad ministrat ion in the GC syste m. Co ntract man agement regard s cont racts as manage me nt too ls that sh o uld be used reso urcefully to improve the con struc tio n process as well as protect the o wne r' s best inte rest s. The standard con struction documents. used in the G C system of co n tracting. a ue mp t to favor the pa rties who issue the documen ts. Th ei r provisions (sometimes at the insiste nce of owne r's attorneys) are under continuou s revisio n as looph oles de trimental [ 0 the owne r are unco vered , These d ocuments a re cur rent ly to the point where exculp ato ry provis ion s. words. and phrases make it almost imp ossible for the par ties to pe rform the ir respo nsibilities in a prod uct ive way. The cons truc tio n process has bee n ne glected and pr otect ionism has become paramoun t. The eM co nt rac ting sys tem bro ught about the need for new co ntract docume nts that would be app ropriat e fo r the forms and var iatio ns of the new system. Figure 11.1 lists nine forms or variati ons o f forms that req uire co nt ract documents. To fill th is need. three familie s o f eM docu ment s had to he de velo ped . o ne for each o f the form s. plus supplemen tary doc umen ts to imple ment the va ria tio ns. With this number o f basic co nt racting options. and the cppun uni ty to usc different co ntracting form at s for differe n t con tractors und e r the m ultiple -bid d ing format.

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162

l

163

' 64

Chapter 11

Section 11.4

Contract Management

eM contract management becomes a mor e demand ing task than with either the GC or D-B systems. The complex contracting requi rements and various contracting op tions

11.3

11.1 THE CONTRACT MANAG EME NT AREA OF KNOW LEDGE

11.2

CONTRACT PROVISIONS

The eM system has several forms and variations as described in Chapter 5.CM System Forms and Variations. Contracting formats are available for all variaticns. one or mo re o f which will closely (if no t exactly ) mee t an owner's contracting preferences a nd req uiremen ts. The followi ng a re a few examples of owner op tions. Gu ara nte ed Maximum Price CM (GMPCivl) provides an uplront construc tion cost com mitment tha t ca n be used to a rrange project financing before design is 100% com pie te, Agency eM (A CM).coupled with comprehensive mult iple contracting . produces ma ximum project economy by extracting competition at the lowest pos sible COnt racting leve ls. Multiple con trac ting permits pre-qualification of trade contractors and im pro ves the pote nt ial for obtaining co nstruc tio n quality, Co ntrac to r Exte nd ed Services CM (Ccnuac tor-Xf'M} relieves the owner from holding multiple con tracts and sheds almost all responsibility for overall construction cost. Selective bon din g o f cont ractors is a value management option that can sa ve bondi ng costs whe n dealing with reputable contractors. This opt ion is usually only av ailable on p riva te secto r p rojects.

16S

CONTRACT DOCUM ENTS

When using the gene ral contract ing system. con tract options arc mini mal. The owner selects either a standard se ries o f co n trac t doc uments issued by the AlA. NSPE. or AG C or uses a proprieta ry se ries dev eloped and publ ish ed by the owne r. Th ese doc uments ha ve usua lly stood the rest o f time and can be used over agai n with min imal modi fications. They consist of: (1) the con tract for co nstr uctio n. (2) the ge ner al condidons, (3) the supplementary an d spe cial conditions. and (4) accessory doc u me nts, such as the instruc tio ns [ 0 bidders, subcontrac ts. proposal forms. and sure ty. insura nce. and request for payment forms. W he n using contra ct docum en ts, it is impe ra tive th at all doc ume nts used are fro m o ne se ries; they arc coo rdina ted w ithin the se ries and ref er to provisions one to ano ther, Using doc umen ts fro m d iffe ren t se ries should no t be conside red and adding new documen ts and fo rms should be do ne with great cau tion. Aside from me thods o f payme nt (lump su m. un it price. gua ran teed maxim um price , and cos t p lus options) and add ed features suc h as liquidated da mages o r bonus pe nalty pay ment cla uses. the contracti ng process is fai rly constant fro m o ne p roject to ano ther and shou ld be we ll unders too d by all project pa rtic ipa nts. A cco unta bility fo r using the righ t co nt rac t documents, and using them correctly, is the owne r's, However. as the kn owledgeable pa rty regarding con tract documents. the NE is expected to guide the owner throu gh the se lec tio n and modifica tion process and. with the co unsel of the o wne r's a tto rney, assemble and issue the doc uments for the p rojec t.

positions the cons truc tion manager as the knowledgeable party on the project team.

The contract management area of kn owledge encompasses the involvement of the eM in the operat ional and administrat ive provisions of the cont racts used on the project. CM expertise includes the recommendation of standa rd contract forms and the pe rfo rmance responsibilities to be inc luded in contrac ts b ut do es no t exte nd to the writing o f con tracts or in a ny way infri nge upo n the legal professio n. Th is a rea is import an t bec aus e the Cvt system is a unique contrac ting system. the success of wh ich depends on a work able realignment of tra ditio nal contracting roles and participant responsibilities. It is the CM's responsibility to establish a contracting format for the project an d to see tha i each co nt ractor's opera tional and administra tive req uirements are definit ively inc luded. The co nst ruction manager mus t be ab le to evaluate each project from a contracting perspecu...'e ba sed on the un iqu e cond itions of the project and local construction industry practices. TIle C[l.1 must assess the available poss ibilities. recommend 3 con trac ting st ructure to the client. assis t in developing contracts. review cont ract documen ts for sui tabili ty. and coo rdinate thei r provisions on the project. The co n tra ct manage men t are a of knowledge includes an und erstanding of con tracts, co ntract language. standard cont ract documents. contract law, and co nstruction con tracting in the area of the p rojec t. A thorough knowledge of traditional contracting procedures. C~I contrac ting procedures. and the re asonable possibilities for cont racting innova tio n is necessary. Excelle nt communication skills are required.

Contractability

11.4

CONTRACTABILITY

Whe n using the C~'I syste m. the re are many contracting op tions that produce very differ ent co ntracting struc tures. a ll o f which sho uld be co nsidered by th e team in the co nte xt o f the owne r's preferences, The select ive use of co ntra cts and the opp o rtuni ty to establish a n ideal contract ing plan and ins ta ll the best cont racting struc ture has added a new term to the const ruc tio n co nt ractin g glossary: contractability, The basic concepts of contrac tabili ty are no t new. Most have been used for as long as constructi on se rvices exis ted. H owever. the emergence of the CM system. with its broad variety of co ntrac ting o pportu nities. de mande d close r atte ntion to contracts and contracting st rategies. Th e developme nt o f a produc tive co ntrac ting p lan is recognized as a prime ma nage.ment strategy for im provin g project de livery performance. The basic premise of con trac tabi lity is tha t each project has a unique se t of circurnstances that can be be neficia lly exploited throu gh op timum cont racting arrangements. When prope rly for m ulated and inst alled . the appropriate co ntrac ting plan will accom moda te most of the ow ne r's cri teria and greatly improve the opportunity for project success. Th e owner criteria tha t lead to the decision to use the eM system m ust be prioritized, because the inherent fea tures of the construction industry may no t allow all of the m to be included in o ne eMco n tracting plan. Trade-offs sim ilar to those made during co nstructability revie ws may also have to be made du ring co nt rac ta bili ty re views.

166

Chapter 11

Secti on 11.6

Contr act Ma nage ment

11.4.1 Con traetab ilit y lim itati ons Co ntract ing stra tegies and con tract ing plans have limitatio ns: eve ry opt ion is no t 3V3ilab le unde r all projec t circ ums ta nces. Indust ry protocol s. local area prac tices, a nd corn ma n sc.nse. enter into the co rnrac tubility dec isions made. For exam ple. ar bitrary bid packaging o n mult iple co nt ract eM proj ects might nullify the cos 1 adva nta ges of compct iti ve bidd ing. Fast-tracking when not really needed cou ld increase co ntrac ted costs. Preq uali ficat io n of trad e cont rac tors is ef fective on priva te sec to r work but may not be pe rmitted in the public sector. and negotiated contr acts have p ub lic sector restrictions o r bans. Th e dolla r differe nce bet ween the posit ive a nd negative consequences of a con tract stra tegy's success o r failure pos itio ns con trac tabili ty
11.6

MULTIPLE CONTRACTING IMPLI CATIONS A major fea ture of CM co ntracting is the use of trade cont ractors as pri me contractors, Chap ter 22. Multiple Bid d ing and Co ntrac ting. co vers th is featu re in de pth. However . multiple prime cont racts provide contrac t m anagem ent o ppo rt unities tha t sho uld be expanded upon under this heading. To those un familia r with mult iple prime contracting. the mere implications of the concept often provokes negativism a nd serio us do ubt. Yet when pro perly employed, the prac tice provide s significa nt financi al retu rns to [he owner. In addition to eco nomy. multiple co ntracts co ntribute improved credibility to the task of managing co ntractors and to the import ant aspect of contract admi nistration . A mult iple prime pro ject will no t o nly utilize ab out the same num ber of tra de con tracto rs, but it is a lso likely th at they will be the same trade contractor s that would be empl oyed as subcon tracto rs if the projec t used the GC or D-B system . Th e differe nce is that the proje ct team. thr ough the CM. will coord inate trade contractor per form ance and ad minister tr ade co ntrac to r co ntracts instead of the GC o r D·H contracto r. O nce this is un derstood. dou bts abou t multiple con tract ing sho uld d iminish conside ra bly.

Project Delivery Ele me nts When per formi ng a cont ractability re view or for mulating a cc ntractability plan,all service eleme nts or componen ts necessary [ 0 deliver a proje ct mu st be considered individually and ea ch contractua lly assigned to mem bers of the proje ct tea m. The re qu ired service elem ent s are projec t mana geme nt . design . contrac ting, construction, contract ad min istra tion. and cons tructio n coo rd inat ion . covered in Chapter 1. When using the CM system. the d ist ributi o n of respo nsibility for these elemen ts depend s on the fo rm of CM used .Th e agen cy form of CM assigns the Al E sole rcsponsibility for de sign but shares respo nsibility for proj ect ma nage me n t and contract ad minis tra tion with the CM. Trade co ntractors are responsible for con st ruction . The eM has sole responsibility for co nstructio n coord inat ion and shares contracting respo nsibilities with the owne r. Figure 11.1 (o n page 163) shows the d istributio n of responsibility for the for ms of the CM system . The GC and D- B syste ms have been inclu ded to demonstra te the nume ro us con st ructability o ptio ns that are available in the CM system but not in the o ther two.

11.6.1

11.S CONTRACTS AND CONTRACT DOCUMENTS Contrac rabiliry stud ies produce innovative contracting strategies tha t require significantl y modi fied standard contract d ocu ments. Conse q uently. major con tract abilu y dec isions sho uld be made prior to th e o wne r signing service agre emen ts with the AlE

167

and eM. Otherwise. pro visions to acco mmodate th e contrac tua l e ffects of construc tab ility decisions sho uld be includ ed in the modified stan dard se rvice agreemen ts. Contractability stress es the review of all pro posed co ntrac t documents prio r to commi tting to use. The mos t acce pta ble of all de finitions for CM is innovative co ntracting. Th ere are three majo r forms and severa l varia tions of two of the forms to choose from. Acceptable sta nd ard docum ents, capable of co nvenient modi fication are pub Iished fo r so me but no t all vari at ion s. Unlike genera l cont racting and design-b uild contra cting. whe re longstanding standards o f perform ance ha ve bee n established by precedent. CM co ntracting has no universally acce pted standa rds from which owners can de termine pe rfo rmance req uire men ts or resu lts. let alo ne form ula te specific con tr ac t provisio ns to prod uce a desired resu lt. The abs e nce of sta nda rds requires con siderable anal ysis to dete rm ine the specific provisions that sho uld be adde d to CM contrac t documents. Result ant ly, a much higher level of co ntra ct and co ntra cting expe rtise is req uired on CM projects tha n o n gene ral contra cting o r D-B projects.The co nstruction manage r is expected to prov ide th is expe rtise with in put and guid ance from the AlE.

The success of the team 's co nt rac tabili ry effor t depends equally o n a complete and accurate unders tanding of the constru ction indu stry and construc tion cont racting and a complete and accu rate understanding of the owner's requireme nts and lim itations. Ow ners sho uld no t atte mpt to ma ke cc ntractabili ty decisions witho ut the expertise of a qualified CM and AlE. an d CMs should not mak e co ntractability recomme nda tio ns without compl e te. detailed input from the own er and N E. Th e time to initiate co ntr actab ility discussio ns is th e brai nstorming sessio n (described in Chapter 7, ACM Proced ures).

11.4.2

Multiple Cont ractin g Implicat ions

,; r

i

Cont ra ct o r Paym e n ts An example of imp roved credibili ty is in the progress payment req uirement of co ntract admi nistra tion. On a sing le prime project , a single payment is du e each pay peri od . Under a lump sum con tra ct, the payme nt is de termi ned by ap plying co mpletion pe rce ntages to a sched ule of values tha t cove rs all th e wo rk o n the proje ct. whethe r it is done by the prime cont rac to r o r the prime con trac tor's subcont ractors. Th e prog ress paymen t is made by the o wne r to the single prime con tractor. The contrac to r the n passes o n individual payments to subc o ntracto rs who a re e ntitled to a share of the progress paym en t based o n the work they acco mplishe d.

168

Chapter 11

Con tract Management

Section 11.7

When the schedule of values was typically developed by the single prime co nt rac tor, every effort was made to front -load- to inflate the value for wor k do ne ea rly in the projec t by equally defla ting the cost of work to be do ne [a ward the end o f the proj ect. For example. funds earmarked for finallandscaping in the sche dule of va lues might be transferred 10 clea ring and grubbing o r demolition. Thi s billing tac tic imp ro ves the p rime contractor 's cash flow b ut has the opposite effec t on the owne r' s cash ftow and equ ity. Alt hough the prim e co ntrac to r will n OI receive J grea ter total payment th an called for in the con tract. pa rtial paymen ts are rece i...-ed before they are ear ne d. This see ms harmless unle ss you co nside r this scena rio. If the co ntrac to r default s o n the performance bond. the sur ety is not responsi ble for overpay me nt made to the contrac tor prior to defa ult. Thi s me a ns the ow ner wou ld suffer fina ncial los s. Payme nts to cont ractors under multipl e contracts are based o n individual schedules o f value from eacn co ntr act or . Pa vmen ts ca nno t be moved fro m one co ntractor's sched ule to anoth er. and front-loa din gis virtu ally eliminat ed. Increased cred ibility is also influenced by where owner payment s to contraciors finally end up. With a single prime pay me nt, the owner hJS no W.1Y te lling when :IO U if the prim e co ntractor is pay ing his subcont ractors pro perly and o n time . With mulu pie cont racts, the owne r pays [he individu al co ntrac tors d irect ly. elirninann g the co ncern for liens being filed by a com ple te tier of co ntracto rs (on pri vate secto r proje cts) or claims again st the la bor end mate rial bond o n pub lic projects.

The Contract Management Plan

169

Alt hough contractor s usu ally canno t be excl ude d from bidd ing o n public projects. ther e is no restrict ion o n ob taining qu a lifica tion information that can be helpful in evalua ting pro posa ls, awardin g co ntrac ts. and working with contracto rs dunng co nstruction. On priva te secto r projects. qualification info rma tion can be used to select bid lists, ':,.'

11.7

THE CONTRACT MANAGEMENT PLAN

Although cont ract man age men t appears to be complex. especially on projects using mult iple co ntracts. it shoul d be rou tine for experience d constructi on managers. The project participants. with the exception of the main chara cters (the CM. or the G C or D-B con tractor) are the same regardless of which contracting svstem is used : on lv the co ntractual relatio nships have changed. ~ . The ccnrractability re view. initiated at the brainst orming sess ion. is the s tart ing po int for the contract man age men t plan. A t that sessi o n. the CM should ext ract infor: marion from the owne r that willlead to determining the eMfor m that fits the owner's requirements. Th e eM must also extract firm informa tion rcga rdm g the physica I aspects of the project. the de sired time sched ule. how the owner expe cts occupancy to occur. and the contracting climat e in the area where the pro ject is to be bu ilt. Although it would be poss ible to decide the eM form at the brainstorming meeting, it is usually bette r to d iscuss the poss ibilit ies and ramificati ons with the owner and AlE . let the m absorb the da ta. ask q uestions. and make the deci sion at a late r da te. The choice of contracting strategy is o ne o f the most important dec isions that will be mad e o n the pr oject. and it sho uld be made with a mp le fore thought. If the C!\.1 was chosen by the o wne r witho ut a pre conccived idea o f which co ntracting system(s ) to use. the opt ion s avail able 10 the own er are all those listed in Figure 11.1. including genera l cont rac ting a nd design- bu ild contract ing. Th e CM sho uld un der sta nd that the prod uct ive defi nition of eM is inn ovative co ntracti ng and that the optimum con tracting st rategy-the one that effe ctiv ely and eco nomically provides as many o f the o wner's nee ds 3 5 possible- sho uld be insta lled o n the project. Expe rience has show n tha t o n ce rta in projects there is a place for all thr ee systems sim ulta neou sly, If such : 10 ar rangeme nt be nefits the owner. It sho uld be used , Howeve r, mo re often tha n no t. the ow ner has prede termined wh ich sys tem will be used. If eM is chosen, the n onl y the form and variati on p roba bly re mai ns to be d ete r;n ined. A comprehensive cont ract ing strategy proposed for an ac tual pr oje ct th ai incl udes the use of a ll three syste ms is de scri bed in Appen dix C.

or

11.6.2 Qua lification of Bidd ing Cont ractors Another exam ple of ho w mu ltip le co n tracts and C~t contract manage me nt co ntrib ute to imp rov ed cred ibility is in the bidd ing: proce ss, O n G C pr ojects. th e se lection (an d qualifica tion) o f trade con tractors is left en tirely to the ge neral co ntrac to r. While this is tradi tio nal. it is not always in the o wner' s bes t in terests from a logical poin t of view. Trade contractors (s ubco n tracto rs) bu ild buildines. Th e gen er al con tra ctor usu ally under takes about 15% o f the cons truct ion with hi; own Iorces, Trade contract or s u ndertake the rema ining 85% . If tr ade contractors bui ld buildings. they ar e the ones that sho uld be scre ene d as to the ir po te nnu l perfor man ce-c-it is their work that will determ ine the com pleted qu a lity o f t he b uild ing. Due to in tense com pe tition . ge neral co ntrac tors tend to assem ble thei r d olla r pr op osals using the most ec onom ical trad e co ntractor quo tes they can find. Other than refle ct ing o n thei r ex per ien ce with trade contractors in the area of the p rojec t, genera l co ntractors do not formal ly q ualify trade co ntracto rs, Mor e o fte n than not. low-q uot e trade contract ors ' price s will be used. whe n using mu ltiple co ntracts, bidd ing compet ition occurs at the tra de con tractor level: three o r four contractor s will be in comp etit io n with each o ther in 30 or 40 bidding work -scopes. Because they are biddi ng dir ectly to the o wne r, the y can be prequali fied by the owner regar ding ex peri ence. financial stat us, current wor k loa d. and references rega rdi ng their pe rfo rmance in ar eas such as safe ty and pun ch list coope ration .

11.7.1 Fo rmulati ng the Contra cting Plan , O nce the contracting strategy has been decided upon . the co nstr uction man aeer can formula te a contracting plan that inco rpo rates as man y of the owner's require ments as possible, taking int o co ns id eratio n owner restrictions and prio rities. con struction ind ustry prac tices. and location-of -the-projec t cont racting practicali ty.

j

170

Chap te r t 1

Section 11.7

Con tr act Ma na ge me nt

Public sector projects most always requ ire open co mpet itive bidd ing procedur es. Private sector projects do nor. Conse quently. some of the featur es a public owne r would like to inco rporate (such as restricting the bidders list by qua lifica tion. negotiation of dolla r proposals. and a closed biddi ng format) are no t available . Private sector projec ts. without publ ic financing involved. can be wha tever the owner wishes. a t least within acceptable construction industry practices a nd locationof-the-project contracting practicality,This con tracting " free dom" in the private sector often leads to contracting plans that look good on pa per but do not wor k very well in practice.

11.7.2 Bidding A n example of private sector "trecdorn" is the private bid open ing. E xperi ence has shown tha t cont ractors prefe r to bid proje cts whe re the work-scope is definitive and their proposals a re ope ned and read with bidding cont ractors in at tenda nce. They are well awa re of the bid shopping potential whe n work-scopes are vague and their preposals are ope ned privatel y (see Ap pen dix F). For some reason. private sector owners believe that clever tactics such as these will cre ate a be tter project by eve ntual ly extrac ting a lo..... et cons truction cost through the process of negotiati ons (pos t-bid shop ping), By private ly vying one co ntrac tor's price against an other's. a low-bid a uctio n is created after dolla r proposals have bee n reveale d. What owners fail to realize is tha t contractors arc also clever, much more so than owners presuma bly SUSPCC l. llll: constr uctio n ind ustry is a cont ractor's a re na. and construction co ntracting is the ir busi ness. Cont ractors have no inten tion of negot iating themselves into an agre em ent where they will lose money. If the y do nego tiate a lower price than the work-scope de ma nds, they will make up the diffe rence in the way the y perform during ccns truc tio n-c-m uch to the regre t of the owner. The CM contracting system facilitates compet itive bidding that ex trac ts the lowest price without bid shoppi ng. What it offers as routine in the public sector should be adopted as routine in the priva te seclor. eM provides finely de fined work-scopes for all bidding cont ractors a nd on opp ortu nity to have a dolla r proposal opened and read in the presence of the co mpe tition.Th e appa rent low bidder is promptly ident ified. Bidding procedur es on CM projects sho uld follow the same forma t rega rdless of whether the project is publ ic or priva te secto r. If a private owne r requi res project cost confiden tiality, ani)' those cont ractors submitting proposals sho uld be at the opening. When multiple biddin g and contracting is used. which it is more often tha n not. onlv bidde rs for the work-scopes being opened shou ld be prese nt. Th is limits cost inform..;· tion to portions of the project. Chapter 22. Multiple Bidding and Contrac ting. expands on this procedure.

11.7.3 Schedule, of Va lue' It has been mentioned that the Sched ule of Values unde r mult iple cont racting esse ntially elimina tes cont ractor from -loadi ng for payme nt purposes. In addit ion.Schedul es of Values can aid in keepi ng the site free of co nstruction deb ris for reasons of safet y a nd conven ience. and make houseke eping and final clean -up mor e readily enforceable,

Th e Contr act Man age men t Pla n

171

Each cont ractor's Schedule of Values should have two clean-up line items, one for day-to-day house kee ping and the othe r for final clea n-up as a punch list condition. Clean-up is a contract requirement for which cont ractors must allocate cost. By providing clean -up line ite ms. the contractor can only include dollars in a progress payment request when and if clean -up is perform ed . Work unde r these line items is ve rified the same as work unde r othe r line items is verified. Whe n using multiple contracts, the nature of the work of each cont racto r influences the amoun t of money to set aside for housek eepi ng and final clea n-up. The mason could have a high housekeeping cost and a com par at ively low final clean -up cost. Th e curtain -wall contracto r could have a comparatively low housekeepi ng cost and a high final clea n-up cost. assuming window cleani ng was part of the curta in-wall contracto rs work-scope. A typical CM Sched ule of Values including ince ntive items is shown in Figure 11,2.

11.7.4 Punch Lists Punch list payment reserves can also be selec tively handled as parr of the schedule of values. Note [he punch list item in Figure 11.2. O n multiple contract projects. each con tractor will have a unique completion da te and a diffe ren t pote ntial for punch list liability. Instead of including a single ret a ined percen tage for all con trac tors, the liability potenti al can be det ermined from the same persp ect ive that clean -up and housekeeping potentia l WIlS dete rmined . For exam ple: a pile driving contractor that has ea ch pile inspected and appro.. . ed 3S it is d riven a nd is paid for clean-up under hou se keepi ng a nd final clean -up line ite ms Sequence Work fr"/II

Work Item Number

"'001

",002 04003 04004

QUI Building BDOJIXXI Work hem Description

04011 lJ.m12 1).:01 3 04014

ClXl40

S 12.CXKl.OO S. 18.000.00 S 12,900.00

S ·u oo.oo $16200.00 S 6,.l50.0tI 5 t7.';09.oo S 3,120.00 S 6,100.00 0.00 S 0.00 S

S 21 .762.00 S 3.900.00

50.0 0.0

S 7.SOO.00

~l e l a b

Finishes Specialties

O.ll

Miscellaneous

70.0

//ofut'k u pi ng e/c'on,"p

Punch List CO..4·377 1·1

SO.O 0.0 0.0 0.0

Totals.:

JtU

COSI To Dale S 1.090.00 S I,S311.0Il

90.0 SO.O 80.0 80.0

75,0 35.0

SI12.71 2.oo

2.HXlOO 2..~ 5 0.{JO

Masc nry

Carp
()JOIO

,s

90.0

oeos OJ()(J.~

Allocated COSI

Percent Complete

Gene ral Cond itions Sill: Work Conc rete Work

",006 "'007 ",0'"

Original Contract

S 12,20000

,s

. 1 ,350.00 450.00 S 2.000.00

s 5

s

1.500.00

s s

0.00

S

0.00 0.00

u.soaoo s 570.00

S113.282.00

FIGURE 11.2 Typic al Schedule of Values.

360.00

S umoo

552.207.00

172

Chapter 11

sho uld not have any punch list liability when the pile driving work-scope is com ple te. The punch list line item in the pile d riving schedule of valu es shou ld be zero. A masonry co ntracto r has a pote ntial pun ch list liability with reg a rd to bo th q uality and quantity of th e wo rk after the mas onry cont rac to r declares the work-scope co mplete. The amo unt listed in the punc h list line item of the mason 's Schedu le o f Values sho uld be de termined as a func tion of risk ma nage ment. What is the punch list liability for a maso n co ntrac to r based on the requirements o f the d efined work-scope ? The advant age o f using Schedul es of Values as 3 stra tegic approach to con tra ct man agement is a ppa re nt. Co ntracto rs app rec ia te wha teve r co ntr acting co ncessio ns they receive. especially those involving prog ress payments. Trade contract o rs have long bee n on the defensive regardi ng cont ract pr ovisions. especially blank et provisions tha t fail to take into acco unt the co n tract ors ' u nIque positio n in the p roject del ivery proce ss and that pu t the m in situations they should no t hnve [0 e nd ure. (See Appendix F.) Sched ule o f Value amo un ts. based o n the type of work bei ng performed. arc consistent with the higher leve l o f management Clvls are expect ed to prov ide. Inste ad of conve niently lumping all trade con trac to rs und er o ne classifica tio n and burde ning them withou t d ue conside rat ion. co ntrac t ma nagemen t demonstrates cooperati on tc co ntrac tors without un due exposu re to the owner. It has a positive impact on cont racto r per form an ce.

11.8

Section 11.8

Contra ct Ma nagement

CONTRACT MANAGEMENT IN THE FIELD

The use of construction man agemc m re prcsc rns a dr ama tic change in the way trad itional (GC) field operat ions ar e per ceived and conducted. The effe ctiven ess of eM field personnel does not depend on intimidation of subcon tracto rs and the handling of ind ividual craftsme n bu r ra the r on an abi lity to induce con trac to rs to per form coope rstively, Three com mo n goa ls should be kept in view-safe ty. q ua lity, a nd timely com plction -e-toward an end that pro duces pro fits for part icipatin g contract or s. O n G C projects the same goal s are kepi in focus. bu t the han dlin g o f the con trac tor 's o wn work- fo rce is o ften an overriding co ncern. More o ften than no t, mo re time is spe nt stri ving to efficie ntly use the GC's empl oyees and equi pment to pr oduce p ro fits, than in the efficien t pe rfo rma nce o f subc ont rac tors where profits hav e already been assured by con tra ct. O n typical building projects. whe re 80 o r 90% of th e p roject is usuall y subco ntracted, this situa tion some times poses a priority pr ob lem. The pr o blem doe s not exist on projec ts tha t em ploy brok er general con tr acto rs (w he re 100% of th e work is subcont racted) . All supe rvisory effort s can be dir ec ted to subcon tractor coo rdination. if in fact supe rvision is pr ovided. Howev er . there ar e very siamficant on-sire di fferences betwee n GC and CM projects that should be accepted. Supe rvisors o n GC projects are in the service of the G C, are adv oca tes of the GC. keep recor ds that benefi t the G C, and a re orie nted to ward profit-ma king for the Gc. Supervisors o n CM p rojects a rt: in the service of the ow ne r, a re adv oca tes of the owner, keep recor ds that be nefit the o wne r. and are no t dire ctly involv ed in profitmak ing from co nstru ction o perations.

Cont ract Manag ement in t he Field

173

The forms and variations of CM notwithst anding. Clvl field pe rso nnel should have no co nst ruction wor ke rs to d irect. Th is is certain whe n using ACM and shou ld be no d ifferent whe n using ot he r fonns a nd varia tio ns of CM if dual cont racts a re properly used (as pcm ted o ut in Chap te r 6. Construction Managemen t Under D ual Serv ices Ag reements) . Plann ing, coordi na tio n o f trade co ntract or s. reco rd keeping. and rep orting are prime eM responsibilities. Planning focuses o n the efficient use of trade contractor e mploy ees and equ ipment. There arc no hiring or firing distraction s.The principal effort is to maximi ze efficiency-to see that the project is ad eq ua tely sta ffed and co mple ted in the shortest time un der th e circumstances that preva il. By achi eving these goals. all pro jec t part icipan ts should profit to thei r own sa tisfact ion. 11.8.1

Single Fi eld CMs

O n man y CM projec ts. o nly o ne full-time field person IS nee ded on -site.Th er e is a full co mplemen t of reso urc e and SUP PO Tt peop le in the home-o ffice: with the necessary expe rtise [ 0 assist in car rying out the fiel d CM 's respo nsibilities. Plann ing, the coordination of co ntrac tors . record keeping and report ing fully occupies the field perso n's day.and assist ance in scheduling. expediti ng, estimat ing and reso urce pla nni ng is necessary to ge t the jo b do ne. Field e Ms are the eyes. ea rs. and voice of [he project tea m. espe cially o f the Level 2 eM team mem ber . 111is close conne ction adds cred ibility and e xped ie nce to on -site pr oblem so lving. When J. problem ari ses that is beyond the aut hority o f the Level 3 ream members. Level 2 team mem bers are readily available to help. Uppe r level team me mbers ca n rely on the a uthenticity of inform ation pro vided from the field and expeditiously find sol u tio ns and re lay [hem to the field for execution. When using: the GC system, thi s simple re liance is not always poss ible.Th er e is a po te nt ial for conflict or interest rathe r than a trust ing allegia nce between the GC field person and the N E. Unde r these con d ition s. inform at ion p rovided by the GC is con sidere d less than credi ble and usually must be verified by a time-ccn summg AlE site visit. Fu ll-time. on -site CM residence sho uld beg in short ly befo re the initial co ntracto r arrives on the site. The CM field person and his/h er Level 2 superviso r estab lishes a nd staffs the eM office facility an d insta lls the commun icat ion prot oco l wit h the C~ I home office and with the o ther team mem ber s. A co mp u ter link s ho uld be installed between the CM hom e o ffice and the field office to minimize hard co py files at the site and provid e immediat e access to project informat ion. Thi s last suggestion sig nificantly changes the tradit ion al job de scrip tion fo r field supervisory personn el. To effectively manage contracts/co n tracto rs a nd pe rform contract ad mi nistration d u ties. the C ~f field pe rson sho uld be avai lable on-site as much as poss ible d uri ng construc tion a nd should work at least the sa me hours that co nt ract o rs do. In the eve nt of a requ ire d a bsence for what ever re ason. the team and co ntractor s sho uld be given a me ans of con tacting him/her or a tem porary field person should be assigne d to the site . Contractor s sho uld neve r be with ou t access to someone from the team [hat has a utho rity at the site.

174

Chapter 11

Contract Management

Sectio n 11.9

1. Short term scheduling 2. Chairing prcgruss me etings 3. Conducling coru ractor stan-up inte rviews 4 . Repo rting co ntr actor act ivities

5. Expediting materials and equipmen t 6. Record ing sue and wea ther cond itions 7. Re cord ing.ccmracror progress 8. Verifying progress payment qu antities 9. Exp.:ditlng and logg ing shop drawings 10. Recording as-built information 11. Resolv ing des ign discrepa ncies 12. Observing Ic rcc account wo rk 13. Posling kg:.!l not ices 1.;. Attending eonnacror safely mee tings IS. Providing cco stru ct ion s uppc rtue ms 16. Rece iving/storin g owner pur chases 17. Che ck ing site ~C UriIY 18. Supervis ing other on-site eMpersons 19. Obt ainIng speci fication clarifica uo ns 20. Coo rdinann g contractors FIGURE, 1.3 Typical contract managemen t dunes o f a field

11.8 .2

eM.

Site Person's Duties The rout ine contract management duties of the CM site person on an ACM project include: but ar e not limited to the list in Figure: 11.3.

11.8 .3

Quality Inspe ct ion Exem ption

It is import an t to note tha t constru ction inspec tion is not listed as a CM site perso n's contrac t management duty. Day-to-da y inspecti on of contractors ' work is usually not required by the terms of sta ndard ACM contracts and only beco mes a eM responsibility when specifically called for in the CM's contract with the owne r. when inspection is required by cont ract. inspec tion procedu res should be included in the quality manageme nt plan.

11.8.4 Field CM Planning The responsibilities of the CM site pe rso n should be sbort -range. Time does not per mit adequate study and evalua tion to effect ively cope with long-ra nge conditions. Longrange responsibility is the assignment of the Level 2 CM Person with the advice of home office resource and support persons. Cred ible and comprehensive communications with the field person pro vide the neces sary input for proper long-term evaluation at this management tier. All the abilit ies of the C~l field pers on(s) must be directed to the tasks immed iate ly at ha nd. The C~'I site pers on's re lat ionships with contractors can on ly be prod uctive if the respect and confidence: of the con trac to rs is attained. While it is difficult to be bo th

.,

Contr act Compl etion

175

critic and leader at the same time. the site person must find a way to balance both functions on a day-to-day basis. When it can be shown that the cont racto rs will benefit from a well-managed projec t. this balance can be achie ved.

~ 11.9 CONTRACTCOMPLETION One of the most persistent co nt rac ting proble ms is ge tti ng co ntrac tors to co mple te ly finish their work. an inhe re nt pro blem tha t the CM system can not co mple te ly eliminate. Toward the end of a GC project. there will be work still to be done and problems with completed work tha t requ ire co rrec tion. The work is mostly subcontracto r or trad e contractor work. not wor k underta ken by the: GC s own forces. Th is re maining work seems insignificant to cont ractors but is significant to the owne r. a nd it must be comple ted by the terms of the contrac t for constructio n. To help protec t against nonper form a nce, the owne r retains funds from the prime con tracto r's e nti tle me nt as an ind ucem ent for co mpletio n. Sta nda rd cont racts generally specify that the owne r is e ntitled to retain the estimated cost of the r e m a i ~ ­ ing work aft e r the da- te of substa ntia l completion is certified . Howe ver. on GC prclecrs. parti ally as a result of front-loa ding. the reta ined funds are entirely owed to subco ntractors. Un fortunately. subco ntractors whose work do es not appea r as punch list items are held hostage by the retained amount at the same percent age as those whose work does appear (unless. of course. the GC took an uncom mon step and made equi tab le payments to subcontractors in the progress payme nt prior to the estab lishment of the retained amo unt estab lished for the punch list). To com pou nd the problem . the GC has already co llected profit and ove rhead o n the collective value of the punch list ite ms when the owne r paid inflated Schedule-ofValue billings a t the sta rt of the projec t. Additionally. the cost to some subco ntracto rs to eliminate constr uction deficiencies and complete unfinished work exceeds the: amou nt retained by the owner to pay cont ractors for com pliance. Withou t a financial stake in the completion of punch list items. GCs are not anxiou s to force the issue with their subcontractors. It becomes :1 matter of simp le economics. With little financial ince ntive to finish the wor k, an attractive alte rnativ e for some of the subcont ractors and the: GC is to accept a reduction in the contract a mo unt for the incom plete punch list items. Wh ile this may solve the GC 's and deficient subco nt racto rs' problems. it docs not solve the owne r's prob lem.The owne r is left to her/his own initiative. Whe n the CM forma t utilizes multiple prime contracts. an op portuni ty to minimize the contract comple tion dilemma arises. On GC projec ts. subcont ractors (t rade contractors whose work constitutes a majo r portion of the punch list on a buildi ng) can only be urged towa rd comple tion by ap plying leverage to the general co ntractor. Unde r a CM multiple prime co ntrac t, forma t subcont racto rs (now prime con tractors) can be dealt with direc tly and selectively by the owner through the CM.This is accornplished with the punch list procedu re and the cont racto r's Schedule of Values.

176

11.9.1

Chapte r 11

Contract Mana gement

Section 11.9

Multiple Contract Pun ch Li sts

Contr act Completio n

177

Expe rience shows that some N E's are disinclined toward the continuous quality assessment concept. Th eir exp ressed concern is for incre ased liability more than for the additional effort required during on-site visits. However. the concept is spreading. mainly as a result of the cooperative allegiance of the CM site perso n and the ccntractual accessibility to trade contrac tors.

With eM multi ple bidding. each co nt racto r will reach co mpletion individually. Th is contrasts with GC con tracting where. from the owner 's perspectiv e. subco nt ractor contr act com pletion coincides with GC contract completion . Alt hough some CM multiple contracts will extend to project com pleti on, many will be comp leted earl ier. The use of mul tiple: contracts requi res and permi ts app roaches to contract administra tion that are different than when using a single contract (co ntract com ptetion in part icular). While it is no problem to certify the da tes of contract subs tantia l comple tion individually; it must be de cisively determi ned exac tly when a cont ract is acceptably comp leted so that ret einages can be relea sed. Multiple contract com pletions req uire ne w co ncepts an d changes. Tradit iona l docu me ntation previou sly used to initiate a nd certify that substantia l completion had to be modified. Several tradi tio nal document d liUSCS have bee n p UI to work tha t previously were seldo m called upo n under the GC format. O ne such clause permits an owne r to take over performa nce of a contractor 's work if the contracto r is negligen t in the perfo rman ce of duties. While an owner might thin k twice before applying that clau se to a general con tractor-doing so coul d cause a bigger problem than the o ne at hand-an owner can prudently apply the cla use to trade contractors without fea r of escalating the prob lem. Threa tening to re move a contractor has a positive effect towa rd comple ting his portion of the pro jec t. Figure 11.4 is a n exa mple of the conte nt of a provision that will improve punch list completion from slow-finishing contractors. To facilitate punch listing. quality co nformance should be observed when eve r the AlE is on-site. The AlE sho uld revie w the wor k of con trac to rs on a co ntinuing basis and not wait for a reques t for substa ntial completion certification to ge nera te a punch list. When on-site for some primary purpose. the: A l E sho uld keep a n eye ou t for work ite ms that obviously require co rrec tion. The punch list sho uld be a collaborat ion be tween the AlE and CM. The CM shou ld address work thai is incomple te; the NE should address the work that is not properl y done. By cont inu ous obser vation. a provocativ ely long punch list ca n be avoided when a cont ract or files for subs tantial completion .

11. 9.2

GC Su bstantial Com plet io n Whe n reviewing the GC system. we find thai a cert ificate of substa ntia l comp letion is issued to the genera l co ntracto r when [he owner can occupy the facility. in whole or in pan . for its intended purpos e. In the case of a building, this could mean partial occupancy (even though there are item s that need correction or ar e inco mple te. the remaining work is so mino r that it can be accom plished while the building is bene ficially occupied by the owne r). Whe n the: GC assumes the project has reached the poin t of substan tial comptetion. he/she fillsou t a request form. co mpiles a list of wor k still to be com pleted and correc ted. and submi ts these to the NE for review a nd owne r acceptance.The A lE reviews the list and adds items the co ntractor has overlooked. If the AlE de termine s the lis! only includes work that will not inte rfere with the owner's use of the building. the AlE accep ts the GC's requested da le as the: official da le of substantial completion. The NE then forward s the certificate to the owner for concurrence: and signature. The significance of the date of subs tantia l completion is that it is the ending dat e for the time requiremen ts or the contract for construction. the starting da le for many of the gua rantees and warra nties prov ided by the contrac tor. and it lowers the amount of the retainage held by the owner .

11.9.3 CM Substantial Completion Th e major con trast be tween G C substa ntial com pletio n and CM multiple-con tract subs tantia l comple tion is that the N E ca nnot measure multiple-con tra ctor substantia l comple tion by the occupancy criter ia. Th e founda tion cont ractor or stee l erecto r will rea ch substan tial comple tion lon g befo re the projec t can be occup ied by the owne r under any circumstances. Th erefore. CM multi ple: prime projects require it diffe re nt approach to establis hing co nt ractor substantia l completion. A date of substantial comp letion for multiple contr acts is applied for individua lly by each contracto r. but the owne r-occupancy crite rion is not necessari ly used as the deciding facto r. A date o f subst antia l co mple tion may be reque sted by a mult iple contractor afte r app roximate ly 95% of the cont racto r's work is comp leted. The request and a list of work still to be com ple led or corrected is forwarded to the CM for review. Th e CM physica lly verifies a nd if necessary add s to the list of incomplete items: the request and amended list a re then forwarded to the Al E. The A lE physically verifies and if necessary adds to the list. In place of the owne r-use or occupancy crite ria used on a GC project. the NE an d eM must de termine if the con tractor 's wor k is a t the point where subseque nt con tractors can pe rform their work without being incon venie nced. If the N E deems tha t only minor work and re work re main. an d completion is to the point where the work of interfacing contractors will not be ad versely affect ed. the:

If the contractor negtec ts o r fails rc ca rry o ut the wo rk. o f the cc nuact in acco rdance wu h t he:re q uire me nts o f the com rac r. the: Own er may provide writ ten notice to Ihl: cc mr ccto r that the o wner will do the remaining wor k with resources other than those of the co ntr ac to r. To a vert owner acuo n pursuunt ro such no nce. t he con rructc r shall. no tater 11I:!n Ihe cnl.! of the secon d wo rk day after rec e ipt of Ihc o wne r's nonce. pr ovid e ...de l:ailed sche dule of the wo rk to be comple te d tha t is acce pta ble 10 the o wne r.The o wner will sho w acceptance by e ndo rse me nt.

If th e cont racto r f:ails (0 provide a scbc dclc thai is acc e ptable to Ihe o wner o r fails 10 meet t he:schedule that IS acceptable to the o wne r. t he o wne r "..ill no tify the co ntra ctor thaI the cont ractor shall ce ase ope ration 00 the: project and tha l lhe:outstand ing work will be done wun Olhe r resources,

ln such case a chang.: order sha ll be issue d 10 the co ntr ac tor de d ucting the cost o f correcting a ny dencrcncie s a nd the:COSI of co rnpletl ng the wor k. including lhl: cost of t he Archucc r's and the Ccn srructlon Man age r's additiona l services made nel-eS1ary by such defa ult . negk ef c r Iaitute. f iGURE 1 1.4 O wner's right to do remaining .....ork .

1

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Contract Mana ge me nt

request is forwarded to the owner with a recomm enda tion for approval and signat ure. If the reque st is rejected. the co ntracto r ma y resubmit afte r co mpleting the specific deficiencies noted in the submitt al return ed by the CM. 11.9.4 Completion Mot ivat ion As a means of urging cont racto rs [ 0 complete their ob ligations on the punch list. two contract pro v isions should be included : (1) a punch list line item of a sufficient amount is included in the contractor's Schedule of Values, and (2) a notice is se nt advising the contracto r that the owne r will finish the uncom pleted work if the co ntractor fails to make significant and susta ined progress on punch list items. Experience has shown that these steps have a positive impact on com pleti on pe rformanc e.There is enough mone y retaine d 10 motivate the cont ractor to complete the work. and no contractor wants to have his sur e ty notified of nonp erforman ce. Needless to say. the seco nd device should not be installed as an empt y thre at. It must be dem onstrated through oven prepara tions that re placement of the cont ractor is a viable alte rnative for the owner. The re will be siruauo ns wher e It would be inappropri ate or unwise to re move a contracto r. Compl et ion of the work may be stymied by back -o rdered equipment or material. or the contrac to r is too involved in the constr uctio n to be conside red for replacemen t. When this occurs, the re is little else to do but work the retainage to its ultimate adv antage and enco urage the contractor to compl etion . 11.9.5

Occu pancy Pressure Another strategy for a pproa ching time ly contract comple tion is to have an obvio us and valid occupancy date. Contractors will respond positively to must-occupy siiuatlons. but on projects tha t a re run ning fur ahead of sche dule or where com ple tion is not viewed as essent ial, contracto rs become indiffer ent in their performanc e. Fast-moving. well-managed projec ts. runn ing on an uncomprom ising schedule. have the best chances of co mpleting on time. When a complet ion date change docs occur, it is the construct ion manager's responsibi lity to mobilize co ntractors and the team to respond . Those expe rienced in construction operations will testify that progress moment um is difficult to spee d up or slow down withou t suffering consequ ence s. If the project has been well managed and the co mple tion date cha nge is not perceived as the result of poor planning or misguida nce, a comple tion date change should be able to be met with minimu m consequ ence. By earn ing the respect of the comractors ea rly in the project . the eM shou ld have no trouble making the correction.

11.9.6

Contractor Sche d uling Good scheduling has a lot to do with how well cont ractors respond to constructio n coo rdination. Chapte r 20. Schedule Man agement. covers the schedules recommended for CM projects. If the CM's schedu ling efforts are realistic in terms of cont ractor accomplishment . construction coord inati on can be achieved more smoo thly and sue-

Sect ion 11.9

Contract Complet ion

179

cessfully.Contrac tors tend to be defensive whe re scheduling is concerned and are quick to notice when the scheduling of interfaces breaks down even the slightest bit. Manag ing con tractors is much simpler when the CM's scheduling cHorts produce results an d pred icted date s are met. They are more inclined to cooperate when the CM is perceived as a comp ete nt planner a nd schedule r. Instead o f accepting the CM's pe rformance da tes as guesses. co ntrac to rs begin to rely on the eM to assist them in their own plann ing as well. Once a position of respect such as this is gained , the level of contract management improves. E xhibited proficiency in othe r manag ement area s such as decisio n. quality. resource, and safely also increase the performance stat ure of the eM in the minds of contrac tors but none any more tha n sched ule manage ment. The two schedules that significantly affect co nt ract mana gement during cons truc tion are the Shor t Term CAP and the comple tion schedules. The eM should make a maximum effo rt to ensure the credibility of these schedules to carry out cont ract managemen t responsibilities.

Section 12.1

CH APT E R

Decision Management

12,1

12 .1.2

STATIC AND DYNAMIC DECISIONS

AlE Advice and Decisions AlE design decisions are exten sive. The o wner makes the d ecisio ns tha t establish the p roject 's broad design parame ter s. and the AlE make s the man y de sign de cisions tha t

lao

eM Advic e and Decisio ns CM adv ice is mainly pro vided d uring desig n and. alon g with the expertise of the Al E and owner. helps to make static decisions. Most o f the C \f's decisions. howev er. arc made duri ng con struction whe n the CM 's expertise is germane and there is onl y time Io r u cur so ry review and study o f the issues. Con sequently. the major differences be tween AlE and eM decisions should be understood . Too often the services of a eM a re favo rably compa red wit h the services of an Al E. alt ho ugh as ex plained above. they arc tot ally different in thei r context. The vast majority of AlE decisions are subject to pre- re view. whe rea s the majo rity of CM deci sions are no t. Yet when judging the performance of a eM. a sta nd ard of ca re suitable for an A lE is mos t o fte n the crite ria used for dispute resolutio n. C M pe rfo rma nce should be judged on a CM's standard of care. which re mains in the deve lop ment stage and hopefully will be established in the near future. The refore. eM s shou ld realize tha t this ineq uity loom s over their shoulders and should take addi tio na l s teps [0 avo id making decisions that fro m thei r expe rience appear to be correct but cou ld somehow prove o therwi se. The followi ng adv ice is reco mmend ed:

The re are IwO types of dec isions in Inc Cl\1 proj ect-delive ry pr ocess: stuuc and dyna mic. Sta tic decisions an: those tha t can be ma de witho ut co nce rn for an immediate resp onse. There is time fo r review. stud y. and appro val before those affected by the decis ion will respon d by ac tion. Th ey can be thou ght of as be ing made in a sta tic or stationary envi ronmen t. a pause during the pr ogression o f [he pro ject. Decision s co lleclively made by the owne r,AIE, and CM arc static deci sion s. Dynam ic decis ion s are [he op posite; the y will be acted upon immed iately by [hose who are expe cted to react 10 them . There is only time for a curso rv review and study of the issues. and ap pro val may or may no t be o bta ined befo re the decision is made. Th ey are in effe ct auto no mo us decisi ons based 0 11 whatever pol icies or co llaboration is at hand to provide guidance for the dec ision mak er. Dynamic decisions are made to keep the pr oject going wit hout int errupti on fro m the time-c o nsum ing stati c decisi on -making process. Static decis ion s a re made by synthes izing the expe rtise and ex perience o f a ll th ree (earn mem bers. Sta tic decision s are p re ferred in the eM system and should be used whenever po ssible. Dynamic decisio ns ca n o nly re flect the expertise and experience of the team memb~r(s) who mak e.s them. The y are a necessa ry pa rt of the CM system b ut shou ld be avoided when possible. 12.1. 1

181

are required to convert paramete rs into de tailed design requirements- All Al E design decisions are fully docu mented a nd legally sea led by the Al E 's license befo re they are rel eased by the ow ne r [ 0 be used by con tractors. De sign documents are ex posed to rev iew from the nontec hnical perspective o f the owner. the practical perspective of the CM. and the oversigh t pe rspective o f the N E firm. Th e doc ume nts. and conseq uently the design decis ions of the NE. are all subject to app rova l before they are respon ded to du ring biddi ng and construc tion. AlE advi ce is provided throu ghout the project du ring bo th design and constr uerion. AlE decis ion s. howeve r. are concentrated du ring the design phase of the pro ject when the A /E's ex pe rt ise is ge rma ne. Al E design dec isions are bo th d yna mic and stat ic. Those that are mad e du ring the desig n docu me nta tio n are necessarily dynamic; they re flect the exclusive expertise and expe rience o f the A l E (skills which conv inced the own er to hire the A lE in the fir st place ). However. decisions to proceed with the vario us phases o f de sign and to relea se the work of the AlE to con trac tors are stat ic decisions. beca use they are subj ect to ex te ns ive learn review, st udy. an d a ppro val.Th ey must survive the tests o f designability and con stru cta bility and the sat isfac tio n of the owne r befo re [hey a re re leased.

1 2

The eM co ntracti ng syste m place s con s truct ion manage rs in an adv isory pos itio n with an owner-a position of age ncy. with fiducia ry responsibilit ies based o n a sta ndard of care. Although the co nstruct ion manager's ro le is mos tly advis ory and the owner makes mos t of {he de cision s. the age ncy rel ationshi p places consid er ab le res ponsibility o n the const ruction manager to pr ov ide well-founded advic e; advice th at is consis tently in the o wne r's bes t interests. Th e ad viso ry an d deci sion-ma king d oma in o f the eM d iffers considc rablv fro m that of the A lE. who is also an agent of the o wner. AlE 's decisions a re orien ted toward tech nical desi gn. with shared resp on sibility with th e eMfor pro viding ad vice in project ma nagement and contract ad ministration. C ~I deci sions are oriented towa rd manage. men t and Cf..l advice is o riented re war d the practical aspects of design .

Stat ic and Dynamic Decisions

When pressed for a decision . take adv a ntage of all the time ava ilable to make th at decis ion. If advic e is available. ma ke eve ry eff ort to seek that adv ice and use it to adva ntage. Record every eM decisio n in app ropria te de tail. 12.1 .3

Advi ce vs. Decisions The charge of the eM is to advise and con sult with the o wner. Al E. and other me mbers o f the project team on all decisions pe rtaining [0 the cost . lime. and q uali ty of the p ro]ect a nd its poten tial to cause excess business inte rrup tion to the owne r.

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Chapter 12

Section 12.3

Decision Management

12.2

DECISION MANAGEMENT AR EA OF KNOW LEDGE

The decision management a rea of knowledge enco mpasses the develop ment an d handling of the project and co nstructio n teams and the relationship of the ir respective mem bers.This area of knowledge is the le ast technica l but most important when pro viding eM se rvices. It is the CM's respo nsibility to con siste ntly extract decisions from the tea m which are in the best interest of the owne r without aliena ting any learn membe rs.Team members must approach decisio ns a nd make de cisions coopera tively. respecting each other 's project function. expe rtise, and ope rationa l capacities. Decisions which become conten tious must have a prescri be d path for resolution. The co nstruc tio n ma nage r m ust effectively estab lish each team member 's in volveme nt in the te am as early as possible and guide the decision -makin g process th ro ugho ut the project. Th e CM must have a clea r und erstandi ng of the services being provided by lea rn membe rs and the ir business ope ra lion and style: induce a productive. low-profile system of decision-ma king checks and ba la nces. generate syne rgistic tea m act ion on decisions. cre ate a productive tea m man agem en t hier ar chy, and ma ke availab le a fair decision-mak ing process when decisions are contended. The decision managemen t a rea of knowledge includes a gene rous unde rsta nding of business structures, organ izat ions, pr actices. procedur es. motivati ons. and philosop hies. plus de tailed insight into the design profession an d contracting business ope ra tions. High-level communicatio n skills and e thical sta ndards a re required. and a grasp of huma n resou rce man agement a nd alterna tive dispute resolution practices is impo rtant.

Desig n Decision Responsib ility The responsibility for the proje ct's techn ical design is singula rly in the hands of the AlE .The owner and CM may influence the tech nical desig n but neither can force the NE to change it. The AlE is professionall y and legally obliga ted to existing statutes. codes. regulations. sta ndards of practice and industry standa rds. Advice on design in the cont ext of designability and cons truc tability is all that should be offered by the owner and the CM and all that needs be considered by the A lE. The reality of a Clvl's vcry limited role in design and desi gn decisions must overcome 3 major miscon ception which is held by owners, design professionals. the courts. and even some eMs. Contra ry to a co mmo n be lief. the CM has no technica l design responsibility to the owner . Liberal inte rpret at ions of ow ne r-CM contract langua ge referring to the CM's responsibility in the area of design (especially duri ng pre -bid document reviews) have fueled this misconce ption . Howeve r. a literal interpreta tion of the qua lifications requ ired by law to provide design services, and the qualifications of a CM firm, clearly nullifies the possibility of the CM 's involvement in technical design .

12,1 .5

183

process. As explained in Chap te r 19, Risk Man agement , risks are inherent to the project-delivery process and must be add ressed. Risk decisions should be neither imp ulsive nor based strictly on odds. Th ey should be anticipated . identified, evaluat ed, and disposed of by a sta tic dec ision .

VO lunteering cost-savin g advice to the AlE on design does not shift the responsibility for the design decision to the eM. Advising the owne r to accept a qualified contracto r as 3 bidde r doe s not shift the resp onsibility tor awa rdi ng the contract [rom the owner to the CM. In the context at de cision mak ing, the charg e of the eM is to mak e decisions tha t provide a proper and expedient course for the construction team and project to Collow. The eM is not to exceed the authority stipu lated in the owne r-Clvl agree ment and must fully consider the advice pro vided by the Al E and owner. Or deri ng a contrac tor to continue work on a spec ific date or purc hasing grovel for a road provided as a construc tion suppo rt ite m woul d be va lid unilateral eM dec isions; changing the water-ce me nt rat io for a concrete slab pou r or adding a n item to the work -scope de finition of a cont ractor would not. 12.1.4

Decisions and Decision Making

De cision Risk-Ta kinq Constructi on industry users and many of its obse rve rs believe tha t the project de livery process and the cont ract ing aspect in part icular is a gamble , that the industry is an are na for risk-takers who make risk-based decisions that somet imes produce winne rs, sometim es losers. It is common ly and wrong fully assumed that contracto rs expect to lose money on some projec ts a nd to mak e money o n othe rs. This impression is understanda ble in the cont ext of the GC con tracting system as explained in Chapt ers 2 and 3. Man y dec isions made by GCs are dynamic decisions made under the pressure of time , especially those made du ring the bidding phase of a project. Decisions invol ving construction mean s, meth ods. and techn ique s oft en contain an element of risk but when they do. experience rath er than impu lse drives the decisions of the con trac tor. It is certain that cont racto rs at every level ne ver expect to lose money on a project. The CM system . as demonstrated by its contracting structures. attempts to eliminate the impression and mitigate the rea lity of risk-raking in the projec t-delivery

12.3

DECISIONS AND DECISION MAKING

The best dec isions are de rived from timely.credible input and discussed in an e nviro nment that ensures adeq ua te checks and balanc es. Th e CM cont racti ng structu re pro vides this en vironm ent to a grea te r degre e than e ither GC or D-B cont racting. By co ntract . the Al E and CM agree to serve the owne r's best inte rests when dccisions are made. All team members have a common goal with few if any se lf-serving distrac tions. The CM struc tu re pe rmits the owne r to be direct ly involved in the static decision making process to whatever extent desired.Th is is a major (bene ficial) revision to traditional contracting systems which give the owner unprecedented access to the project during design and con struc tion.The expertise of the team me mbers facilita tes the deci sion-making process and ensures the owner that well-fou nded decisio ns can be mad e. To alleviate owne r conce rn for too much involvement, the owner has the authority to i

•

184

Chap ter 12

Decision Manage ment

transfer decis ion mak ing. in whole or in part. to the singular or combined expe rtise of other learn mem bers. Owne rs who do not wish to be imme rsed in sta tic decision-making can cont rac tu. ally assign specific decision-making responsibilities [0 o ther team members. If this option is chosen. the o wne r mus t use discretion when mak ing the assignm ent: it is Import ant [hat the synerg istic balan ce of the tea m no t be compromised. As sta ted in Chapter 4. Th e Agency Form of CJ\1. team leadership must shift between team members de pe nding o n which team membe r's expertise is germane. Th is is a ccmmiuueru made by ea ch team member th rou gh the pannering process and fully supported by the o wner. Assig ning. owner responsibilities to eirne r the NE o r CM co uld be inte rpre ted as assigning tea m leadership, It is important that this does not occur-s-ne ither the A l E no r CJ\'1 should be assigned leadership of the [earn under any circum stances.

Section 12.4

I

The Decision-Making Hi erarchy Monetary

185

R~ponsibi1i IY

Function Ar e a

Decis io n Responsibility

Exec ut j"e Princi pal of the Firm

Policy·m aking fo r the Te am a nd Te am mem be rs.

The highes t Team decision le vel; the next ste p is Dispute Resolu tio n. Makes all pol icy de cisio ns.

Lim ited o nly by Co mpan y policy. Can a me nd budget ; a pprov e extra expenditures.

Milnllxe me nr Re prese nt auve in respons ible cha rge ot the

project

Co nvert Team and Team member pol icies to proced ures. lead 'learn re pr ese nmnv e.

Int ermed ia te Team dec ision leve l. G ene r.lles all project procedures. Ma lc.c ~A pproves 'III project decistcns.Aueods all Tea m meetings whe re deci sions a rc:made.

Limited by Com pany and Team Policy. Usu ally set at 'I ma xim um figure by the Execu tive Level . This figure can re place but no t sup plement lhc figure se t (o r the Adm mistra nve Leve l.

Aciminislr:lli\e Field Re pre se nrauve

Execut e Team and Team mem be r procedures.

Day-to-d a y decision level du ring cons tru ction . Passes Team decis io ns to the Management Le vel.

Limn ed by Co mpa ny and Team Policy. Se t OIl a maximum figure less than set fur the Ma nilgcm cnl Level.

Level

12.3.1 Che cks a nd Ba lance s fiG URE 12 .1 The rea m's dec ision-making hie rarchy,

By design. the CM team struc ture req uires tha t the ra nge of expert ise o f the AlE a nd eM o verlap sufficiently to prc ve nt unilateral decisions fro m becoming te am decisions by defau lt. The owner 's involve me nt in decisio n-making pre clude s A/E·CM bilater al decisions from beco ming team decisio ns. The expe rience o f each tea m member. and their peer posit ion in the lea rn structure. pro d uces a depe ndable checks and balances en vironment that essentially guarant ees so und static decisio n-mak ing. The full benefit of checks and balances will not be rea lized . ho we ver. unless the relied-upon knowledge of each team membe r is well-h on ed and available when needed. For this re ason. static decision -making sho uld be a preplan ned te am activity whene ver possible. Many decisions will have to be made without pre plan nin g due to the relatively fast pace of the proj ect and the vagar ies of the project-delivery proc ess. However. the team (es pecially the N E and eM) sho uld con stant ly an ticipa te major decisions and schedule their discussion well in adva nce. Th e co mbin ed exper ience of the AlE and eM sho uld produce a decision- making agen da that minimize s dynam ic decisions. and sta tic decisions which have to be made without sufficient preparatio n.

12.4

underway. du e to the co mpa rativel y long design phase time. Howeve r. their invol vement in the project need not commence unti l design is almo st complete. The adv an tage in ide ntifying th e Le vel I and 2 project tea m membe rs early is access to their ideas and input a t the organizational meet ing when the responsibility chart is de veloped. The Le vel 1 and 2 pers ons from all team members should be in vo lved in that meeting beca use the cha rt deals cxtensi...ely with (he decis ion-makin g proce ss. Est abl ishing the deci sion -maki ng hierarchy nee d not be postpo ned until team membe rs are ident ified. The hierarchy can be esta blished academically if necessary. 12.4 ,1

Decision respon sibilitie s a re on the agenda of all e arly program management meetings unt il all fo reseeable decision-m aking responsibilities have been agreea bly assigned. As the proje ct mo ves ahead, it is probable that respo nsibilit y assignments will be added o r alt ered. Con seque ntly. the decision -manage ment plan sho uld include reco rding decision-making assignments as well as making o r changing assignme nts. The plan sho uld become a part of the eM project manual for future refere nce. Decision-ma king responsibilities should be speci fic and as dear as possible . This is especially true regardi ng monetary limits and the kinds of decisions made, Th ere must be a clea r understanding be twee n team members as to level-approp ria te discussions and which decisio ns should be passed (0 the next leve l. The goa l shou ld be to make all dec isions at the lo west possible le vel witho ut violating rules of hierarchy

THE DECI SION-MA KING HIERARCHY

The project team's hiera rchy is explained in Chapter 4. This st ruc ture Iac ilita res dec ision making by assigning responsibility fo r decisions of certai n types and ..·alues to three defined team levels (see Figu re 12.1). To functio n e ffectively. it is Impo rtant that the [cam 's deci sion- making hierarchy be established early in the project. The CMos and AlE 's executive level a nd ma nagement le..-c l persons a re usually designated prior to the brai nsto rm ing sessio n, and it is assumed that the owne r's executive and management level selec tio ns will be made by the brain stor ming sessio n or sho rtly the rea fte r. Although it is comm on for an o wner to he... e the: Cr..-I and A lE ide ntify thei r exec. urlve and administrati ...e level per so ns prior LO signing contracts with either. it is not always possible 10 identify the A/E ·s and CM's adnuni st rurion pe rsons un til design is

Est abl ishing Decision Re spon sibilit ies

12.4 .2

Reco rding De cisio ns The number of decisions that will be made th ro ugho ut the course of the project is eno rmo us. There will be far more dynamic deci sions tha n static decis ions. Becau se it will be impossible to iorm ally reco rd all dynam ic dec isions. recordin g must be left to

186

Chapter 12

the pr erogative of the rndivid ualfs) that make s them. Ho wever . all static decisio ns sh ould be docu men ted as part of the approp ria te meetin g minutes. Particular attention should be paid to decision s that impact the p rogress o f the pr oje ct and the inte raction of the project team . The number of meetings on a eM pr oje ct is subs tantia l: the team co ncept and th e requiremen ts of static dec ision-making form the bas is. Most meetings requ ire [hat all members of at least on e hierarchy level be in attendance. Con se qu ently. dec isions made at meet ings will automaticall y be recorded in the minutes of that meeting and be made available to team members at tha t level. If a team me mber feels that deci sions mad e at o ne level sho uld be passed o n to ano ther level( s), it is the responsibili ty o f th e team membe r 10 see that the information is passe d on 10 the o the r level.

12.4.3

Excep t ions Althou gh all three parties sho uld be invo lved in al l static decisions. bila te ra l decisions can be made if the thi rd party would have no appa re nt reason to disa gree with the deci sion and ther e is no need for the de cisio n sa fety net of checks and balances. Bila teral sta tic decisions might develop during a telephone co nve rsa tion or at a n infe rmal meeting. Th ey require a special effo rt to inform the missing pa rty of the bilate ral sta tic decision and the co ndi tions under which it was made. One o f the team members involv ed in the decis ion sho uld be des igna ted as the info rma nt. Bila teral dec isions made via corresponden ce pr esent no difficulty if the inforrn aricn man age men t plan requ ire s th a t copies of each tea m mem ber 's project co rr espo ndence be forwar ded to the o the r two mem be rs. In this insta nce, the copy a lerts th e th ird party to the bila ter al dec ision .

12.4.4

Sect ion 12.5

Decision Manageme nt

Decision s and Schedule Ad herence

TImely decisio ns ar e vital if the project sched ule is to be maintained. A firm commitment must be made by eac h team me mbe r to adh ere to the decision schedule. It must be ac cepted that time lost d urin g the co urse of th e project can not be recovered without the owner incurrin g costs in so me form. When static decision s ar e due. they must be pro vided un less the reason to r the delay is in the best interest o f the o wner. Activities in the ea rly pa rt of the program schedule a re decision orie n ted. It is during Ihis ph ase of the p roje ct when an e normous amount of info rmation must be exchanged and nume rous impo rtant static decision s must be mad e by the team . A spe cial de dication to commitm ent and promptness must be made byall. The CM must inspire a sense of decision-m ak ing urgency in the team and then support and maint ain it by exam ple. As the designa ted sched ule r, the CM sho uld be seen as a fair-handed facilitator, o ne who maintains a sha rp focu s o n decision-making. The CM shoul d never lose sigh t of ea ch learn mem ber 's pr ofe ssional commit men ts beyond the project at han d o r the effort expen ded by th ose who provide check s and balan ce s to static decisions. To this end. the eM mus t per sistent ly dr aw each team member into the dec ision -sched uling proce ss.

12.5

The Decision Management Plan

187

THE DECISION MANAGEM ENT PLAN

The dec ision management plan is ne ither lengthy nor involved, but it is necessary bo th as a rem inde r to team members o f the importance of the decision-making p rocess and a guide to that process. The deci sion man agem ent plan should stipula te the types of decisions that can be mad e and a suitable defi nition of each d ecision for common understa nding by team members. A stateme nt defi ning the d ifference betwee n advice and de cisions shou ld be made . A simpl e procedure for placing stat ic dec isions on the agenda for program sched ule and project mee tings sho uld be sta ted . A sta tic-decision file sho uld be es tab lished a nd a p rocedure writt en to record decisions.Th e crite ria for bilate ra l sta tic decisic a-making sho uld be clearly stated and a procedu re es tablished for recording these decisions. A chart that est ablishes the decision-making hierarchy (s imila r to Figure 12.1) sho uld be crea ted .

Section 13.1

CH A P TE R

1 3

Information Management The eM contract ing struc tu re and its ass ignme n t o f contractu al respo nsibilities ge ne rate s an unprecedent ed am ount o f project-rel ate d info rma tio n. Its syne rgistic strategy for del iver ing a proje ct man dat es a flow of inform ation be twee n p roject learn mcrn be rs, Th is combi na tion co uld inu nda te part icipant s with d ispe nsable info rma tion and

prove counterproductive. unless controlled,

Co nco mitan tly. the int egrity of the eM syste m is founde d in open ness. a time ly exposure to info rmation tha t facili ta tes the checks and ba lances of effective decision making. Chapte r 12. Decisio n Ma nage ment . dealt with the decision -making proc ess. emphasizing J need fo r team act ion ra ther tha n ind ividual act io n and pro mot ing syne rgism anti discouraging un ilat eral decisions. Th is chap te r iden tifies informa tio n that is speci fically necessa ry to manage J ( \.1 project success fully. Th e owner, ME. and eM. ha ve the exact sa me o bjectives: (1) to design the proJ' ect to meet the owner's needs. (2) to cons tru ct the project in confo rma nce With the co ntract documents. and (3) to acco mplish both tasks with minimum in terrupt io n to the own er's busin ess ac tivities. Ho weve r. they may not hav e the sa me appr oa ch to reaching those Object ives wit hou t a prede te r mined plan. especia lly in the area of inferm arion management .

13.1 THE INFORMATiON MANAGEMENT PLAN Sharing informat ion is essential to a te am's performance. Hovve ver, if th e te am is la rge and dispe rsed . it IS no t pra ct ica l for all info rma tion to reach a ll te am me mbe rs co nccmita ntl y, nor is it possible fo r every tea m member to productively use all the infe rmation available. Co nseq uently. de cisions shou ld be ma de early in the p roj ect regard ing the distribu tion o f project info rm ati on. As with all o the r mana ge ment a reas, Information ma nageme nt procedures sho uld be doc umente d in a managemen t plan an d inco r po rated int o the eM project manua l.Th e informat ion ma nagem e nt plan sh ould clearly sta te: ( 1) the info rmati o n [Q be gathered . (2) who is resp onsible for gat hering it. (3) in what for m will it to be pre sco red. (-l) how it will be d issemina ted. (5) who is to rece ive it. and (6) ho w. wher e. and for how long will it be filed an d stored.

13.1 .1 The Need-To-Knew Phi losophy The large volume o f informatio n produ ced by the team co ncep t m ust he ha nd led pru den tly but expeditiously. Product ive team actio ns are de pen de nt on comple te and time ly awareness of the facts and da ta availabl e fo r the tea m decisions that must be made.

188

The Information Managem ent Plan

189

Ideally. all three team mem bers sho uld be involve d in every project dec ision . Bilateral decision s are mo re acce p tab le than uni late ra l de cisions but neith er is desi rable. Bilate ral and unilateral decisio ns will be necessary under the ope ra tional co nd itio ns th at p re vail. and whe n they are. con sider atio n should be give n to the team member(s) who could no t participate by passing on the decision and its ra tionale as soo n as possible. To achieve the le vel of co mm unicat ion tha t p rodu ces co nsisten tly good team decision s. the inform atio n ava ilab le fro m all sources mus t be harne ssed . The decision ma na gement plan sho uld prio ritize decisio ns ca te gorica lly and guide lines should be set fo r deci sio ns which ma y be made without full tea m involvement. This is not a complete solutio n because situatio ns are bou nd 10 arise that will no t fit the guideli nes, but it is a posi tive s tep. A need -to-k now p hilosophy be st se rves the ma nag eme nt of info rmation in the CM tea m structure. Th is ph ilosophy ca n on ly be attain ed by com mon co mmitment 10 a way of conducting project bu siness (in the curren t vernacular. pa rt ne ring be tween te am mem ber s). Nee d-to-know de pa rts fro m mo re com mon info rma tion philosophies which rlood [hos e in the loo p with all availab le info rmation . lett ing eac h reci pie n t det e rmi ne its impo rtance.Th is is co m mo n practice in busine sses o f all types.I t provides an illusion of controi while burdening manage rs with data. much of which is not rele vant to immedial e co nce rns. Cert ain con cepts o f to tal quality management (T O M) pro vide an ana logy that fits perfectly. As in TQ1\1. each te am me m be r's information is rece ived as a customer. anal yzed as a processor, and fo rwa rded on to the nex t pa rty as a suppher. As a custo me r. the tea m member wa nts the informa tion received 10 be concise. accurate. german e. and in useable form. A s a proc ess o r. the team me mber is expected to refine and appropriate ly co mme n t on the info rma tion: and as a s upp lier. the lea rn mem ber IS ex pected to package the inform ation to the sati sfa ct ion o f its recipi ent . Need -to-k no w expe cts suppliers of info rma tion 10 d iscre etly de te rmine impo rtance and urgency. Recipie nts should be confide nt that suppliers o nly forwa rd accu rate information and do so on a ti mely bas is. Su ppli ers. commi tted to team allegiance and respo nsive 10 the mo res o f team pa rticipa tion . select need -to -k no w recip ien ts p ruden tly. Th ose learn mem bers responsib le o r q ualified to act. com mu nicate. ma ke the decision . d ocumen t it. an d info rm those who wer e out o f the loo p as soon as po ssib le , The need-to -know informa tion phi losophy wor ks effe ctively on C~f p rojects beca use of the com mo n goal o f the team and the fact that all decis ion-mak ers are peers. Neithe r the A lE nor CM have a financial stake in the project to influe nce their decision s but d o ha ve their re putatio n to lose by pro viding inaccurat e or untimely inform at ion. The checks and ba la nces um brella that protects agai nst irresponsible actio ns provide s add itio nal assu rance of in fo rmation an d deci sion cred ibility. The info rm ation man agemen t pla n shou ld specificall y add ress areas where all team me mbers are invo lved in the dec ision-maki ng pr ocess. All othe r in formati on areas s hou ld rely o n the need-to-k now phil osophy.

Section 13.5

190

Chapter 13

Information Manag ement

13.2

INFORMATION MANA GEMENT AREA OF KNOWLEDGE

191

communica tion sho uld be confined to each column. Ignoring this struct ure by taking sho rtcuts. either ad vertently or ina dverte nt ly. will progre ssively undermine team morale and crip ple team pe rforma nce. An important rule of info rmation man agement is to be ce rtain that all info rma tion is availa ble to all parties 10 a timely manner. If the de cision-management plan exe mpts a team member from primary involvement in a decision. the information management plan sho uld stipu late that copie s of mee ting minut es. report s. mem os. o r correspondence be forwarded to the excluded team member. Surp rises should be avoided under all circumstances. A co mment such as ·'1 wasn't aware of that" will quickly undermi ne the synergistic goals of the team [provid ing. o f course.that it was a breakdown in communicat ion that prompted the com ment ). If information is properly man aged. surp rises will seldo m occ ur, It sho uld be evident that informatio n must be micromanaged . especi a lly earl y in the project when the needto-know phil osophy has not yet taken ho ld.

The info rmat ion manageme nt a rea of kno wledge encom passes the collection, document atio n. dissem inatio n. safe keeping. and dispos al of verbal and graphic project. relat ed informat ion . Th e team struct ure and the use of multiple contracts significa ntly increases the information availab le to the owner. Th e volume of information {gene rated for proj ec t accou nta bilit y purposes and by tea m mem ber pa rtici pation in decision -making chec ks and balances) req uires a multi-level. need-to-kn ow report ing structure and an efficien t information storage and re trieval system. The construction manager must be abl e to pro perly and effectively mana ge the informati on gene rated by the project. The CM must be familiar with all for ms and means of comm un icatio ns. especially computer-base d informa tio n syste ms, and will recomm end and install those mos t ap prop ria te in all areas for eac h leve l of man age· ment. The eM must be proficien t in sett ing agen das, chairing meet ings. record ing meet ing minutes. pre sen ting o ral and writte n re port s, and perceiving the need -to-k now requ irements of team members at eac h management level. The informatio n management area of know ledge req uires high-level co mm unication skills. includi ng per son al co nversation , correspondence. tech nical writing. meeting leadership. no te tak ing, meet ing reco rding an d rep orting, re port fo rm design. knowledge of informat ion ma nageme nt syste ms. business protoco l. and com puter system s. and a strong sense of e thics.

13.3

Co mmun ications

13.4

INFORMATION CREDIBILITY

The checks and bala nces of the CM team structure shou ld nOI be relied upon to establish the cred ibility of inform ati on . The prime purpose of chec ks and balances is to extrac t the highest level of perform ance from each team me mbe r, not to corr ect mista kes in information pro vide d. As a processo r and supplier of information. each team member is expect ed to perform to the expectations of the other team members. Infonnation is expec ted to be co rrectly a nd com pletely processed befo re sup plying the informa tion to the recipient. The C~l's. A/ E·s, and o wner's resour ce people will proce ss most of the inform ation based on data and di rec tion provid ed by the A /E 's Proje ct ArchitectlEngineer. the C Mos Project Man ager. or the owne r' s Management Represe ntative. These three man age rs should be held acco untable for the cred ibility and timel iness of the informatio n provided to the team.

THE KNOW LEDGE CIRC LE

The flow of project info rmation shou ld facilita te the team' s structure for decision manageme nt cove red in Chapter 8.The CM O rganizat ion. In gene ral. info rma tio n dissem ination sho uld be lateral. be tween projec t team member s. a nd vert ical within a team mem ber's o rganizatio n. Th er e will be exceptions for this practice and situations when the ma nageme nt plan dictates otherwise. However. the integrity of the information ma nagement netw or k hinges o n cons istency an d conformance to the need-to-know

philosophy. Figure 13.1 shows the late ral and vert ical flow o f projec t informat ion for a typi cal projec t. Executives communicate with execu tives. admi nistra to rs with ad minisrra ron, and manage ment level persons with counterpart ma nage me nt level persons. Vertical

Level Executive

ThteM Executive Project Man;lger

Management

Administ rative

:

.

Project Architect/E ngineer

Executive Managem ent Rep resentative

A rchitects

Enginee rs

Value Eng ineers

Engineers

Techn icians

eM

Field AlE

Field Represent a tive

Value Managers

Field

COM MUNI CATIONS

In th e ea rly days of e M. communica tio n was limited to meet ings. the mail. telep hone a nd telegram s: time consumed by communicati on s was a sizeab le handicap when dealing with information transfer. Today. with so many co mmunica tion options ava ilab le. it is o nly a matter of select ing the method best suited to acco mplish the task at han d. Mee tings are by far the best way to co mmunicate when d iscussion s must ta ke place. Telecon ferenci ng is a co nvenient option but sho uld o nly be used whe n the mee ting age nda is brief and the subjec t matter fairly no ncontrover sial. A lthou gh it redu ces time and eli minates tr avel. telecon fer encing is more form al a nd tends to stifle the un inh ibited flow of inform ati on that shou ld take place d uring con frontati ons. Q ueries by team members prompted by checks and balanc es ( that are so impo rta nt to funda mental decision making) will be mor e ca nd idly stated during face-to-face encoun ters.

The O wner

The AlE

I Executi ve

13.5

FIGURE 13.1 The late ral and vert ical flow of information.

,

I

192

Chap ter 13

Section 13.7

Information Mana ge ment

••

13.6

Compu te r Commu nica t io n It is d ifficult to visualize a co ntemporary eM project witho ut computers. Th ey are essen tial lO sched uling and a major conve nience when b udgeting o r making progres !l payments. The y also become indispensable in com mu nicati o n a nd recor d ke eping. When pr operly used . compu ter s C:1O se rve as the p rime com munication link bet wee n team mem bers. Ho wever . as with sched uling. co mpute rs can be o verused. While the ide al o f hav ing a computer on e veryo ne 's des k has me rit. their use sho uld be: carefully co ntrolled if efficiency is to be realized . TIle project team sho uld de termine how compute rs will be used in co mmunications. It is sugges ted that projec t co mmu nica tion rem ain priva te through the use of local area netw ork s and modem transmissions, Pr oject communications sho uld not occur on the Interne t unless it is necessar y or dee med pr ude nt. Co mm unica tion s with in the C M's orga nizat ion shou ld also be con tro lled . The job site sho uld be linked with the mai n o ffice to facilita te co mmun icat ions be tween man agement an d ad min istr ative level pe rso ns. Howeve r. the informa tio n accessible to the field should be selec tive; the inform at io n access ible to the office sho uld no t be sele ctive. On proje cts tha t ha ve a sizeable field-based staff. a d irect link betwee n the field an d the offices o f th e A lE and o wner is jus tified. On mos t proje cts wher e f ield-based pe rso nne l consist o f o ne o r two person s. it is not justified. Th e lines o f co mmunica tion establish ed in the information ma nagemen t plan sho uld determ ine d irect link jus tifica lion . Th ere is no single computer co mmu nication syste m that will se rve all projects equally well. E ach project shou ld dev ise its own syste m bas ed on the comp ute r capacities of the team member s and the type o f communicat ion tha t will tak e place. Th e systern should be detailed in the info rmation management plan . If sufficien t foretho ught

CORRESPONDENCE Two suggestions co uld make the C M's correspondence involve men ts more efficient . The first facilitates identifying each project's correspondence; the second provides a convenien t way for project mana gers to mon ito r outgoing co rrespond ence fro m res o urce pe rso nnel. Both an: con venient and econ om ical. Constructi on managers can use a col or -cede system to q uickly id entify paperwo rk co nnected with a specific project. Self-adhering tags o r marker str ok es can be a pp lied to all int ern al and incoming pape rwork and file folders. E~ch p roj~c~ ~s assigned a d ifferent color, makin g ide ntification much simpler than readin g mu lti-digit jo b num be rs. To mon ito r daily ou tgo ing corresp ond ence. a daily le tte r Il k ca n be create d. This is done by pr od ucing an extra copy of ea ch o utgo ing letter o n un ique colo red paper. At the end of ea ch day all cop ies are stapled toge the r. ma rking the da le noticeably on the first page and rou ting them to th ose in the need-to- kn ow circle for compa ny corr e, spo nde nce. Correspo ndence monitoring is especially useful 10 Level 2 managers on a dally bas is and to Le vel I e xecutives on a spot -check basis. No tes and mem oranda can be made direc tly on the lette rs because the file is no t part of the fo rmal reco rd -keeping syste m. A fte r the dai ly letter file has se rved its p rime purpose. it ca n be kept in a chronological file (or future reference o r de str oyed if con sidered d ispe nsable. Th er e are mor e elaborate syste ms that can rep lace the two simple o nes sugges ted her e (such as creating com puter files ra the r than using hard copies) but the portability and co nve nience of a ha rd copy. daily le tter file ma kes the sugges ted syste m d ifficult to beat.

vide guidelines in th is area ; there fore. prudent ind ividual choices must be relied upo n. A similar situation exists in sched uling. It is noted in Chapter 20. Sched ule Management. that CP:Vl schedu ling is a com p uter ized too l with a much greater capability than requ ired for e ffectiv e CM sched uling. It is no ted th at th ere is a ten dency to ove ruse schedu ling soft ware simp ly beca use the capability is th ere. Th e most prude nt informa tion tra nsfer me thod sho uld be used. There is a tende ncy 10 sched ule the informa tion processing so tha t the faste st and most expens ive me thod o f transfer must be used to meet deadlines. As with schedu ling. availab le elabo rate op tion s seems 10 influe nce choice. While certainly no t a ma te rial th reat to the b udget . the cos t o f last-minu te tra nsfer is an ind icat ion o f inefficiency and a que st ion ab le altitude toward project cos ts. While this is a minor po in t. it is flagrant ly co ntra ry to eM phil osophy.

13.5.1

193

is put into th e decision a nd th e res ultant plan is followed. the system \\; 11 serv e its in tended p urpose.

While the telep hon e pro vides the qu ickest acces s to info rmat ion. the FAX automatically provides 3 record o f what tran spires. Th e FAX sho uld re place the telephone when ever pos sible and sho uld be use d to back -up teleph one discussio ns by caps ulization.ln the latte r ca se, a memo o r let ter will also suffice.

Information transfer options should be chosen wisely to ensur e timely delivery and minimize duplicatio n of effort. TIle information management plan can only pro-

Forma l Reports and Records

13.7

FORMAL REPORTS AND RECORDS Th e informa tio n management plan sho uld iden tify the major report s to be pro vid.ed b ut sho uld refer to each separa te man agem ent plan for re port ing details, Th e ma jor ongoing repor ts and recor ds are listed bel ow. There will be periodic. seco ndary. and bac k-up repo rts ::IS well as th ose listed. Budget

;\ l :.lna~clllcn l

M onth ly Financ ial Report

Appl ication Summary Dispcr seme nt Re port Schedule o f Values Repor t

The primary project re po rt co nt aining the Iollowin g docu me ntat ion. A mont h-b y-m onth listing o f p rojec t payme nts ma de by th e owne r to da te. A listing o f disbursements made by the owner for the curre nt pe riod. A summary of schedu les of values update d to th e cu rre nt pay period.

194

Chapter 13

Informati on Manag emen t

Billing Summa ry Budget Report Cha nge Ord er Report Purc hase Order Re port

Section 13.7 A cu rre nt sta tus re po rt o n eac h contractor's dollar contract. A budge t summary sho wing costs to date and anti cipated in the future. A summa ry o f Change Orders to date. includ ing cont inge ncy tra nsfers, A lis ting of Pu rchase O rde rs issued by the owner for the current period .

Sched ule Management

An objecti ve re po rt on the day's activ itie s.

Val ue Mana gem ent

O ccu pan cy Sched ule Report Milest one Schedule Repo rt Program Sche dule Repo r t Short Term CAP Rep on

Contra ct Managcmen l Daily Field Re port

including co nd itio ns and comments.

Valu e Managem e nt Repo rt

Deci sion l\1anaf.:cm enr Major Decision Log Info rma tio n

A log o f major deci sio ns mudc by the te am d uring the projec t.

195

A cu rre n t updat e o f the occ upa ncy sched ule and its interface with co nstructio n. A demand (d aily, wee kly. mon thly) upda te 0 0 milest one sc hed ule progress. A d ema nd (dai ly. wee k ly. monthly) upda te on pro gra m sched ule progress. A period ic (milestone date ) update on construc tion progress.

A mo nthl y report o n value man agement acrivities during des ign and con s tructio n.

TIle names or titles o f the reports are not cas t in s to ne. and the list is nei ther a minimum no r a maximu m req uireme nt. Th e budge t management mo n thly financial report is a prod uct of the team's finan cial management information system (FMIS) diagra mmed in Figur e 13.2 on page 196. II should be p resented in a forma t acceptable to the ow ne r. o ne tha t coincides with the o wne r's account ing require me nts.

~1:Jna g cm clll

Minutes o f me et ings

Formal Repo rts and Records

Mi nut es of signal meetings that take pla ce d ur-

iog the project. ~ ta le riaVE q u i pm c n r

)tana gem cnt Expedi ting Report

wa rran ty/G ua rantee Report

13.7.1 The FMIS Syst e m A rep ort o n the whereabout s o f material and equipm ent purchased for the projec t. A listi ng o f all warranties/guarantees with expi rat ion d ates.

A computerized FM IS ca n be designed usi ng spreadsheet so ftware. Th e so phisticatio n depe nds o n the computer capab ilities o f the co nstruc tio n Ol Dnager.These ge ne ral rules apply: (I) d evelop the FM IS progra m so that ma nual e ntry need o nly be don e once for ea ch item o f data.Thi s red uces the chanc e for e rro r. and spee ds up the process; (2) cre ate files tha t cross-c hec k eac h othe r whe re ver possible. Th is will flag err ors if the y occur: an d (3) provide reports in the le ast co mp lica ted forma l so tha t ef fort less commu nica tio n is facilitated.

P roj ect M:m agcl1Icnl Month ly Mecnng Repo rt Q uality

A repo rt sup po rt ing the top ics on the agenda for project month ly meetings.

13.7.2

~t 3 n 3 ~ C lll e n l

Punch list R epor t

Figu res 13.3 th rough 13.9 show typ ica l formats for the seven re ports and summa ries include d in the Monthly Financial Re port It is suggested that the month ly financial report be mecha nically bound so its cre dib ility and pe rmanence is assu red . O n many pro jec ts. this re po rt pro vid es the onl y so urce o f acco untabi lity and is th e owner's prime reco rd for the project. Figur e 13.3 is an A pplica tio n Summ ary format use d on
A sta tus report o n contractor punch list item s.

Resource Managem en t Co ntractor Manning Re port

A dai ly repor t iden tifying contractors o n-site and their crew make-up and size .

Risk Ma nagem ent Insurance Report

A monthly upda te of the sta tus o f co ntrac to r's requi red insurance.

Safety Management Lost Time Accide nt Repon

Formani ng Re po rts

A mon thl y update on lost time acc ide n ts, includin g types and cau ses.

i

196

Chapter 13

Form al Reports and Recor ds

Sect io n 13.7

Info rm a tio n Ma nagem ent

197

MOllthly Fin :uu::ia l Re port No . 07 A pplication Summary Project No._ _

Project

_

Owner:

_ Project Nu mber: Page __ o t _ _

Dalc:JU..:Q.l.:22.. Time :

Applica tion No. ill

_

A pplication No. Applica tio n No, App li cation No, Appticauon No. Applica tion No. A l' plicHlioli No . Applica tion No.

Checks Irom

Scbed ufes of V alue s Fil.:

previous billings Checks O UI~ i u.: h illing. syste m Inp ul

0/ 02 03

01· 12·96 UZ·QQ·96 OJ· 15·96

Q4.

03·3 1·1)6 05-10-96 On-/2 -96

05 00 07

Tolal Applica tio ns to Da le :

()7. I9·t)6

_

S 37X.9.:.l.69 \03.2 52.30 IOJ,SJI.03

183.693.37 3 1O,990.2K

5S5.292. IK 17fJ.1 52A5 $1.835.856.30

/'/IY"'I:II I Allflr"f1:lI/i!JII:

Owner's Rcprcsuntati...e: A rchi te ct 's R ep resen ta tive : Co nst ruc tio n Manager 's Represe.uari...e:

_

Da re Dal e:

_

Da le :

FIGURE 13 .3 Typic al Applicat ion Sum ma ry,

ncr amount pa yable will be the amount of the current applicat io n on the applicati on summary. In Figure 13.4:

Sched ule s

of v alues Repo rt

Column ( t) iden tifies the wor k-scope number . Colum n (2) ide ntifies the work-scope description and con trac tor. Column (3) lists the est ima ted final budget amo unt including change orders and the ba lance remaining in the budgeted amou nt. Colum n (4) shows the amount earned to dale and the amoun t retained to date (ro m that amount. Column (5) lists the perce nt earned to da te and percent to be retained. Column (6) lists the prev ious amount billed. previous amo unt retain ed. and the amoun t cert ified fo r payment. Colu mn (7) identifies the current billed amoun t, curren t ret ained amount , and stored materia l. Column (8) sho ws the current amount cert ified as payable to the con trac tor . Co lumn (9) lists the certified net payme nts made to the contractor to date.

I 1 xore: Monthly Financial

Report

0 D D

Destgnates a Report Des ignates a Fill: D esigna tes In pu t

FIGURE 13.2 Diagram o f n typica l Financial Mnn age rncnt lnfo rm a t io n Sys te m.

For added owner convenience. a dispersemem report is sometimes included that lists the names of current progre ss payment recipients and the am ount to which they are e ntitled.This page C:lO be enhanced by Including the ma iling addresses of the recip ients an d the purchase order number fo r each cont ract. Th e goal is to se pa ra te the contractor prog ress payment process from the financial repo rt ing process and mak e issuing progress payment chec ks as simple as possible for the owner. Back -up infor mation can be foun d in the included reports. The col umn fo rmat for the re po rt in Figure 13.4 is op tional. The example uses a column -stacking for mat to save report width . If width is no t a pro blem . each headin g can have a column of its own, and the page can be print ed bro adside (la ndscape). Th e last page of this report will sho w the totals for the project, and the tot al of the certified

Figure 13.5 is a format for a typical budget report similar to Figure 10.7 in Chap ter 10, BUdget Ma nageme nt. Figure 13.6 is an exampl e of a chang e order repo rt or, more descriptively, a Change Order/Cont ingency Re port. II is a recap of change or de rs a ppearing on ot her repo rts with added information for track ing continge ncy expen dit ures. tra nsfer s, and bala nces. This report is usually of considerabl e interest to owners. As noted in COflllnllC'd 0 " PQg~ 201

I

.~

1'iI00 lhl )" t l"ltl1d

lll H" pu rl No .07

UiIlin !: SUllI llll, ry

Proj ect No.

_

P roject :

_

Ownc r ;

_

I' ru jCt:1 Nu m l....t .

l) llh: :.ll1.:..Ul:.2!l Time : _

Bil1in /: Su nu ll ilry N n ..!l1.

-n, n .ll .:

C u nen l

" n: vi' IU'

lI ilk d

E~l.

Final lI ud get

---

Score

work -Scope Description 'O J

-- H.llan c...

Conu acuu

Relll ilin ing

Nil, I) l)

07

42-1 Sm ith Aven ue Ii vc rmo rc.M l 4')1)) 1

171l,(1 15.25

CONCRET E Johnso n Cu nl raclOls. l llr, 6 24 W. Cross St. E\'clnlo rc, MI -1'.1'131

2oIHt22.IK

I

tI'''-,

Amnu nt

t- tll o.' l i; l h

!' ;I)',lll k

" ,Iylllc nb r(l D,lte

I J ,ln rl ,I N.1 lI ,tN.1

13.1)) (1,011 I 252,911·4.15

lUX)

(Il k)

I

RK4'r"

176.7J-UK.l

~ml,

~,K36 . 70

l.)13 .I K 45.M

Ifl7 , N97.JII

lI lIO

I{M U!%

7, ltllltll l

O UIl

"""

11.1 10 7, IOn .IXI

IU XI 0 .00

0.1111 0.1111

1I.UU

n.on

UH I

7, lt W Ill lUlU

I

O,IXI

&67 .5 2

I 16H,7M .H2

IU III

7, IIXI.0II

om

IUlIJ

4'}l))1

BIT UMINOU S PAVING

om I

122 ,623.fKl

Ca ll er 's Hlack top Inc, 16-1K W 10th St. E ve rmor e, M l -\')1)] 1 (I )

23'.l.n·IIl.75

N<: I

Sun cd

K,&'i:!.J6 I

177,M7.11l

7, 1I1l1,11l1

222 E . 351h S I.

EvclnJllfc, MI

5K%

Ce ll ilie d

N CI

2 3~.C ~8.75

Mura n Fe lice Cu.

65

-- ('c rtilie d

2.1.! 7500

C1IAIN I.I NK FE NC E

'"

Pe rce nt Hcl lliflcJ OJXI

C u rrcut Cc:rl ilk J

1 ~ e I,linc d

Re laille d

252.lJ~ , 7 S

431,6CXL fKI

---

---

R l: l il llll 'lI

CM FEE T O. & It , Limited

---

Ulll cJ

t'cr ccnr <'clmrk tc

CUlIIp h:l cJ

Amo unt

\Vu,l·

_

" il,gC__ O' __

Per il III Em l i ll8- ; ~

o'x,

( U1 l]

10 %

122,6 23 .00

I

(2 )

( J)

I

I

(')

FIGURE 13.4

T~'ric a l

(S)

I

« I)

0 .(11)

I

I

(7)

(HI

I

(9)

B ill ing Summary.

'$!_

... ' -

" iI2Al1t

M unthl, J'i lllllld :1l UCl'lOr l N fI,07 lIu dl:CI Ill'ptlrl Prujcel No.

_

j I'rwne ll cCr: I:_-== = = = = = = = = = = O

Project Number :

Da te:..l.11..:Ol:..2 l ime: Wm k ScoflC

Nt>.

""so

117 6S

B ill ing Summary No,Jll.

Work · Sco pe Description

Previou s

CM FE E CO Ncn ET E FEN CE nITUMI NO U S PAVI NG

T OTAL T il lS I'AC E:

Cost ro

Curre nt Cos t to

Oil\<'

Dare

2.\9 ,041'i.75 176 ,73 -1.00 7, IlXUXI

252 ,9s
o.oo

o.oo

X

X

X

X

X

X

U2.KS2.75

.0 1,731.9 3

1-I . ~9 . I H

3 24 .4 13..:'5

76 2,145 .18

762 ,14:'\.18

7 ,IOO.£X1

FIG U RE 13 .5

~ ~

_

Pa ge __ o r _ _

Per iod E nd i ng :~

Ctls l fm the Pe riod

Es timat ed Co st to Co mp lete

ESlima lc d

1J,'{ \ldXI

171'1.0 15.25 23, 175 .00

4 ) 1,6011 0 0 200,1'1 2 2. 11'1

t) 1.\.1 1'1

0 00

000

lUX)

122,6 23.tJO

Tnli~'" l

Bud ge l Il cpUtl

Mnal Cost

7, 100,(X) 122 ,6 2 ) .00

Hudge ted A mou nt

va riance (t ' . )

Adj usted B ud ge ted A moun l

4) 1,6OI1.lXl 2(11),82 2. 18 7, 100 .00 12 2.623.00

0 0 0 0

4 ]I ,lJIX1,OO 21XI,i'l22. 1toe 7,100 .00 122 ,6 23.00

0

762,145 . 18

X

200

Section 13.8

tntorrnancn Management

Cha pte r 13

Mon t h l~'

Ch an!:c Orde r Report

DaIC: ~

Tim e:

Balance

40.00

52.0
18.000

x

.53.02U

X

...1175

39.025

X

0302 0303

-1.005 + 1,650

3H.(P-O

OlOJ OJOJ

+2.0SO

35.1140

+ 650

3 5. ~ ·)(j

X X X X X

0304

-34-2

}.lo..:..

X

CO .

No.

Arn cum

LJ6

llJOI 0302

- 1 .()~0

Contingency Bala nce

X

s

Project Numbe r: _ Page _ of _

Per iod En d ing: ~

Interface Contingency B;IIJnce

work-Scope

L ineIte m

"

_

Change O rde r Report No..ol.

_

Work Scope No.

21 Of, IJ 21 2!

_

O wne r:

Dcsren

Continienc~

_

To la]

CO A nw unl

X

-1 .020 - 45 " 60

Ib.35()

...2,6) 0

X X X

+ 4,6l}O

- 5.340 .,.6.1 82

Not e!>

Mora n Brothers Thompson . Gra ll Inc. Allman Inc. Moran Brothers Dotson Excavators. Inc.

Rapid Stcct. Inc. Regal Con cre te Co.

X

c.os Report No. 01:

+6.182 j ..1 ..us

Totals (0 Date: 37

0305

+2.650

.,

4'

0300

-..1$l}

X

SJ.OlO

\(1.3;'1 0

+6.1::;2

X 52.540

t3.7(1()

- 2.650 +3.13U

X

Totals to Da te:

2' 27 4'

0306 OJ06 0307

...14.2S0 ...6AJO d .200

L))OO

+9.312

X

X

X 49.3-10

X

-;. )4.280 + 20.710

Martin Blacklop Co Ouigtey,Slone & Sons

X

+ 23.910

Leve n St ruc tures ltd.

34..w.W.

5!.540

20.1110 13,731l

X

X + 23.910

Report No. 03:

13.738

TOIOl ls 10 D;\le:

46

OJ22

-111.:<-10

lJ,700

...33.222

13.8

X

No te (il)

"'1 ~ .-l50

X

Note l.> i Transfer, 10.000; i.c, to A.C.

- 10,000

...\0.000

30.:MJ

X

· 12.450

X .;-)2•..150

Re po r t No.07: Tot;lls 10 Date:

Gordo n Elec trical Inc. Levin Struc tures Ltd.

X + ) .13u

CO.s Report NQ. O:-

201

Chapter 10. con tingencies are ofte n a top ic of controversy. Owners commonl y qu estion the ir justificat ion and the necessity of th eir eve ntual de pletio n. A brief descrip tion of eac h number ed Cha nge O rder (C.o.) shoul d be available in the Cha nge O rd er file by e nteri ng the CO. num ber . On sma ll projects the descnp[ion of each C o. co uld be included direc tly o n the change orde r report. Figure s 13.7 and 13.8 pro vide detai l and docume ntation for the Mon thly Fina ncial Report. Figure 13.7 shows a Typical Di sburs em ent Report and Figure 13.8. a typical Sched ule of Values Re por t. A Purchase Orde r (P.O.) re port is on ly required on projects where the owne r's acco unting system req uires purcha se o rders be used to initiate eve ry purchase includlng construct ion co ntra cts and o n projec ts that have a high incide nce of dire ct o wner purchases of equ ipment. furnitu re. and o the r item s no t installe d by wo rk-sco pe contrac tors. A P.O. file is unnecessa ry but he lpful o n o the r projects, especia lly for const ruetion suppo rt items, Th e P.O. file is an accumulate d listing of purchase orde rs issued by the owner that con be sor ted by number. vend o r name and add ress. a nd da te of issue .The P.O. Rep ort lists the P.O:s issued du ring the inte rval covered by the current mo nth ly fi nancial report. Th e tile pro vides P.O. dat a to o ther rep ort s as well as the Purchase O rder Report. A n exam ple of a Pu rcha se Orde r Repo rt is shown in Figure 13.9. The alp ha -nume ric designations under the work -scope column in Figure tJ .9 identify work-scope acco unts o ther than cont rac ts with con tractors for cons truction services.The "CS " identi fies con structio n support items, ·'OF" iden tifies owne r-purch ased furnishings. "OQ " cou ld be owne r-purchased cquipme nt.A fi might be used for the AlE fcc. Wha tever coding syste m is decided upo n sho uld be logical and consisle nt. and the codes shou ld be listed in the info rmation managemen t plan in the project's eM man ual. Wo rk-scope COdi ng co nsiste ncy facilita tes sorti ng project informa tion for use in various repo rts and mak es the m Jess of a chor e to produce. A logical. consiste nt codi ng system and well-develo ped reports pro vide checks and bala nces which subs tantiate the accuracy of monthl y financial report inform ation .

tin:mcial Rep ort No. 07

Project:

Proje ct No. _ _

Cc ftat erallnt o rrnat lo n

:S .71l3

36 ,~90

3.71Kl

+ J 5.672

FIGURE 13.6 An e xam ple Ch ungc Or der /Conlingenq'

Report.

Baker Ce ilings. Inc.

COLLATERA L INFORM ATION

In obt aini ng and docume nting the info rmation necessa ry to admi nister a eM pro ject . the contracting st ruct ure produ ces info rmat ion that has the potentia l to raise the con ceptual est imatin g performa nce of cons truction manage rs ano ther no tch. The deta iled pro jec t informat ion and compe titive work -scope cost da ta available to Cbts on mu ltiple-con tract pro jects prov ides an un preced ented es timating resource. When diligent ly collected a nd a pp ro priat ely stored in a da ta base, these datu prov ide the bes t source for co nce ptua l a nd co nst ruct ion es timating that the const ruction industry has prod uced (a nd all to the own er's be nefit). In the GC syste m, co mpet itive subcon trac t cost inform a tion neve r becomes availab le to the A l E: conse qu en tly, this highly des irab le informa tion is no t avail able when the o wner is trying to establish a prede sign bud ge! o r when the A lE is putt ing toge the r a co ncep tual est imate.

202

Sect ion 13.8

Informa t ion Ma na gement

Chapte r ' 3

~10 n t hly

Monlhly t iniinciaJ Rep ort ;0.;0. 07

-==========~

Owner.; Project :

DJle :~

Tim e:

_

Disb ursem ent Repo rt No ,JlL Disbursem e nt Amo un l

Disburse To

Peri od End ing:..!.l:6.:.1.l:2

w ork-Scope Ite m No

Projec l No. _ _ Proje ct Number:

Page __ of _ _

x c res

APPLICA TION 01:

Johnson Ccnuacrors 624 W.Cros s 51. Evermore. MI -1':NJI

13.936.f.xJ

""

lime:

"'

-==========~

Sched ule of Values Re port No...Q2.

CfR(W9

Ile m

Descri ption

IStJlOI02 15010206 ISOlOJO) [5010JOS [.$010508

Vinyl l1h: Ceramic Tile Parnuons Acous tical Ceilings Gyp Board Ce: ilings Aco ust ical Walls

1$010603

ser.sz

_

150107 12 150 10823 150 10930 15011005

CT H07

Amounl

HOUSekeeping. Final Cleanup Punch List

Deco rauve Chann el

--- - - -~ ----- - - - - --- - --_

Rl)bins Mechanical 25-l E. 121h 51.

Evermore. MI

S.t.6f11l.80

)5

(~OJ 1 105

CTR 035

150.H201 I~OJI30J

~9',lJI

( E lC.)

1503 1..10J 1511) 1502 15031603

IOO.HS.1J X

A I' PUCATIO:'li07 TOT,\L:

SI711,1 52.J 5

Port a-Jon . Inc.

Deco ra tive Channel S k ~' lig ht Liners Relocate Bu[khca J AJJSlud Linc DeJuclVinylTIIo: Add Bu lk h.::.Id

work-Scope DI\·.Tolals:

C o. Percent vanunce:

Construction Suppurt Report 07

or \ 'a!uc:s Report

O wne r. _ Projccl:

D ale :~

c o. AUlhoriL1lion

5U M~I A RY

T.O. & H . Limited ~ 24 Smith Aven ue Everm o re.MI4'N JI

_

..00 X S2,657

Peri od

% Complete Cu r,

Prev.

Project Number: Page __ of __

Endin g;~

_

Budget

Ear ned

Pre vious

Earned For

Amount

To OJ te

Earn mgs

Period

0 0 50 15 0

0 0 70 15 25

IO.lXX) I 2,lXXl 115.000 [6$( X) 7.:WO

0 u so.soo 2.520 1.950

0 0 57,500 2.520

0 0 :!).fH} 0

0

1.950

0 0

10 0

2.400 9.217

2";0 .:..5IX1

0 3,0l.1Il

i.soo

0 0 0

0 0

J.lIIX) 6.JOO J ./lOU

0 0 0

0 II

0 0

0

0

I)

560

0 X40

IJ.~

6n

n

119 (300 )

uv

0 0 0

.. __.. _--_ .. _. . \IOU 1....00 13M 1111 (3lXl)

203

Finan cial Rep ort :"10. 01

Sch~dulc:

Debursemem Rl:pun

Project No. _ _

Collatera l In fo rmat ion

0

_- - - --- --- - -_._ .- ~-_ . _ .

0

Q

JQ

100 100 100 100 100

SO J(X)

0 100

0 0 0 0 U u X SlX5.tol7

0 I.Joo

._

__ . . _._ ------- _. -

0

~K)"eX)

X S'JI.Jh7

2JO

X ';t>·Uli5

X S27-'0 2

..1....3%

wo rk-Scope % Co mp lete;

Esuma teu Final Earnin gs: 2·l.00

CS02

PO~57

(+2.657 + 185,617) '" $1&'1.21':

OS/3119fl to 0612&~{)

..122 E. 121h 51.

fi GURE 13.8 A n example Schedule of Values Repor t,

Everrnore. M! 49YJI Go lde n l ighl & Power Co, P.O. Box 444.$ Golden. MI 49932

36..1.38

CS II

PO 2785

05129(% 10 06128196

Co ntract Testing. Inc.

o.'W A5

CS2.:

PO 097.:

Co ncre te Cylinuers

65S 8th St. Micron . MI .:9932 (E tc.)

3. I-1S.80 X

CO NST HUCfION SUPPORT01 TOTA L.:

S·UI 8.6J FIGURE 13.7 A n ':J;a mpk Disbursement Repo rt.

Subcontract cos ts are the exclusive properl y o f GCs who cannot beco me part of the contracting syste m until after des ign is com ple ted (unless of course the con str uctio n contract is negotiated), On public projects, negotiated co ntracts are a rare exceptio n an d no t th e ru le. Co nseq uently, the party th at really needs this information-the A l E. who ca n use it to the o wne r's adv an tage- has no way of access ing it in the GC system. To complete this po int. in th e de sign-bu ild system. the D-B co ntrac tor has this informat ion and can use it in conceptual es tima ting. However . the indepen dent contractor status of D-Il contrac to rs pe rmit s the m to usc the information to the ir bes t ad vant age. no t necessarily the o wne r's. Competitive bidding, und er a preponde ra nce of current publi c law, prevents negotiating con st ructi on contrac ts, Thi s collateral benefit of the eM syste m streng thens per formance und er the syste m if construction man ager s take the steps req uired to harness it.

204

Cha pt e r 13

rntormancn Manag ement ~l lln lhl~-

fin ..ncial Rep ort :\0. U7

CHAPTER

Pur chase Ord er Kepurt Prolect x o, _ _

PrOjcct:-=========~

Material/Eq uip m ent M an ag em ent

O"'O":T:_ D a t e;~

Purchase O rdc r Report :-':u..ll.:

l i me: p.o .

Vendo r Nam e

Number

and Ad dress

P0 3457

Bnef Description of h em

Porta-Jon . Inc. E. 12th $ 1. Ever more. Ml ..19')) 1

..In P027$5

P\:I1UoJ

Golden Llght.1: Po.....e r Co. P.O. BOll.w..w Golden . MI Jo;llJ2

Sanitary service 0513 1 10 U612S/Wl

EnJ illg :~

Projec t Numb er: Page __ of _

P.O.

w or k-

Amount

S
Da le Issued

CS
12'15195

S:!J .OO

_

NOi ('S

Materia l/Equipment (M/E) refers to all manufactured items installed in the project plus processed an d raw materials incorp orated in the project. Equipm ent used ( 0 install and construc t is include d in Chapte r 18. Reso urce Management. Th e sco pe and compl exity of MIE manag ement va ries wide ly o n a proje ct basis. However. eve n [he smalle st. simplest proje ct will require M/E mana gement. and many large. comp lex projects have M/E manag eme nt req uirements tha t literally dom inate the co nstruct ion mana ger's projec t re spo nsib ilities. TIle MJE to be managed exte nds from owne r-furnis hed /I.-lIE ;lOU direct purchase M'E to the M/E provided by trade con tra ctors under their contract with the owner. O wner-f urnished and direct pur cha se M/E manageme nt is readily achievab le; trade co ntracto r-furnis hed M/E man agement can o nly be accomp lishe d through app rop riate o wner-co ntracto r contract language an d the full cooperat ion of the trade co ntracto rs. Material/Equipment man agement provides fo ur impor tant results. It pro vides a means (0 : (1) reliabl y inco rporate the owner 's M/E requirem ent s into des ign. (2) p~r­ mit closer con tro l of the project sched ule. (3) extra ct competitiv e prices when acq uiring MJE. an d (4) provid e practical follow-up on contra ctor and supplier M/E warranties und guarantees.

S2J .OOtmo ior IS mos-; no pnce change.

Office pow er

SJ6·U~

CSll

1211 8195

and light 05129 I II Ofil21PJ6

Office tra ilers. no t tempora ry pc wer. Fnd usmal

rare.

P0097J

ConlTaCl Tesung Inc. 655 :Slh 51. Micron. MI J9QJ2

P0 7b7 3

Office Design!>. In' . 862 Bitmore Ave. Evermore. xn JI/'J31

All mare na ts testing rcqu n cd by specs.

FurnIShing lor

SM-l.J5

CS:!J

0111 t/%

Includes all testing on and off su e. See rD. ror pncing,.

$9.78000

Of1l.l

W0519b

f um l5t:mj5! sketch II F-J:097. Dcl 1296 No equipmen t.

conference room

"601

1 4

FIGURE 13,9 An example Purchase Order Repo rt.

14.1

When es tablishing the alp ha-numeric system for ide ntifying worK·scope divisions. it was suggested tha t a n eight -digit number be used. The last two digits of that system shou ld be reserved for inter unl Ci\ l cos t tra cking. If the num bers from 1 to 99 are used 10 iden tify similar wo rk-sco pes o n every project. a nd [he work- scope bids are filed with the physical construction the bids represent. it will not be long before a super ior data base of estimating information is available to the e M for use on fut ure projec ts. The raw da ta will need to be relined. by uSing cost ind ices re presen ting geographic areas. date s. a nd project co ndit ions [ 0 bring the dat a to a commo n base. but the info rma tion could be invaluable when checking o r establishing co nceptua l estimates .

THE MATERIAL/EQUIPM ENT AREA OF KNOWLED GE

The mate rial/eq uipment are a o f know ledge en compasses all activities relating to acq uiring nuuerin l and eq uipme nt from specification to installation and warra nty. Th.c eM forma t facilitate s direct owne r pu rchase of mat eri al and equip ment for the prolect .The advantages (and disad vantage s) of direct owne r purchases must be evaluated a nd decis ions o n direct purchase ite ms extracted from tbe tea m in a timely manner . The planning. specifyi ng. bidd ing. acq uisition. expe diting. receiving. handling. and stor ing of direct purchases mu st co nform to the o wner's purchas ing policies and accurately reflect the req uire me nts o f th e project schedule. The Clvl must be able to identify materials and eq uipmen t which are in sho rt supply. have long. lead delivery times. o r wou ld pro vide an econo mic advantage ( 0 the owne r for dire ct pu rchase items early in the design phase of the project. The eM arranges fQT the ir proper procurement . timely deli very. and physical disposition at the site. Th e eM must exped ite owner purchases from thei r dete rmina tion of need .to deliverv at the site. an d must be famil iar with procuremen t procedu res and strategies and under stand the mat er ial and eq uipment marke tplace.

i

205

206

Chapter 14

Ma terial/Equipment Management

Section 14.3

The ma teria l/equip me nt area of kno wledge includes bu t is no t limited to technical spec ifications. pu rchasin g techniques. bidding and nego tia tions. transportation. expedi ting. inspection . materia ls hand ling. sto rage and war ehou sing, the Co m merc i~1 Code. lien sta tutes. an d material and equ ipmen t costs and values. Excellent co mmunication skills are req uired. 14.2

14.3

14.3.2

OWN ER·PURCHASED M ATERIAUEQUIPMENT

Lo nq -Lead Ite m s

Lo ng-lead items usually Involve extensive fabrication alter the o rde r has been placed or time-consuming sho p drawing req uire ments th a t preve nt time ly delivery. Non -stock items such as mecha nical and elec tr ical equ ipment requi ring te am app rova l and extensive fabricat io n fall into this category. (A boiler or specia l air-handling unit is an exam ple of a long-lead item. ) Waitina for a contract to be awarded to a mechanical cont racto r would put del ivery long into the future. After the contract is awarded . the contractor mus t place the orde r to a manufacturer and go through the shop drawing process before fabricati on can begin by the manufacture r. Adding fabricati on time to the delay-in-awa rd time and the shop drawing processing time could cause avoidable construc tion delays.

Eco nom ic Ad vant a ge Ite ms Some owne rs in the pub lic secto r are e xempt from paying sales tax when pu rchas ing materials. However. the own er must pa y sales tax o n materials provided as part of a constr uctio n contract: the owner's tax exemptio n canno t be passe d o n to the con tractor who makes the purchase. An economic advantage acc rues whe n mate ria l IS purchase d by the owner and turne d over to a cont racto r for installa tio n. No t only is the a mount of the sales tax sa ved. but ope n compet itive bidd ing by suppliers usually results in addi tio nal savings to the o wner . However. the separa tion of labo r and ma terial purchases must not contradict com mo n const ruc tion ind ust ry cont racting prac tices to be successful. Most trade cont racto rs o n a project use their labo r to mod ify and install raw or process ed con stru ction materi als on the site. Howeve r. some const ructio n materi als are prefabricate d and req uire only minor e n-site mod ifica tio ns d uring insta llatio n. Ra w o r processed ma te rials. because they a rc financially tied to labo r prod uct!v ity and profit. are not suitable for direct owner purchase. A lthou gh tied to profit. prefab ricat ed mate rials arc no t as closel y tied to produ ctivit y and arc ge nerally suitable for d irect owne r purcha se. A n example of a q ua lified eco no mic adva ntage item is structura l steel. Steel e rection contractors often do not fa bricat e and supply st ructu ra l steel: steel fabricat or cantrac to rs often do not er ect structural stee l. By d irectly purc hasing fabri ca ted steel and acq uiri ng a separate erec tio n con t ract. the owner saves the amou nt of the sa les tax that an erector would have to pay if supply and e rec tion were combined in a single contractors wo rk-scope. This arra nge me nt obviously provides an econ om ic adva ntage to the owne r without cont rad icting co nstruction ind ust ry practices. O ther mate rials which cou ld suitab ly provide an eco nomic adva ntage to the owner. after due conside ra tio n. a rc: doo rs. door Iramc s. ha rdwa re. met al deck . open· web jo ists. casewo rk. cabi net ry. ca rp e t. and rei nforcing steel.

Own er-purchased M/E are items that will be installed by contracto rs as part of their construc tion work-sco pes but which for strategic reaso ns have bee n purchase d di rectly by the o wner. O wne r purchases must be jus tified in the context of comm on constructio n industry practices to prov ide beneficia l results to the owner. The re are onlv two valid reasons for direct owner purc hases : (1) an item has a long de livery time {lcng-lea d item) that requires early purchase to ens ure on -time de livery for schedule reaso ns. or (2) the pur chase will provide an economic adva ntage to the owner without contradicting common const ruction industry contracting practices at the location of the project. 14.3.1

207

Th e project ream must identify lo ng-lead ite ms as earl y in the design phase of the proj ec t as poss ible and then a rrange fo r timely prep urchase by the o wne r. usually after Obtaining compe titive bids from man ufactu rer s or suppliers. Th e CM sho uld can vass the so urces of lo ng-lead items to dete rm ine the ir pos ition in and influe nce o n the constru ctio n sched ule. The CM must also spec ifically ass ign receiving. care custody. contro l. and installa(ion res ponsibi lities of long-lea d items and include them in con tractor work-scope descriptions. Alth ough desi rable. assignme nt is not always made to con trac tors ; the re are times when receipt. ca re. custo dy. and co ntrol are prefe rab ly hand led as a gene ral conditio n line-ite m un til the designa ted cont ractor is ready ( 0 proceed with the installation.

OW NER· FURNISHED EQUIPM ENT

On some proje cts. espec ially those in the industrial arena. th e owner furnishes large and small eq uipment to be i·nsta llt:d. by cont ract ors or the owner's own forces. during construction o r as part of the occ upancy process. As the owne r is the knowledgeable part y. these purchases are spe cified and accomplished by the owne r without ass istanc e fro m the Al E or C M. Howeve r. in many cases. this equipmen t becomes an integral part of the project and must be prope rly and timel y rece ived. inspe cted. sto red . and systematically incor po ra ted int o the project. Eve n if owne r-furnis hed eq uipmen t is no t part of the contracts for construc tion. the re is an obliga tion on the pa rt of the CM to see that it doe s not inte rfe re with const ruction or the pe rfo rming con trac to rs. To this end. the CM must obtain delivery and disp osition info rmation on all ownerfurnished equipmen t and inco rpo rate consequen tial info rma tion into the projec t schedules, In essence. equi pment furnish ed by the owner must be trea ted by the CM no less atte ntively than all o ther materia l and equipment used on the project.

Owner-Purchased Material/Equi pm ent

14.3 .4

Com pet itive Bidd in g It is highly recom mended that all owne r ma teria l/equipment purchases be accom plished thro ugh the compet itive biddi ng process regardless of whethe r the: project is public or private sector.To this end. the project team must develop tec hnical specifica tions. coo rdinated wo rk-scopes. delivery information and schedules. and bidding doc ume nts. Info rmation on competitively bidding mate rials can be found in Chapter 22. Multiple Biddi ng and Con trac ting.

208 14 .3.5

Chapter 14

Mat erial/Equipme nt Management

Section 14.5

Care, Custo d y. an d Co ntrol Assignme nt

Contract or-F urnish ed Ma te rial / Equipme nt

14.4. 2

M/E MANAGEMENT PLAN

An M/E Manageme nt Plan that is acce ptable to all team mem bers sho uld be developed by the CM ea rly in the design phase. It shou ld be installed before the ini tial purchase for [he project is mad e and ma int ain ed by the C:-'1 during the co urse o f the p roje ct. 11 is ter minated after th e last M/E item has re ached its warranty/guar antee date. The complex info rmatio n gathering and sha ring . and the docume nta tio n req uire ments of material/equipment m an agerneru.calls fo r a man agem ent pla n to exe cut e this resp on sibilit y. A CM's in-ho use h'VE manageme nt plan ca n usu ally be mod ified to accom moda te team needs. A s a management p lan, il should be includ ed in the p roject manual. Th e plan shou ld have fou r mai n co mpon ents: (1) a p roce d ure For M/E selection guidance d urin g the desig n ph ase, one tha t ass ur es the ava ilab ility of the mat e rials and equipment spe cified For th e pr oject: (2) a coo rdination procedure for re vie wing shop drawings. product data. and sa mp les: (3) a mate rial/equipmen t exped itin g sys te m. o ne that accu rately an d co nve nien tly tra cks all pu rcha ses by the o wner an d the con trac tors from the P.O issuance to the inst alla tion o f [he mat eri al/equipment: an d (4) a com prehensive inst alled materi al an d equipme nt wa rrarny/g uurnn tcc fo llo w-up pro cedure. The rvUE selec tio n p roce d ure sho uld interface with th e Quality Man age me nt Plan (Ch apter 17): the MfE exped itin g proced ure sho uld int erface wit h the Sche d ule Mana gement Pla n (Chapte r 20 ).

14 .4. 1

Mate rial /Equipm en t Selection The main purpose of the r-.UE setec uon plan is to exclude mate ria l a nd eq uipm en t from the con tr act specificat io ns that are ou t of pr od ucti on. have d elivery dates wh ich are inco mpa tible with the co nstructio n schedule. or a re un fam ilia r to the av ailable contractor s. It is the e M 's respon sibi lity to iden tify ma terial/eq ui pm ent that fall in these. three categories an d bring th e Iacis to th e team 's att en tio n ear ly in the design phase. To

Sh op Dra w in g . Pro d uc t Data , and Sampl e Co ord ination Figures 17.4a and 17Ab (Chapter 17) show th e invo lve me nt o f a eM in the sho p d rawing. product data . and sam ple pre const ruct ion procedures. In this cas co th e Cr-.I is directly invo lved in the "a pproval" pr oce ss and co nce rne d wit h compo nent com pa ra bilit y in syste ms situ at ion s. However . o n p rojects where component co m pa rability is no t a maj or issue . the CM can delegate the "a pproval" role to int erfa cing contrac tor s. The CM 's role conv erts to one o f facilitator and co ord inator o f the review process. Th e proced ure sel ected shou ld wo rk for both qu alit y management an d M/E managemen t wit hou t duplicati on. figure l-r.I sho ws a CM's alterna tive involvement where the e M d elegates an "approval role"t o interfac ing co nt rac to rs.

The vast majorit y of material/equip men t will be purchased by the contractors who install it. Th e few ite ms purchased or fu rn ished by the owne r ca n be trac ked clos e ly by the team from the first- ha nd infor mati on ob tained from th e various ven d o rs. Becau se the o wne r usuall y has no di rect access to informa tio n re ga rding trad e co ntra ctor purchas es. the status of contrac to r-fu rnishe d M/E is a concern that m ust be po intedl y add resse d in the o wner-cont rac to r contract doc ume nts.

14.4

209

acco mplish this, th e CM mu st be fam iliar with the loc al co n tra ct ing establishmen t. ca nvass th e available supp liers o f material and equipment. have a tec hnical understanding o f the ma teria l/equipm ent under con siderat ion by th e Al E. a nd pr ovid e cost infor matio n for alt ernat ives. As with all de cision s pertaining to de sign. the CM can only assum e an ad viso ry role in [he se lect ion proc ess: the Al E makes the fina l de te rm ination.

Owner-purchased mat er ial and eq uipment mus t be recei ved. inspected. p roperly s to red . and eventually insta lled by co nt rac to rs, Th e CM is resp on sible fo r assigni ng these respon sib ilities to con tra ctors In ve ry specific terms. Th e loca tio n of thi s in formatio n is in the wo rk-sco pe desc rip tions writte n fo r each contract to be awarded.

14 .3 .6

Mat eria lfEquipment Expediting

14. 5

M ATERIA U EQUIPMENT EXPEDITING

A major functio n o f the CM is to expedite all material/equipment inco rpo rated into the project. Th e main expediting tool is an expe diting re port accessible at all times 10 311 team members and co nt racto rs. The report sho uld be updated on an informationava ila ble ba sis and fo unded o n reliable in formation ga thered by the C~f. A simple com pu teri zed spreads hee t can be used . The rep ort should be constructio n-schedule ori ented. referenced to contractor w or k-scc pes. a nd crossre fer en ced LO specific items under procuremen t. Ea ch item shou ld be assigned a mark -num ber: the co ntrac to r pr ocuring the item s ho uld be num erical lv iden tified within the mark-n um be r as well as the num ber o f the div ision of wor k.-Sorts shou ld be possib le by item number. co nt rac ted divi sion of wo rk number. and co ntracto r number. 14.5.1

Exp ed it ing Repo rt Co lum n Hea d in g s

Typical head ings for an ex ped iting rep ort ar e listed in Figur e 14.2 on page 21 I. Each lime the rep ort is Upd ated. tile date of the upda te and the per son who did the update sho uld be no ted on the form.Th e column headings sho uld be customized on a project basis. In use. the e xped itin g re po rt sho uld immed iate ly provid e the stat us of any ~'1/ E ite m on the curre nt dale and include: th e o rde r s tatus o r date placed. promi sed delivcry d at e. shop d rawing s ubm itta l dat e. sho p drawing sta tus. sho p drawing approval date, terms o f de liver y. for eca sted de liver y dat e. the received da re. partial s hipm ent informa tio n. bac k orde rs. an d the co ndit ion of the item upo n recei pt. Information for the re po rt sho uld be gathered d ai ly by the eM. O wner-furn ished a nd owne r-p urchased M/E in for ma tio n sho uld be ccnvenient lv ava ila ble du e to the CM's direct involvem ent with th e owner. Howev er. informil ti~n on contractor M/ E purchase s is vo lunt ary (a nd unrelia ble) unl ess co nt ra ct provisions re qui re contractors [ 0 make this info rmat ion a vai la ble in speci fic term s.

210

Chapter 14

Sect ion 14.6

Material/Equ ipment Ma nag ement

M/E Warranty and Guara ntee Follow-Up

21 1

ElCpedi ling Repo rt Column Headings --..... - (resu brnin a l when netessary)- -

-

e Itern

.. Item ~l ar k Number 3 Part Submiu.:l! Form

(Pro,'id~d

- w or k-Scope Num ber .. Q uantily Requi red - Furn ished By • Re 4uin:
by e M) (OK:lOd NO subminuls]

OK Subunuals C\I \--...,,- -

Contrac tors lhal interlace with submittal co nte nt for compa libllity review befo re pJssin g submi ual I 1\) NE

(NG s bmiuab]

1-- - "--'"

(submilta l wllh

Dal e o rde r placed wilh supplier Dal e S.D. initia lly submined Dille Srxieeves NE Office Dale promised by supphc r Truck \I) sue: rail OI l stdlng.e lc. Unloa ding co ntr ac tor's W.S.II Party assigned custod y al sue

Dale shipped by supplier Dale received 011site. siding.. etc. PartiOll.damagcd . O.K.•ere. Problems, required 3 c lion . ~ourCl: s

FIGURE 14.2 Typical col umn hc::adings (or an Expediung Report . Forms Only

I"G Subnuua ls

i'--

OK Submittals ~''-_ AIl Reviewed Se bmiua ls

eM

form and com me nts to N E)

-¢ C

~r--" 0

(su bmilla l and form . OK and NG reviews

Irnrn A'E]

FIGURE 14 . 1 An olrcrn.ne pre con strucuc n su bmillal review procedure

It is suggested tha i contractors be req uired to designate someone in their organization to provide expedit ing info rma tion on nil purchases made by the con tractor when reque sted by the CM's expedite r. It adds cre dibility to the inform ati on recei ved when contractors a re re qu ired to fo rwa rd co pies of purchase o rde rs (witho ut pricing) and M/E recei ving slips [0 the CM. TIle goal is to
[

.. Shop Dra w ing Su bmittal Da le .. Shop Dra w ing Approva l Dale .. Delivery Date .. Del i"c ry Meth od .. U nloadin~ Pan)" .. C ustody Part y .. Sl a lUS of De hvery .. Ship ping Da te .. Delivered Da te • Ccndirion Upo n Delivery .. Comments

Subrmual

co,

.B

• Stares of Order .. O rdered Dille

Descript ion of item Distin ctive num ber for item Installing com ratc r's w.s. # Ea ch.Ton s. CYs. Lbs, O ars.etc. W.S.'. Owner. CM. e lc. Accor ding to Sho n Term CA P

14.6 M / E WARRANTY AND GUARANTEE FD LLOW- UP A standard provision of con stru ction contracts (o ften ove rlooked. to the detriment of the owner ) is [he warr anty/gua rantee stipulation. warra nties and gua ran tees on labo r. material. and eq uipment seldom ge l the a tte ntio n they dese rve unless a blatan t pr oblem develo ps. By then . the condi tio n is usually trou blesome to the owner and difficult . to correct.

As pan o f the M/E Man agement Plan , the CM should establi sh a fo rmal warrunty/guarant ee procedu re that extracts the most fro m the contract provisions. The proced ure sho uld begin with the installatio n of the first item under warran ty/gua rantee an d cont inue until all warranty/guaran tee time periods expir e. which w ith some exceptio ns is within a year afte r installa tion o r use. A tool \...-hich no t only ext rac ts the most from wurrant y/guaruntec prov isions but also serves the eM as an excelle nt client relati ons tools is a warranty /guarantee tickler file. In generic terms. a tickler file is on e [hat co ntains time-rela ted information and can be browsed pe riodically to fbg impe nding eve nts. From a convenience standpoint. the file sho uld be computer ized . but a hard copy fi le is equ ally effective. The file (o rganized by month of expi ration ) should contain the list of all can . tracted warranties/guarantees with their start and expirati on dates,The loca tion of the actual warran ties/guarantees sho uld be noted alon g with the name s. add resses. and co ntact info rma tion pe rtaining to the contractor s and vendor s who pro vided them .TIle tickle r files sho uld be: maintained o n a project basis. At the first of each month . the nex t month's fi le sho uld be re viewe d to determine which warran ties/guarantees ar e du e to expire . Le tters sho uld be se nt to the owner identifying the items and their expi rati on dates with
Sect ion 1S.2

C HA P T E R

Value Man agement Decisions

213

the proj ec t's cha racte ristics into a cont racting struc tu re tha t will ext rac t the most value fro m the constructio n industry. The eM m ust consider the four maj o r areas o f owner co ncern (t ime. cost, q uality, and bu sine ss inte rruption] when recommending co urse s o f actio n to the learn . The value man agement area of knowledge includes an unde rsta nd ing of con tracting structu res, formats. and pr ocedures and the co nstructio n indus try as a supplier of services. A thor ough knowledge of cons tructi on materials and equ ipment . va lue e ngineering techn iques. a nd life-cycle cost analysis is essential. Suppor t knowledge in the areas o f des ign. materials techn ology. estim ating. scheduling. an d procurement is impo rta nt. or major Importance a re communication skills and ethics.

1 5

Value Manageme nt Vaillt: Management is the Cr-.1 process that provides o wners with opti mum construction projects at minimum cos ts. Valu e ma nage men t or V\1 is an extension o f the fami liar terms. tl a/lIt' Engineering ( V E). Valli,' A na lysis (VA ). Life.Cycte Costing (Lee ), and

construc tubility. VM unique ly includes designubiliry and cc ntructability as value intfuenccs and in ter jects budge t and cost co ntrol, quali ty. and efficiency factors into value man ageme n t dec isions. or all the se r vices pr ovided by u eM. valu e managemen t is the one owne rs wanted most when th ey prompted the s ta rt-up o f the Cr-.·l contracting sys tem in the 1960s. As slated in Chapte r 2. The Reasons for 3 Thi rd System o f Co ntracting. owners suspected that th ey wer e nor gcltin~ a fair ret urn on capit al the y inves ted in cons truetion proj ects, Th ey felt the y needed help. in ad dit ion to the Al E. to lind thei r way thro ugh the maze of a con st ruct ion p rojec t. an ally 10 cha m pio n their pr actical requirement s and a ma nage r to ex trac t the best return from thei r capita l inves tmen t. VM ser vices shou ld be geared to accomplish this. Th e ove rall result of val ue management is impossib le 10 authe ntica te; it is impossib le to pr ovide an o wner with a comple te. support ed list of savi ngs resu lting from the VM effort.Thi s is bec au se Vr-.l is a co ntinuing intu itive p rocess as we ll as a period ic initiat ive. in man y res pects simila r to q uali ty man agem ent. Both depe nd heavily on team in tuition and chec ks an d bala nces to ach ieve res ults. U nde r the circumstances, the CM sho uld devel op a VM plan tha t no t on ly get s the job d one but makes the owner aware that it is being accomplished.The plan sho uld prom ote the ream's intuiti ve VM effo rts and doc ument the pe riod ic VM init iati ves wher e obvi ous VM progress is made.The ow ne r m ust be made awa re o f V ~ I results.

15.1

VALUE MAN AGEMENT A REA OF KNOW LEDGE

Th e va lue ma nage me nt urea of knowledge en co mpasses a proj ect 's cost ve rs us value issu e. It has th ree value compon ent s: dcs ignability, co nst ructabili ty, ami co ntrac tab ility, De signa bilit y re la tes value to o-e ral l project d esign . Co nstructabili ty rela tes va lue to con struct ion materi als. d etails. mea ns. me thod s. and tec hni q ues.. Co nrractab ility relates value to co ntracting op tion s. con tractual assignm e nts. an d contrac ting proce du res. The eM is exp ected to extr act maximum val ue fo r the o wne r from the co nstructability and cc ntractahility o ptio ns which ar e available. In the area of designability, the Clvl must be capable of extractin g the opti m um overa ll design . In the area of cons trucra bilu y, the: C!'.·f mu st be capable o f securing the o wne r's p rescribed level o f va lue from the design a nd const ructio n o f the project. In the area o f co ntractability. the eM must be capable o( tran slati ng the o wner's goals and

212

15.2

VALUE MANAGEMENT DECISIONS

Figure 15.1, Valu e Ma nagemen t D ecision Maki ng, is a now d iagram sho wing how VM decisions can be made. The terminology used in the d iagram req uires explanat ion : some may d iffe r from provi nc ial usage a nd others are ne w. VE. VA , and LeC fit the ir co mmo n usage. Th e accepted sco pe of ccnst ructabiluy has bee n reduced: rhe contracting aspects have their o wn te rm (co ntruct ability) . The term dcsignabrln y has bee n intr oduced 10 manifest the CM 's in volvem ent in pragmati c de sign and 10 empha tically stress the CM's noni nvo lveme nt in technical de sign.

I

Co ntr an abiJily De':lslons

1I' -- - - - - - - - - ,

I

1

V3!UI: An alvsis

,,,J '

f--

Vaiue Enj:.lneering

,

I Cun~tru';labiljIY II I

1

DCCISlons

-

I

Dcs l,!,:n3 0ihty Dco;J,Sio!li

Buugcl ;!nu

Cost-Cen tro! Fac torv

Lifc· C}clc:

C"', Analysis

IC051· EHjcjenc~' I Factors

-

I I FIGURE 1S.l Thc flo..... o r vat ue ~f a n 3 g em e n l Decisio n ~l :l :' tn ~

~

Decmcns

I

214

Chapt er 1S

Value Management

Value Engin eeri ng re fers to the practice of red ucing projec t costs be fore. d uri ng. and after the de sign pha se by act ively seeking o ut equally performing but leas t expensive des ign alternatives. Value Analysis is esse ntially after-the-fact value engin eering. It is an ob jective review of a formulated des ign o r design co m po nen t to de termi ne if there are ways to imp rove it to benefi t the owner from a phy sical and eco nomic perspect ive. Life-Cycle Costing is comparing design al terna tives on a-cost-o f-construc tion ve rsus a cost-du ring -use basis.Th e results of LCe provide the requi red info rm ation for o wner pa y-now or pa y-late r de cisions ( i.e.. should the con struction budget be: increased or is it more viabl e to P:lY higher ope rating/m aintena nce: costs d uri ng occu pan cy o r u..c}, Coustr uctability is a pragmat ic. value- based opinio n of the: cons tru ctio n fea tures and de tails des igned into the proj ect. Con struct ability is rated high to low. Featur es and detail s with high rat ings meet des ign crit e ria and can be eco nomically co nst ructed. Co ntructability is a p ragmatic. val ue-based op inio n of the cont rac tua l distribution o f the six req uired se rvice: clements of proje ct delivery covered in Chapter 1, Tne Fundamentals o f the Ro ot Form o f eM. Contractabiti ry is rated high to low. A high rating indicat es an econ omica l assign ment of co n trac tua l respo nsibilit y to project par ticipant s. Deslguability is a pr agruark. val ue- base d opinion of the pr oject's design an d major design elements from the pe rspective of the owner's requirements and aesthetic preferences. Designa bility is ra ted high to lo w. Des ign and design demen ts with high designab ility ratings accu rately and economically meet the o wner's design require. ment s. Budgel allil Cus t Co urrul as pr ese nted in Chapt er 10. Budget Management. IS an integral pan of value manageme nt. One point of budget and cos t co ntrol in te rject io n is in Lee decisions whe re the po ssib ility ex ists tha t con struction costs cou ld increase to save on fut ure o pe rating exp ense. The goal of a ll othe r VM ef forts is 10 red uce cos t, Cost-Efficiency Fact ors in fluence the economic ou tco me of the proj ect through exercising expedience. Cost -e fficie ncy facto rs inject time. cos t. an d schedule co nsid er atio n into the VM dec ision- maki ng proc ess. Ex amples of cos t-ef ficiency queries are the best time to begi n co nstructio n o n a proje ct. o r (he value of a delivery delay res ult ing from substituting one piec e o f eq uipment for an other. Cos t-Q uality Factor s influ ence econo mic project o utco me through their ult ima te value [ 0 the owner. Practically eve ry mate rial or product has a cost-qu ali ty facto r. Cos t-q uality factors inject owner pre fere nces into the de cision-making process. A n examp le of a cos t-quali ty query is whethe r to use imp orted marbl e for its p restige or local marble for its econo my.

1S.3

TH E FLOW OF VM DECISIONS

Referring to Figure 15.1. V~I d ecisio ns fall into o ne of the three major categor ies: contractability. co nstructabi lity, and de signa bilit y. Generally speaking. contractabiluy decisions shou ld be de vel op ed by CM operations an d ad minist rat ion per son nel. constructabilh y o r designabl firy de cisions by operatio ns and reso urce personne l. Th e

Section 15.3

The Flow of VM Decisions

215

bas is for this brea kdo wn can be fou nd in Chap ter S. The CM O rganizatio n. where the tale nt of the CM firm's pe rso nnel is d escribed. Ho wever . whe n de aling with so me thing as importa nt as VM de cision s. all individu als in the CM orga nizatio n with pert ine nt ex pe rtise sho uld be invo lved in the dev elop ment process regardless o f departmental ties. It is the opera tio ns man agem ent le vel person's respo nsib ility to han dle each VM decision appropriately to get the best results. Intui tive VM decision deve lopment mig ht only require informa l discussions be twee n the man agem ent leve l and approp riate operat io ns. resou rce. and ad ministra tive pe rso nnel. Intuit ive VM disc ussio ns w irh the AlE co uld also be informa l and exclude the o .....ner if a de cisi on is within the o wne r's project parame ters, V M initiative s demand a more for mal approa ch hCC: lU!\C of thei r size and complexi ty 15.3.1

Co nst ructabi lity De cisions Co ns tructabili ty decis io ns are bas ed on co nstruction experie nce. II is co mmo n knowled ge that many des ign pro fessio nals do nOI acquire enough field expe rience 10 understa nd the prob lems connect ed with co nstruction featu res and deta ils. Man dator y field experi ence sho uld perhaps be part of ~I de signer 's qu alificat ions hu t. un fo rt una tely. is no t. Consequently man y design feat u res are based o n sta ndards an d inst inct with lill ie consideration for the difficulty an d COSI to con s tru ct them. Construction ma nage rs. especially those with a co nst ruction and co nt rac ting bac kgrou nd. hav e exp erie nce in the field a nd kno w the ease o r difficulty co nnected with co nstruction fea tu res. Addit ion all y. man y c~rs ha ve experien ce o n varying pro]ect type s {hos pita ls. warehouses . schools. comme rcial bu ildings. and civil works} and co nseq uently have a wide range o f ccns tructa biluy exposure . On the ot her hnnd.nrchitccts rend to specia lize: in project type s which limi ts their cons trucmbility exposure. It is co m mo n for a des ign sol utio n success fully used o n a warehouse o r civil works to p ro vide eq ual quality. pu rpose. and value. at less e xpe nse. than one proposed for a hospi tal o r co mmercial build ing project.

15.3 _2

Comp ound Soluti ons Co nstructabiluy decisio ns may or may no t requ ire VE. VA. or LCC analysis dependi ng o n thei r complexity bu t may a lso involve designability decisions. For example. changing two 45° ma sonry co rne rs of a bui lding 10 o ne 90° co rner will obvio usly save const ruc tio n costs bUI will also inc rease tloor an d ce iling area. cx tc rior an d int ernal wall area. buildi ng volume. excava tio n vol ume. founda tion length. and roof a rea . The loss will be an a rchitectural feature tha i may affect the buildi ng' s aesthetics. If only one corne r o f thc buil ding is invo lved and the hypotenuse d imen sion (fro m 45° corner to 45° corne r) was. say l -t fee t. the cha nge wou ld no t be worth VM co nside rati on . Ho we ver. if ton co rners with hypo ten use d ime nsio ns o f 14 fee t are invo lved . con siderable plus and min us life-cycle costs will be involved. In the case o f on e corne r. neit her the COSI quali ty no r the bud ge t and cost-co ntro l facto rs would come into play. H owe ve r. in the case o f te n corners. the cos t-q ual ity facto r (and especially the budge t and cos t-con trol facto rs ) could be decisive.

216

Chapter 15

Section 15.3

Valu e Mana geme nt

Th e: above exa mp le br ings up a ve ry impo rtan t po int for eMs to con sid er whe n pe rforming V ~t se rvices. The chamfered co rne rs are fea tures used by the architect tu p roduce a stru ctu re that is d istinc tive a nd pleasing to the eye. one th at enhances the

landscape and conveys the image of the owner.The architect conside rs the corners to be products of a responsibility to the client and the profession to produce: arch itectur e

cr-.rs

15.3.4

15.3.6

eM

15.3.5 Th e Des ignability Exa mp le The construct ability exam ple used above is also a good desig nability example. In add itio n to a que sti on o f const ructi on COSI. there is a ques tio n o f add itiona l in fer ior space o n every floor at every chamfer ed corner. Co mparing the mo re aesthetic design with the lesser aesthe tic design no t only re futes to cons truction cost but also to the: space

Contractab ility De cisio ns The success o f co ntracta bili ty decis io ns depen ds on the CM's mastery of the co ntrac t management area of kno wledge (Chapte r I I ) and of the ow ne r's con tracti ng requi reme nts an d limitat ions. It co uld pro ve to the owne r's de triment for the eM [ 0 proceed in the coruractabiliry area without the necessary expertise. . The primary con tract ability deci sion is made when the owne r selects eith er the C M. Gc. o r D-B cont racting syste m. Once the syste m is selected. there are mo re cantrac ta bility decisions that mu st be mad e. Of the thr ee system s. CM provid es mor e contracting options than the GC a nd D-B syste ms combine.d.. . . As d iscussed in Cha pte r 5. CM Sys te m Fo rms and Var ia tion s. the first step 10 con structability decision -making is 10 det e rmine the bes t eM form nnd. variat.ion for the projec t. one that is complete ly co mpatible with the o wne r's purc hasing philosophy as well as herlhis con u acu ng req uire me nts and limitatio ns. From this po int . cc nrrac tabili ty dec isio ns lead to the de velopmen t o f the proj ect's contracting strategy a nd plan. Guidan ce: for the decisions is extracted fro m the ot her elev en ar eas o f C~l knowledge.

Des ign a b ility De cisio n s D esienabilitv decision s are the mo st se nsiti ve o f 311 value managemen t decisio ns which the ruust extract from the tear u. It is imposs ible to esta blish one guid eli ne for success because each de sign decis ion has its own se t o f circumstan ces tha t co ntro l the decision -making process. Addi tion ally. the re IS an inh er ent po la rity am ong learn members whe n de aling with de cisio ns pr edicated o n the technical and aes thetic expertise of o ne learn member and subject to the re.. . jew/approval o f others. The N E has design expertise. owners and CMs esse nti ally do no t. H owever. owners have physical requirements and pref ere nces that must be inco rpo rat ed into [he their proj ect de sign and can tell if the y are includ ed or not. C Ms sho uld have sufficie nt experie nce to critique the de sign 0 0 the basis of valu e and the sta ted ne eds of the own er. Conseq ue ntly. the te am should always approach designabili ty de cisions wit h maximum discret ion and an unw ave ring dedicat ion to the projec t 's go als. When pre se nting their input. the CM shoul d always approach design ab ility dis cu ssions wit h maxi mum respe ct for the o wne r's and AIE 's expe rtise. If the o wne r an d A lE are at odds on a po int. the CM shou ld use extreme ca re when sid ing with one or the other. If the C~'l and A l E are a t odds o n a poin t. the' Cr--. t sho uld take the lead in using ta ct an d log ic to effe ct resolution a nd neve r fo rce a co ncessio n withou t a good re ason .

217

nee ds o f the o wne r. Either a cc nstr uctability or a de signability de cision would be valid . .. in this case, and bo th shou ld be de veloped. Ele ct rical and especially mechan ical sys te ms are co m mon areas fo~ de signablli ty co ncern . C urre nt instrume nt technology p rovides many cost-savm g o ptio ns based on lifc -cvcle costs but CJ n also overcontrol hea ting and coo ling system s beyond the owner requir ements, Most CM 's will ag ree that elect rical and mech~nical sys te ms pro~ide fru itful ar eas for de signabili ty reviews and sho uld be closely reviewed on every project whe re they comprise a ma jor po rtion of the co nstruct ion b udget.

15.3.3 A Cons tructe blfl t y Quanda ry

as well as buildings. The C~'1 co ns ide rs the co rners expe nsi ve and un necessa ry from a ccnstructabilit y pe rspective. Square corne rs are less expe nsive to con struc t. The fiduciary respo nsibility to the owner mandates thar the corners be proposed for a Vi-,ft coustructability study.The re is an ob vious conflict between aest he tics and cast. It is the C M's res po nslbili tv to see that it does not bec ome J co nflict between the CM and AlE. • The decis io n should be mad e by the owner. based o n the aesthetic value o f the build ing's appea rance to the owner vers us Ihe co st to produce it. This pa rticu lar decision must be the result o f discu ssion be tween the o wner and Al E. Th e C M is not qualifled to comm en t o n arch itectural acst hc ncs and sho uld no t enter int o d iscuss io n re lat ive to them: the CM should sim ply pr ovide est imate s o f COS t and b udg et infc rm atio n until J decisio n is reach ed by the owner.

The Flow of VM Decisions

15.3.7

Cont ractabil ity Limita tio ns Eve ry contracting op tio n is not avai lab le to all eM variations and fom~ats. Co nstructio n ind ustry protoco ls, local area prac tice. an d co mmo n sense mu st ente r mto the ccntractabilitv de cis ions made fo r each proje ct. For exam ple, arbitrary bid packaging on mul tipl e-contract CM projects might nullify the cos t advantages of co mpetitive bidd ing . Fasl track ing shou ld not be used unles s confi rmed as necessary. Qualifying contractors works well in the priva te sect or bu t may be limited in the pub lic sector. Ce r tain dua l-service co mbi nations can o nly succeed in the priva te secto r. Th e mand ato ry use o f p ropriet a ry con trac t docume nts . . ' could limit cont racting optio ns. To p ut ce rtain ccn trac tabil ity o ptio ns into effect requ ires extensive mod lfica tion s to sta ndard and pro pri etary con tract documen ts, Altho ugh the CM is no t an at to rney . the need e xists to ex press terms and cond ition s in co ntrac t lan guage for review by the owner's att orne y. Th e required knowledge of con trac ts and the construction IOd~~try a nd .the potential consequences of a factious co ntracting p la n e levates co ntra:tablilty to a highleve l respo nsibility. Not a ll construction managers have the expe rtise to deve lop an o pti m um contracting p lan.

2 18

Chapter 15

15.4

THE TIMI NG OF VM DECISIONS

Value Management

To determine the cont rac ting system to use and facilita te the se lectio n o f contract documents. the primary contract ability d ecisio n sho uld be made by the owner be fore hiring anyone for the pr oje ct. If the o wner needs input to these decisio ns, help ca n be pro vided by a con sultant, preferably o ne tha t will not be part of the proj ect after it is underway. This excl usion hel ps the ow ne r to mak e an objective dec isio n. The choice of C~f form and var ia tion sho uld be ma de before selecting a eM: not all CM firms are capa ble of pr oviding all fo rms a nd variations. Con trarily.
Section 15.6 15.5

,I

219

VALU E ENGINEERING

Value eng ineering is used to co nclud e compl ex co nstructability issue s. Its purpose is to o ptimize the material/eq uipm e nt/systems aspec ts o f a p roject to co nform to the owner's cost-quali ty ob jectives. VE is acco mpl ished through the inte raction of the resource me mb ers of the project tea m. It is a continuous process with established check- points during design and o n-d emand involvement du ring const ruct ion. The cr--rs ongoing aware ness o f NE output duri ng design influences appropriate chanaes before desig n solidifies. VE is not a parallel de sign eff ort by the CM. nor are proposals dic tato rial in any way. VE is the product o f a team effo rt which must CM be performed at a pr o fessiona l level. Econ omic s sho uld not be the exclusi ve crite ria for VE dec isions. and the A lE sho uld always be ack nowledge d as the team member respo nsible for design. Cost qua lity and cost efficie ncy factors can influence VE deci sions in the final analysis. Cost -qu ality factor s address the budget: cost-e ff icie ncy fact or s. the schedule. II is the responsibility of the CM to clearly sta te the effect th at either will have on the pro ject It is the responsibility o f the AlE to pr operly equate design alternatives, It is the respon sibility of the ow ner to select an alterna tive. and the respo nsibility of the team to suppo rt the ow ner's deci sio n.

VE

15. 5.1

Contracto r VE 111e value engineering effo rt by the A lE and eM J uring the design pha se sho uld fully op timize the materia l. equipment. and syste ms includ ed in the contract document s. Ho wever. furt her optimiza tion cou ld he prov ided hy tra d e co ntrac tors. To capture the be ne fits of this possib ility. the de sign in the co ntract document s should be o pened up to further value engineering by awarded work -scope co ntracto rs, Provisions in the supple me n tary and special condi tio ns should encourage contracto rs to review the documents and suggest changes tha i would provide the same funct ion and q uality as the de sign. bu t at less cos t. Th e suggestions sho uld be accompa nied by d ocu mentat ion s uppo rting the de sign equ ivalen ce and the cos t savings. Doc ume ntat ion and savings must account for cha nges in the work of o ther contrac tors as a result of the change. Th e CM sh ou ld provide an example of the submitt al format for the co ntracto r to follow. Suggestions wou ld be reviewed by the tea m and. if accep ted . be deve loped as a co n trac t change to the co n tracto rs involved . Rewar d to the sub mitting con tra ctor wo uld be a percentage o f the savings to the o wne r after the cos ! of modifying the co ntrac t docu ments by the Al E is taken int o acco unt. The percentage o f the savings passed on to the con tractor sho uld be in the range of 50% to 6O%. lf a co ntractor VE program is to be included. it s hould be clearly defined in the contract docume nts with the shared savings am ount specifically stated .

As earl y as the bra insto rming a nd o rga nizational me e tings. CM personnel sho uld take copio us notes pe rta ining to d esign whe n developing bud get numbe rs o r infermalty discus sing. proj ect fea tures with the A lE and own er. Although it will be 100 carly to be: objecuve o n casual d esign comme nts it is not too early [Q for m
It is no t unu sual for so me A lE s to be: less than e nthusiastic when eM person s show an act ive Inte rest in the p roject' s des ign. even though the AlE is aware o f the CM 's o bligation to the Owner in this a rea. The CM must accept the fac t that the A lE is the know ledgeable destgn team me mber and was specifically hired by the own er to per form design services. The CM 's ro le is to provid e chec ks and bala nces to A lE design decis io ns from a VM perspec tive and to influen ce de sign in 3 sp irit o f coope ra tio n. Whe n co nfron ted with a no nnego tiable A lE d esign pre ference. the eM must weigh the VM adva ntage to the owner against th e potentia l co nseq uences to future team efforts a nd dec id e on (he approp riate course o f ac tion. VM services arc the most product ive a nd most challenging o f all eM services 10 perform. Resource Management, cove red in Chapte r 18, expa nds o n tea m membe r rela tio nships.

life-C ycle Costing

15.6

LIFE-CYCLE COSTING

If the useful life o f a structure could be accu rate ly pred icted . the theoret ical inte nt o f life-cvcle costing wou ld be to mat ch the life of the co nstructio n ma te rials and eq uipment ' used in it~ co nstr uction with the usef ul life of the structure. By doin g so. the

, 220

Chapt er 15

o wner wou ld have received the predicted return on invest men t. the sal vage value of t ~e structu re at the end of its useful life would be zero. and all compon en ts would fail simultaneously. Obviously this scenario is not possible due to the va rying durabi lity of con str uction compo nents. many of which ca n surv ive indefini tely.Th e refo re. the practical intent of life-cycle costi ng is to prod uce a projec t tha t is the most economical to construct, o pera te. and ma inta in for a definite pe riod of useful o wne rship with the un dersta nding that there will be a salv age val ue. however sma ll. Over a 40 year pe riod. the op erating a nd mai ntena nce costs of a typ ical bu ilding cons ume app roxima tely 30% o f the to tal do lla rs spent by the o wne r. Finance cos ts co nsum e abo ut 4SCYo. constructio n costs about 20%: land . fee s and o the r costs abo ut 5% . Assuming the typical build ing is of ave rage des ign and co nstr uctio n, for every do llar spe nt o n co nstruction, S1.50 is spen t o n operati ng and ma inten an ce costs and $2.25 is co nsumed by fina ncing. Assum ing the building is ae st he tica lly and functio nally accepta ble to the ow ner a nd con ta ins the minimum req uired space. the o nly way 10 redu ce co nstruction costs would be to use less expe nsive mat erial/equ ipmen t. By do ing so. finance costs wou ld decrease: but ope ra ting and mainte na nce costs would increase: or as an alte rna te. the productive life of the bu ilding wo uld be shortened. Man y projects (esp ecially in the private sec to r) are justifie d on the basis of a required retu rn on an investme nt. The owner is interested in the income from the building o r structure over 3 period or yea rs. Othe r projects ar e justified on [he bas is of a resale soon a fter the projec t is ccrn ple ted. Obviously. o pe ra ting and main tenance costs are 0 1 greater concern [Q the long-term owner than the short-term owne r. LCe decisions arc based on " pay now o r pa y later:' In ma ny instances. by investing more cons truction do llars. a n own er ca n red uce operat ing and main te nance cos ts d uring building ownersh ip. Simply put.if a de crease in a & M do lla rs is greate r than a result ing construction cost, the "pay no w" op tion has merit. providi ng the con struc tion budge t can accommodat e the increased cost. The most receptive Le e items are those sub ject to maintenance. repa ir. and re placement d uring use (such as mec ha nical a nd elec tr ical equipm ent }; those tha t requi re mai nte nanc e alon e (such as inte rior an d exte rior surfaces. doo rs and windo ws): those that affect fuel cons umptio n (such as b uilding envelops and H VAC systems and co mpo nents): and those that red uce cos ts of facility ope rations (s uch as vert ical/horizcntnl tra nsport aticn and securi ty systems). To get the most from LC e . the owner 's team me mber s sho uld ha ve the authc ritv to increase the cons truction budge t to e ffect futu re savings. If that authority is net ava ilable, the results of LC e will be limited but not eliminated: LCe studies ofte n uncove r items with similar initial costs that ca n eco nomically outpe rform Items summarily selected by the Al E du ring the desig n proce ss. CMs have a respon sibility [ 0 ide ntify those items with LeC potential. du ring for mal and info rmal ccnstruc tabilir y reviews, and per form LCC anal yses lo r a determi nati on . 15.6 .1

Section 15.6

Value Management

Li fe -Cycle Cos t Anal ysis A n LCC analysis is no t di fficult to perform once the requ ire d data are in hand. It is a simple app licatio n of the time value of mon ey that can be accom plished using finan cial

Life-Cycle Cost ing

221

inte rest form ulas o r tab les. Fo r so me LCe studies, it is the gat herin g of authentic per form ance and cost informa tio n that is d ifficult. For example. da ta for an Le e st udy o n a building envelop und fuel consumptio n is available and dep enda ble as publ ished in ha ndbooks. Da ta o n compe ting mechanical eq uipment must be ob tai ned from manufactu rers who co uld be biased towar d the pe rformance and lon gevity o r thei r prod ucts. To extrac t cred ibility in the lall: r case. projec t tea m mem be rs must ha ve sufficient expe rience with the items to co nnrm the accuracy of the informa tio n provid ed . . LCe analysis will not be tau ght h~ re-there are many so urces that accom plish this in prope r detail-bu t it may hel p those ap preh ensive abou t the tec hnique to briefly out line an LCC procedure. Thi s inform ati o n is offered beca use owne rs sometimes co mment tha t value man agement a nd espec ially LCC arc services tha t eMfirms claim to provide but sho w litt le evide nce of del ivery.

15.6.2 An Example of LCC Analysis Le t us assume that the ma jor compo nen ts of three d iffere nt HVAC systems are be ing co nsidered by the N E. The following. info rmati on has been gath er ed from the equi pment manufa cturers and ver ified as sufficiently cred ible by the A lE and Cst reso urce me mbers of the project tea m. Description o r Cost

A.

lnitiul costs 1. Equ ipment purch ase 2. Inte rface costs 3. O ther relat ed cos ts

B.

Replacement costs

C.

1. Cos t of replaceme nt 2. Rep laceme nt inte rva l Estimated A nn ual cos ts I. Ma inte nance/ Repair 2. O pe ratio n

All #/

All. ,]

Ali. #3

816.000. 120.000. 64.000.

536.000. 1OO.lJOO. 64.000.

738.000. 160.000. 2.000.

10.000.

200.000.

20.000.

16 ye ars

8 yea rs

10 yea rs

25.000. 30.000.

20.000. 35.000.

16.000. 25.000.

The amo rtization peri od is 20 yea rs a nd the interest rate is 10% . An ticipat ed salvage value at the end of 20 years for all optio ns is O. Requirement: Calculate the Presen t Wo rt h o r the Annual Cost of owrung and op era ting eac h system over the 20 year per iod. Det ermine which of the thre e is the Le e eco no mic choice. Procedure: To co mpa re th e alt ern ates. a dollar val ue must be de termined for each. based on the time-value of mon ey. The dollar val ue ca n be expressed and compared as the present wo rth of the o wninglo perat ing/ma in ten ance/re place ment costs. or the ann ual cost of the owning/op cratinglmai nlena nceJre placc me nt costs. The present worth of euch alt ern ate is th~ sum of the prese nt wort h of the annua l o perating/ma inte nance costs and the presen t worth of the repl aceme nt costs. calcul ated

222

Chapte r 15

Section 15.7

Value Ma nag eme n t

J

~ - - - --- - - - - --- - - - - - - -- - - - - OIM 55.0001,, · - - - -- - - - - - - - - - - -- - - --- ---I

o

15

10

c:- - -- -- + - - - - -- lI-- - -----+i R t.~.~

I ~M

816.0G0

120.000 6-1.000 Present Worth .

C (I .OOlJXlO)

of.

R PtF 0:16 DIM PIA n:20 ( IO.OCIO x 0.~176 ) + (SS.OOJ x 8.5140) '" IA70j 7fi

Ahcrnutlve #2

~ - - - - - - -- - - - - -- - - - - - - - - --- Olfo.. I55,1)(j)lyr --- - - - - - - - - - - - - - - - -- - - - -

o C:-

-

-

-

5 -+-- R -

i

-

700.000

15

10

-

-

200.lX.IO

i

-+--

-

-

-

--J 2O\B

- 'If--R-

-

2fll .000

I

----1

536.0CI0 100.000 6-1.000 Prese nt Wort h

BUDGET AN D COST-CONTROL DECISIONS

Bud get and Cos t Cont ro l iS:l pr ime r~ s po ns i h ili ty o f th e (, :-'1. Budge t co ntro l is applied ( 0 the bo tto m line 'of the bud get and co ntro ls the transfer o f Iund s fro m line ite m (0 line item . Cos t co ntrol is applied to eac h line ite m thut co mprises the budget an d co ntrols the use of fund s within ea ch line item. They a rt' interdepe nde nt b ut en vision ed and managed sepa ra tely. Budget control can be test ed bv asso rte d influences bet ween the bud get's es tab lishme nt ; t the conceptual phase "and the fina l payment to the last ~ontractor. Influences such as d iffering site condi tion s. labor d isputes. lab or shor tages. inflati on. escalati on. unr espon sive bidd ing. erro rs and omissions. cha nges. and mate rial sho rtages challenge the bo ttom line o f the pr oject budget. Pote ntial budget influences were anticipa ted wne n de termining the bottom line o f the b udge t by establis hing co ntinge ncies to cove r them if the y a rise. (These contingencies were addressed in Chapter 10. Budget Manag ernent.] Th e function o f bud ge t Cann o I is to ma nage the co ntinge ncies so th ey are used for their intended p ur pose or red istr ibuted in the owner's best int e rests as a team v:vt de cision. Cost control can be tes ted by asso rted influen ces on wor k-scop e item s d uring the cou rse o f des ign. Influences such as the following challen ge the cos ts o f budget lineitems: insufficie nt cons truc tio n det ails. d imen sio n err or s. closed speci fications, misint erpre ta tion of des ign inten t o r o wner require men ts. q uan tity survey e rro rs; outdated labor . mat erial and pr oduct ion rates: and obso lete products a nd ma te rial sho rtages. Cost-cont rol influence s we re an ticipated whe n bud ge t line items we re de veloped from the conc ep tua l budge t. and fun ds were allotted to the design con tinge ncy to

223

Alr ematlve III

at year O. plus the known con structi on costs. The alternative with the lowest present worth wo uld be the econ omic choice. Th e annual COSl of each alte rnate is the sum of the ann ual cost of the equi p ment purchased/insta lled and the an nual cas t o f the replacemen ts. plus the a nnual opera ting and maintenan ce costs.The alternative with the lowest cost per year wou ld be the economic choice. Figure 15.2 on page 223 is a diagram o f the COStS o f the thr ee a lterna tives o ver the 20 year peri od . ( C = co nst ruction costs: R = repl acement costs: DIM = Operatin g and Maintenance cos ts; PIA = pr esent worth fact or @ 10% for n yea rs; P/F = single payment facto r@ 10% for n years.) Alternate 113 ha s th e lo we st presen t worth eve n tho ugh (he con struction cos ts are 5200.000 higher than alterna te 1#2. If the o wner ca n afford to udd $200.000 to the construction bud ge t. it will redu ce the o pe ra ting and mai ntenan ce b udge t d uring the lire of [he build ing. Pay now o r pay late r. The factors used in the exa mple ca n be found 10 any publis hed int e res t tables under the PIA and P/F co lumns for II yea rs at 10% inte rest. If the annual cost calcula tio n we re used instead o f the pre sent wo rth calc ulalion . the replacem en t costs wou ld be co nver ted to prese nt wo rth . the n co nvert ed (0 annua l costs. The co ns tru ctio n costs wo uld be co nve rte d to annual cos ts. Both would th en be ad de d to the an nua l o perating/mai ntena nce cos ts to a rrive a t the ann ua l cost s. 15.7

Budget and Cost -Con trol Decisio ns

C (700 .000)

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FIGU RE 15.2 Dia gram or the th ree fife -cycle allerna li ves,

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co ver misinterpreta tion of design in te nt o r owner require ments. However. the initial line items we re broad-scope allocat ions o f budge ted funds base d o n design concepts until desi gn was specifically de fined in rne co ntrac t d ocuments. The function o f cost control is to accu ra tely alloca te cos ts from o ne line item to another to reflect the work-scopes as they eme rge. and to maintain line-i tem costs with in the owner's para meters as d esign is' defin ed and curre n t co nt racting and constructio n inform at ion beco mes availab le. When a line-item cost is exceed ed. addit ional co nstructability. designability. and ccntractability studies must be made to bring the line ite m und er co ntrol.

224

Chapter 15

Value Manag eme nt

Section 15.8

15.8

THE VM O PTION OF FA sT·TRA CKING

Probably the most consequ entia l V M decision is whe ther o r not to fast-t rack a project . Fast-trackin g has many ramificatio ns. and J decision to use this con trac ting expedie nt sho uld o nly be se lected after a thorough an alysis o f the owner's need s. Co nsidera tions including the req uired occ upancy d ate. climat ic conditio ns. labor and mate rial markets. and the unique dema nds on team me mbers all need to be studied if fast-t racking is a pot ential option. Fast-tracking sho uld be co nside red o ne of several contractability options and a contracting tool thilt has a specific pu rpose. Whe n pro perly utili zed. fast-tracking sho rtens o n-site co nst ruc tion time by allowing port ions of the design and CQnSl rUC[J on to proceed synchronously. How eve r. fast -tra cki n g should not he used unless it can solve u comple tio n date problem. Unli ke the name impl ies. fast-t racking. does not accelerate eithe r design or construction. Th e same amo un t o f time is d evo ted [0 design and con st ruc tion as on a nonCast-tracked project. Th e accele ratio n is the result of overlapping early des ign and ea rly cons tr uct io n activities, Fast-t racking is ~l form of ph ased cons truc tion. Eac h phase is a work -scope o r group of work-scopes designed . hid. and co nstructed as a unit or phase. sep ara te Cram the rest of the p roject. Subsequen t interfacing phase s arc handled In the same manner until the entire projec t is under const ruction . Th e result is a series of design-bid-build phases rather tha n the co nve ntiona l single design-b id-b uild proced ure that is ruandatory in the GC system (a nd custo marily used in the CM system). It should be not ed that the e M syste m. unlike the GC and D- B systems. has a con tract ing structu re tha t facilita tes competi tive bidding of each fast- tracked phase . Fast -tracked phases o n GC and D-B p rojects cannot be ccmpetnively bid; they must be nego tiated. Co nseq ue nt ly, fast -tr acking is a viable opt ion o n most projects in the p ublic sec to r when the CM syste m is used. This is one of the least recogn ized yet most out standin g fea tures o f eM.

VM Considerat ion Exam ple

A n example of the complexity of vnlue man agcment deci sions can often be found in th e selec tion of a building's environment system. Dec isions mus t be made on fuel. heating med ium. distributio n systems . e ne rgy conservation and system co nt rols. Th ese choices affect the struc tural system. elec trical system . roof system. bui lding en velope and inte rior materia ls and finishes, In eac h choice. con cern should be given to the cons tructio n. opera ting . replacement and mainten ance costs. and to de livery dates and insta llation procedures that affec t the co nstruct io n schedule and breakdown of constructio n co ntr act s. Developing an optimu m building design with pr oper consideration for designa bility, construct ability and contractability (with due consideration for cos t efficiency. cos t quality. budget. and cost cont rol fact ors ) requires a well-planned. closel y coordinated effort by the members of the projec t team . It is obvi ou s that a competent, amiable p rofessional-level match-up of Al E. owner. and eM personnel is required to satis factorily accompli sh this co mmo n bu t very comple x tnsk in the owne r's best in ter ests. 15.7.2

225

tio ned from their roots in co ntracting and construction to prosper 3S cons ultant-based co nstruction managers. As pointed o ut in Chapte r 9, The eM Body of Knowledge. as long as me C:-'l firm has the necessary attributes and stays current with construction ind ustry practices. the CM sho uld be co nsidered qua lified.

An excellent example of a pos itive effect result ing tram a cont ractability study of a cost-cornrol problem occurred in the early 1970s. At that time. a sudden petroleum shortage seriously impacted roofing material. The cost of petroleum-based roofing s heets increased at an unprecedented pace with no end in sue. Roofing contractors cou ld no t predict the cost of ma te ria l at the time: the roof insta llation was to begin. and there were no cont rac t provisions to pay for material sto red o ff-site if purchased early. To compensate for unce rtain ty, the)' ei ther stipulated a cost escalator in the ir proposa l or added a high contingency to lump sum proposals, In order to get sensible rooling proposals during that period. roo ling bids were take n as early as possible base d on p rese nt ma teri al prices. The a warde d co ntractor was permitted to o rde r the mater ia l immediatel y and place it in stor age. R oofing con tractors were singled o ut in th e bidd ing documents to be paid for materia ls stored offsite as lo ng as ev idence was provided that it was pntd for and stored and insured in a bonded warehouse. Roofing contractor's proposals include d the predictable costs o f sto rage . 111is unique approach . designed to eliminate the crippling eff ects of unknown esc ala tio n costs used by CMs in the 1970s. has become a stand ard conrmct pro vision in the co nstruct ion indust ry today . 15.7. 1

The VM Opt ion of Fast-Tracking

VM Credib ility 15.8.1

Construction managers can positively impact VM deci sions. espe ciall y if the CM firm has an extensive constructio n con tracting background. Most VM decisions find ereden ce in the info rmat ion and ins tincts o f a practicing const ructo r and con tracto r rather than a co nsultant that functions oft-site. Con tinuing involve me nt in the day -to-day activities of competitive bidd ing. pu rchasing. contact with consultants and trade con tractor s and the work fo rce on the construction site provides an intimate expenence from which credible construction and contrac ting -based decisions can be made. Thi s is not to say that every CM should currently be part of an act ive cons true tion or co nt rac ting firm. beca use over the years some CM firms ha ve comple tely transi-

Fa st -Tracked Phase s De termining what to include in each fast-tracked pha se is a project management/contract manage ment decisio n. TIle wo rk -sco pe ls) o f each phase usually co nform to the typical co nstructio n seq uenc e o f the tot al projec t. Howeve r. consi de ra tion s ho uld be given to work-sco pes th at can be desig ned early and do not physically inte rface tOO closely with each other. On a typical building project. the phases that might fit this criteria are ma ss excavation. site utilities . bu ilding excavation. site d rainage. pa rt ial roads and parking. partial la ndscapi ng. tempo ra ry structu res, foun da tions. and o rde ring long-lead items.

1

226

Chapter 15

Value M ana gement

Sectio n 15.8

Whatever the inclusions . the work included in th e phase is selected fo r its expedien t affect on total project co mple tio n and convenie nce to [he des ign process.

15.8.2

The VM Opt ion of Fast- Tracking

227

fast-track and must also understand tha t the added expense o f fast -tracking is a tradeo ff for an earlier completio n dale.

15.8.3 Th e De cisio n to Past- Track

Managin g Fast-Track Proje cts When fast-tracki ng a project. more deman ds are made o n project man agement . budge t management . and risk ma nagement tha n on single-p hase projects. Contracts are being awa rded and owne r doll a rs are being ex pe nded on const ruction be fo re the total cost of the projec t has been cstublished by competit ive bid s.To protect bu dge t cred ibility. the eM must establish con struction leve l estimat es for the remaini ng work -scop es o f the project withou t cons truction-lev el des ign de finitio n; th is req uires excepti onal c xperience and expertise. Fast-tracking also requires nont radi tion al design seq uencing and additio nal design coordination on the P'U[ o f the A lE .The structural system of a build ing is logically designed from the tOP down and con structed from the bo ttom up. Foundation des ign is based on bu ilding. load s res ulting fro m dec isions made as late as the des ign development pha se of a con vent ional project. Fou ndat ion s and structural steel are good candidates for fast -tracking: conseq uen tly.assump tio ns must be ma de in o rder to bid the foundation wo rk-sco pe earl y anti at least get an o rde r into a mill roll ing for structu ral steel. A building 's uti lity requi re ments are usuall y de te rmined after design has proceeded su fficiently to closel y de tern u nc inco ming powe r. wat er and gas. and o u tgo ing load s for sewage 'IlH.I storm drainage. Site utilitics ar c good candidates for fast -tracking: consequentl y ut ility requirements mus t be dete rmined soo ne r than the Al E would like. and estima ted lo ad s must rep lace acc umulat ed desig n d ata . The earl y design of ma ss excava tion. buildi ng excavat ion. site drai nage. roads and parki ng. and la ndsca pin g work-scopes are no t as problema tic as found ation s. site utilities. and structur al s tee l,These work -scopes can be rea d ily de veloped af ter the bu ildin g has been sited and its gra des es tablis hed . They are excelle nt can didat es for single or phased work-scope packa ges when fast -track ing. To ensure design ad eq uacy (es pecially in found at ions. s truc tural stee l. and site utilit ies) o verd esign is common. Consequen tly. the costs of the se wor k-sco pes will be highe r than if they we re designed in nor ma l seque nce. The exten t a nd na ture of o verdesign is a risk -managem ent de cision to preclude cos tlier ph ysical cha nges after co nstruc tion of the work -scop es is co mplete d. For example. site power co uld be split in two; an earl y work- scope for con d uit. pull bo xes, and manho les. and a lat er on e fo r pullin g con ductors rath er than installin g direct bur ial cable tha t is safe ly ove rsized in a single early package.The cost of the alternatives wo uld be the deciding factor. To accommodate des ign a nd co ns truction coor d inati on pro blem s in he re nt whcn design is o ut of sequen ce. ch ang es must be made quic kly in the field to co mpensa te for desig n oversights. To accomplish this efficiently and eco no mically. a good working relationship between the A lE an d CM mus t exist. A lthou gh su bseq uent design is expected to confonn to the phy sical con figura tion of work-scopes under co nstruction. there will be times when field cha nae s will ha ve to be made. Bo th the AlE and CM should be o n the loo kout for the se instanc es and pr oceed to co rrec t them as q uick ly and econ cmically as possibl e.The owne r must be made awa re of these pote n tials before de cid ing to

The decisi on to use fast -tracki ng shou ld be o ne o f the earliest dec isions made. It sho uld be pro mp ted by the eM. e ndo rsed by the N E. and decided upon by the owner. The time. cost. and business int erruption factors o f the p roject sho uld be aiven d ue

considerauc n.

•

Decisive informati on is found in the program schedule covered in Chapter ~ () . Schedule Managem en t. and the budget in Chapte r 10. Budget Management. TIle sched ule sho ws the owner's occupancy req uireme nts and the estimated time to be co nsumed by desi gn. cons truction. and move-in act ivities. The budge t will re v eal if there are enough co ntingency dolla rs to cove r the po tential increase in costs inhe ren t to fasttracking. With this informa tion . the team ca n make a risk-management deci sion on the practical ity of fast-tracking. Th e clima tic cond itions anticipa ted du ring construction. the building type (single or multiple story) the structural op tions. wall beari ng. steel frame. p re-cast or cast-in-place conc re te frame are the impo rta nt fact ors in add ition to sched ule and budge t. Figure 15.3 shows ho w fast -tracking J school meets the owne r' s move-in date of August I whe n wea th e r condi tio ns are seve re enough to for ce a shutdo wn. If the schoo l was con struct ed when wint er weather is nor a fact or. fast -tr acking sho uld not be consider,..d . However. when entlv occupancy produces mcorn e fo r the own er (ns in the case of a mall o r co ndo minium ). the fast-tra cking o p uo n would be a n income" pro d uci ng expedie nt and sh ould be inve stigated on its econ om ic me rits. regar dless of the clima tic condit ion s a t th e site.

15.8.4

Co nte m po rary Bid di n g

The fast-trac k exa mple in Figur e 15.3 depict s a pr oject that is d ivided into fou r biddina phases: site. foundat ions. long- lead items. and a ll other. Th is IS som et imes called "contro lled " fas t-tracking beca use it limits the biddin g of wo rk-scop es to the design time fra me of a single-phase projec t: all the fast -tracked ph ases a re under con tract between the st art o f design. March 1.and the end o f desig n. July 31. On la rge p rojects with cons truction du ratio ns o f two veers o r ma rc. it is o fte n desirab le to sp rend bidd ing ove r the cons truct ion spa n o f the projec t rath er than the design spa n. Th is is refe rred to as contem porary bidding o r just-in-time biddin g. The intent is to eliminate the gue sswo rk inherent to long-le ad hiddinu in favor o f realist ic p ~ ici ng fo r work -scope s such as roo fing. paint ingla ndscaping. roads. parking. et c.. that will not be sta rt on-sue for man y months, From the owner's perspective. it woul d seem that there is o ne arguable disadva ntage (Q co ntemporary bidd ing: the chance o f e limin atina a contract or who underescaIated a co ntro lled fast -track bid in favo r o f a contractor who submitted a con tempo ra ry bid using cu rre nt marke t prices. Owners sho uld be ad vised to pay current pr ices fo r contracted services rather than lo ng-lead prices. Th e ra tio nale is that alth ou gh p rices ma y rise and fall o ver the co ns tru ctio n peri od. co nte mpo rary bids will ultimat e ly pro vide an ove rall eco no my 10 t

I

Chapter 15

228

('AR APR ~:~

I

Section 15.8

Valu e Mana geme nt

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the ow ner. The small saving that the owne r accr ues from an underescalated long-lead bid from a trade contractor is certainly not considered small to the co ntractor who made the miscalculation. Whi le the ow ner may in terpre t the error as the spoils of the bidding process. an eco nomically tro ubled con trac tor o fte n com mu nicates his d istress to the pr oject in the quality and timeliness of his work . This adversely affects the work of interfacing contractors and disrupts the flow o f the p roject in gene ral. Unfortunately. there is little a Clvl can do 10 quickly reve rse II situa tion like th is. or co urse the grea te r possibilit y exists rhar long -lea d bids will be overcsculatcd. Co n tractors are pro ne 10 p ro te ct bid p ricing in this ma nne r in spi te o f the p ressure of competiti on. Whe n this occu rs, the owner is the unwitting loser because the situ ati on is never revealed. Chapte r 10. Bu dget Ma nagem ent. poin ts ou t tha t an escalatio n conti ngen cy is app ropriate on projects that exte nd ove r a lo ng peri od o f lime. Fast -tracked project s using contempo rary biddi ng shou ld be protected under this cc nungency to prevent s trai ning the budg e t. Th e eM nnd Al E sho uld be well-qualified to de ter mine what the escala tio n co ntinge ncy sho uld be.

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The VM Opt ion of Fast -Tracking

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15.8.5 Th e Imp act of Fas t ·Trackin g o n Al E Fees

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O n a typical . single- phased projec t such as an ele me nta ry sc hoo l. the progra m schedu le will have a bou t 100 activities. O n a phased project. each ad ditional phase adds about 20 activities. As a res ult , the program schedule for a two-phase project will have 120 activities. A l E time and ef fort is oniy requ ire d in about 30% o f the added activities. which a rc mostl y rou tine; co n trac t doc ume nt reviews. adver tise ments for b ids. dist rib ution of b id documents. rece iving b ids. and pre-bid meetings. No netheless. mo re A l E time and effort is req uired . Expe rience has sho wn that a n eq uita ble fee adjustmen t for added AlE time and e ffort will result if the number of pha ses less one. is multiplied by 30% of the added activities. and that amount multiplied by the dollar value of the pha sed portion o f the p roject. The phased portion is the rem aining amoun t a fter the dolla r value o f the largest phase is subt rac ted fro m the to tal dollar value of the project. On the fas t-t racked project in Figure 15.3, four phases are used , Consequently the program schedule wou ld increase 60 act ivities ([4 - 1] X 20): 20 of which (60 "'- 3) will req uire addit ion al A l E time. A l E activities have Increased 20% (20 "'- 100). The budget for the proje ct is $6 million and the budget fo r the larges t phase I S S4 millio n. The refo re. 52 millio n dolla rs is co nsidered [he value o f the phased portion , Assuming the AlE's quote d fee is 5% of the project's sing le-phase construction cos t. the fee increase for a ph ase d pr oject wou ld equal the 20% increase in acuvit ies times the NE 's perce ntage fee time s the calc ula ted phased amount (0.05 x 0.2 X £2 million) or S20,OOO. The AlE's tot al fee for the project would equal 5.33 % o f the proj ect's single-phase budget. The calculation above is only one way to ratio nalize an A lE 's reque st for a higher fcc on fas t-tracked and ph ased p rojects. The re are o thers. Ho we.. . er, this rati onale.

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230

Ch apter 15

Section 15.9

Valu e M a nag ement

CM VM RES OURCES To accomplish th e goals and reach the full po te ntial o fV M'.an adequa,te resource staff is essential. Figure 15A sho ws th e e xpe rt ise ne cessary to Interact with the Af~ and p ro vide the i;fa rma tio n fo r VM d ecision mak ing. The ch a rt s ho~ld not be mtsmterp re ted: it indi cates the exp ertise requ ired. not the pc: rs~ns re quire d. .. . II is probable that the value managers would be engineers ~~d that .the CIVil en gl: necr was compete nt in structu ral enginee ring as well as site CIVil rcqulr::me nts. The adm inistra tive and sch eduli ng functions o f the ch id v alue manager IS normally assigne d to o ne of the val ue man agers. . . Tak ing ;)11 of proba bilities int o con sideration . the rrumrnu m v ~t reso urce staf f would co nsist of four perso ns inst e ad o f the ten implied by the char t.

15.9.1

231

tin ue o n to the nex t ph ase of desig n. Th e mee tin g d uring the co ntract docum en t phase sho uld occ ur whe n arch itec tu ral fe atures are esse n tially final but elec trical and mec hanical features are still access ible for fina l VE an d LCC analys is. Th e rea son for the timing o f the contr act docu ment VM meeting is that elect rical and especially mechanical syste ms have a tendency to "grow" when drawings and technical sp ecifica tions are in the final stages of deve lopment. even though extra efforts were made in earlier phases [0 pr eclude this.

which has be en successf ully use d in the past. can serv e as a guidel ine for C~ls and o wne rs.

1S.9

eM VM Resources

1S.9.2

VM Reco rds The gro und work for VM d iscussio ns at chec kpoint meetings sho uld ha ve bee n laid d uring the mor e casua l inte rac tio ns be tween Vl\·1 team members prio r to the mee tings. Some YM decisio ns simply need the ow ne r's co ncurrence: others require the owne r's approval . M any V ~ f deci sions do not req uire the involvement of the owne r at allthey an: techn ical decisions ag reed to by the Al E and C:-" l based o n thc merits of avail ab le ah ema tives, any o ne of which would be accepta ble (0 the o wner. However. it is sugges ted that the eM and A lE coopera tively ex pose the o wne r to 3S muny VM decisions mode as poss ib le. VM is the o ne se rvice that o wners claim is pro mised by the AlE and C M but not delive red to the level o f their expecta tion s. Unfortunately, the owner is not pri vy to the cont inu o us YM d ialogue between the AlE an d CM [hat prod uces most of the beneficial owne r-oriented deci sion s. To dispe l this concern and pr oduce a valua ble record for future project s. a VM log sho uld be kept and made available to the ow ner a t Yi\1 meetings. While the VM lo g has owne r-rela tions value. it is a lso a perfect way 10 disse minate YM so lutio ns thro ugho ut the AlE and crv' o rga niza tio ns for re feren ce o n o the r p rojects. Figure 15.5 is a sugges ted fo rmal fo r a VM lo g.

AlE-e M VM Int e ract io n At its best. Yt\t is a co ntinuo us pr ocess with sever al che:kpo int s along the way to Cor-

rnallv culmin at e YM decisio n ma king. To coordi nate Wi th [he .d ~slg? proce ss: che ckpoint meet ings coinc ide with the co n trac tual p hases o f AlE paruct pauo n. Mee tings ~ re schedu led near the e nd o f (he schema tic an d des ign develo pme nt ph ases and at a POlOt betwe en 50% a nd SO(Vo co mple tion of the contract docum ent pha se. The schem atic a nd de sign de velopment YM meetin gs can ta ke adva ntage o f the con tractual paus es du ring des ign to verify the budge t and petiti on the owne r to can-

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232

Chapter 15

Section 15.11

Valu e Management

1S.10 THE VALUE MANAGEMENT PLA N A prea mble to the va lue managem e nt plan sho uld state that tile desi gn . co nstruction. a nd cont ract ing o f the p roject can and \\-'i11 be optimize d th rough the on going sync rgislie efforts o f the project's team membe rs. The Vtvl concept of op timiza tion is too imp ort ant to the ow ner to for ego this re minder. Sta tem ent s should be inclu ded that briefl y de fine the three princ ipal areas o f VM (de slgna bility, con st ructabili ty, a nd co n trac ta bilh y) as visuali zed and accepted by [he proj ect team. Similar 10 a partneri ng agree me nt. eac h executive and manageme nt level mem ber of the project team me mbe r sho uld co mmit to coo pe ra tio n in pursu it o f VM oppo rtunitie s. Co nseq uently. the va lue mana gem en t p lan is sligh tly diffe re n t fro m the ot he r ma nage ment pla ns. It se rves as 3 commitmen t to participa tio n as well as a pla n for team member in terac tio n.

15.10.1 Te am Partic ipa tio n Th e owne r. NE. and eM should ident ify the VMIVE pe rsonne l that will be used on the project. lis t their creden tia ls. and s tipulate the areas of their exper tise. Th e tea m VM chain of co mmand sho uld be diagrammed to estab lish VM com mu nica tion links and maint ain co ntr o l o f the p roce ss. The timing and format for forma l YM meetings should be establis he d a nd provisions made [ 0 inse rt da les in the program sc hed ule. G round rules fo r info rm al VM mee tings sho u ld be stipulate d . and a me an s o f co nveyi ng the decisio ns made at these meetings sho uld be stat ed . Tile fo rm at and use of the V:--"'1 lo g sho uld be o utlined and the deposit o ry for accepte d V~l proposal back up Ja w. designa te d.

VM Time-Cost Relat ionships

1S. 11 VM TIME-COST RELATIONSHIPS Th e inescapable co nseq uence o f VM is change in the d rawings and spec ifications or bot h. Cha nge s resu lti ng from V:-. t effo rts save money fo r the owner b ut co st mo ney 10 effe ct. In gen e ra l. the curlier a cha nge is made. the less money it will cos t 10 make. The relati on sh ip betw ee n the sa vings produced by a cha nge and the cost exp ended to mak e the change is not di rec t. Th e type. size. and timing of the ch an ge va riably influe nces the rela tion ship bet ween the two cos ts.The CM must make this fact very clear £0 the o wne r. a nd bo th the eM a nd A l E must provide change-relate d se rvices based on thi s premise. Figu re 15.6 illustrates the relatio nsh ip be tween the cos t of a ch anze and The o wne r's cos t re turn fro m a ch ange.Th e major influence o n the cha nge COS I the timing whe n th e ch ange is mad e. As design proceeds from phase to p hase. co nt rac t d ocu ment s are progressively approved by the owner: ther e for e. cha nges that a ffect previ o usl y-app roved d ocumen tat ion will be billed by the NE to the ow ne r as addi tion al se rvices. Cha nges made with in a design pha se that do not a ffect p re viousl y-app ro ved docum entation are accom plished witho ut ad ded billing. C hanges that requ ire alt e ra tio n 10 wo rk al ready in

i;

~ O w n o: r' s

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Pa rt icipa tio n

U nless a project team mem ber has o the r tho ugh ts o n parti cipat ion . the VM organization structure in Figu re t5A should wo rk in tern ally for the e M, The most difficult proble m will pro bably be schedu ling in te rnal VM team persons in to the V1\-( effort. TIle in ternal e M Master Progr am Schedul e refer red to in Cha p. ter 20. Schedu le Man agem ent , provides the bes t oppo rtunity 10 alloc ate sufficient time to accom plish this. Th e chie f va lue man ager should be a perso n with be ue r-th•an-average planning ab ility in o rde r to ha ve the righ t people at the right place at the right time. Th ere mav be times when the firm 's workload will no t pe rmit timel y schedu ling o f V:-" l pe rson ne l for a proje ct. Under these circumsta nces, it is suggested tha t te mporacy VM help be enlis ted to kee p the VM process mo ving. So me mature CM firm s have reti red employee s who ar e willing to help out temporarily o r have co nnectio ns with pers ons who ca n be hi red o n a fcc basis . It is tem pting to do a less-t han- tho rough job. realizing that the owne r a nd the AlE probabl y will not know the d iffer en ce beca use the eMis the initiator o f most VM efforts. This cho ice. however. is really no t availa ble to the eM under the te rms of the con tract. the c :-.rs agency relationsh ip with the o wne r, and the eth ics of professionals who pro vide VM services. It is bet te r to delay the project than !O igno re a VM opportunity.

233

Adden dum BidJin~

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Detemunc :

Cost

•

Time:

FIGURE 15.6 The cost or a change vs,1110: uv..n o:r· SCO~ 1 return .

234

Chapter

is

Value Ma nagement

place are more expensive than those that do not require alte ration, and the cost of work determined by competitive biddi ng will always be lowe r than if nego tiated. To de termi ne ei the r the net savings o r the net added cost to the owne r as the result of a change, any cost of amend ing documen ts must be added to any nega tive cost impact which results from derivatio n of the co ntract ors price for work included in the change. Conseque ntly. there is a poi nt d uring the cons truction of the projec t where VM changes will have a negat ive va lue. Figure 15.6 is a ge ne ra lizatio n and does not take life-cycle cost into conside ralion. If lhe change has a pos itive impact on life-cycle cost savings. the bre ak-eve n point could be moved to the righ t (late r into the construction phase than Shown) . Changes made betwee n the start of de sign and the S[~1Ct of construc tion can be referred to as papa changes; th ey only a ffect contract documents. D uring the sche mat ic phase, changes require little more than an e rase r and a resta rt a no rmal approac h to schematic desig n. Dur ing the contract documents phase , redr a fting of drawings and rewriting of specifications will probably be required. Changes made after distri bution of bidd ing documents. but before bids arc rece ived. can be included by addenda and the ir COS t de rived from compe titive bidd ing. Changes made by addenda issued a fter bids are received, bu t before awards are mode. can usually be favorably negotiate d. Howeve r. changes made afte r awards are made must go th roug h the change -order process : their cost is usually determined thr ough difficult negcr ia tions where contractors normally win. The value pan of value man agement activity. es pecially in the a reas of designability and constructubility. must be extract ed early.

CH A PTE R

1 6

Project Management Projec t Ma nagement dete rmines and e xecute s the processes that ar e req uired to ma neu ver a project from sta rt to comple tion. It is based o n a n initial plan o f action that is modified as new informat io n beco mes kno wn. Th e Project Manage men t Plan . prescribing whe n and how projec t ma nagement act ions are to be perfo rme d, is inco rpo ra ted into the e M Project Ma nual. lt includes team membe r per forma nce co mmitme nts an d responsibi lities a nd se rves as the guide for orderly project progress.

16.1

EMPHA SIZING FUNDAM ENTA L PRA CTICES

An importan t point is that the proce d ures under (he heading of Project Man agement a re so fundamental tha t so me readers ..... iII view them as either unnecessary o r capab le of be ing accompl ished with less conce rn.This att itude has for years bee n a pro blem in traditio nal const ruc tion ind ustry pra ctices. It is a major re ason [o r embracing the C~ t system in the first place and acco unts fo r its accep tance by owne rs. Good man agement canno t be achieved with a broa d bru sh. It can o nly be realized by checking off the fundamc ntals o n a step -by-ste p basis without igno ring those thai arc untimel y o r do no! see m import ant. Surprise can des troy any coo pera tive relat ionship. especially a team. and CM represents the ultima te team relationship in the cons truction ind ustry. It is the CM's manage rial responsibility to deve lop a CM for mat that is so funda mental that us chances of failure are minimal and to "do t every i and cross every C' 10 avoid surprises,

16.2

PROJECT MANAG EMENT AREA OF KNOW LEDGE

The project management area of knowledge encompasses all of the ope ra tions aspects of project delivery. including de termi ning. formulating. developing. installing. coordlnating and administering the necessary elemen ts from the beginning of des ign to the termina rion of warran ty and gua rantee periods.The CM has the responsibility to make the selected CM process work, to coo rdina te the effo rts of the team and the perfo rming con tractors in achie ving thei r common goa l. TIle CM must provide discreet leadership and expertise in carrying o ut responsi bilities. and e ffectively o rganize the o the r five req uired e leme nts-des ign, con trac ting, co nst ruction. construction coo rdina tion an d co ntr act udministra tic n-c-inro a functioning manage ment fo rmat. Th is fully develops the team 's reso urce po ten tial and prude ntly o rches trates part icipat io n th roug hou t the projec t. 235

1

236

Chapte r 16

Pro jec t managemen t req uires a tho rough understandi ng of the design p rocess. the con tracti ng process. the construct ion indust ry. and all form s and varia tions of the construction management system ; how the Clvl process works. what the required activ·• itics are and wha t is required of ea ch ac tivity and ea ch team member. A good grasp of communicati on s skill s an d ethics is necessary. 16.2. 1

Sectio n 16.3

Project Management 16, 3.1

Major Pro je ct Man ag ement Compon ents

Brainsto rming Session Responsibility Mat rix Cha n Program Schedul e Management Options Project Manage men t Plans eM Project Manual Exit Meeti ngs O the r Meetings BRAI NSTORM ING SESSION

Th e brainstorming session introduced in Chapte r 7. AC~l Procedures. set s the stage for future team interactio n. The session sho uld be sch ed uled as soon as po ssible after the owne r has selected the Cvl and NE. It is not necessary that contracts are signed ; an owner's lett er of intent to the eM and the AlE is apprcpnate. The sessio n is essentially the forerun ne r of pa rtnering sessions used in the gene ral co ntrac ting systc rn-c-a chance to gel to kno w who will be worki ng with who , to surface unique pro blems. to generate a posi tive and coo perative at titude. and establish a cornmon goal fo r the pa rticipants. The difference in eM and GC partnering is that no adversa rial relatio nships are represen ted at [his meeting.Traditionally considered adversaries by owners and Al Es. co ntracto rs will nor get involve d in the proje ct for several months to come. At that time, pre construct ion meetings will serve the partnering p urpose. It should be remembered thar co ntact between [earn member organizations has been minima l to th is po int. Th e Ci\ t's and Al E's salespersons and perhaps Level l Man agers are the ones who inte rfaced with the ow ne r's executives whe n negotiating CM and AlE services. As Ch apte r 24, Acq uiring eM Se rvices. po int s o ut, it is reco rnmen ded thnr mor e inte rfacing occur befo re an owner sele cts a cons truct io n managemc:nt firm. and it is best if thc eM and A l E firm s have an oppo rtun ity to get to know ea ch othe r before either is selected by the owner. (Unfor tun ately. this rar ely happen s.) Th e brainstorm ing sessio n is imp o rta nt because first impression s are important. O nce a project gets under way, there is little time to change negat ive first impressions. The meet ing should be structured to bring ou t the bes t in all att endee s. It should be assumed that the ses sion ca n be accomplished in a day ; to take longer is usually cou nte rp roduct ive. A ll pa rticipants shou ld be well pre pared to ex pla in thei r invo lvc rneru and disc uss the ir assignmen ts in d et ail with their co unterpa rts.Th e Ct-.l is respo nsible for orga nizing the mee ting.

237

Arra ngi ng t he Sessio n The CM's Le vel l executi ve o ut lines the struc tur e. purpose, and co nte nt o f the sessio n to the owner and AlE: they collect ively select a time a nd loc at ion for the session and generat e an agenda that will achieve the meet ing's pur pose. Along with the goal s o f the session, the agenda is provided to all pa r ticipants with sufficient lead time [0 prepare for the session. Th ey an: advised that they will no t o nly learn about the pr oject in gene ral but will interface with their learn co un terpa rts. In te rms of participant s. the size o f the meeti ng de pe nds o n the size of the project b ut mo re so on the extent of the o wner's involvemen ts.The inte ract io ns o f the CM and AlE will not vnry mu ch from p roj ect to project but the owne r's inte ractio n will. No ma iler ho w small the proje ct or how un involved [he o wner will be. it is importan t for the NE and Cf\.1 perso nnel to inte rface in the presence of the owne r. If the owne r is a large coo per at ion or burea ucracy. ch ances a re that many people in the owner's structure will be invo lved to represent their depart mental inte rests. If the project is a manufactu ring facility, the prod uct ion a nd the pla nt engineering de pa rtmen ts will have to pro vide input. The acco unting depa rt ment will have their own req uir em ent s for p rojec t b illings and paym ents. If di rect pu rch ases o f ma te ria l and eq uipment will be made. the owne r' s purc hasing depa rtme nt will be involved. A major interface be tween th e owne r and eMcou ld be co m puterized rep ort ing o f finan cial tran sact ion s. If the o wne r has a syste m in place . the CM has the obliga tion to fo rmat reporti ng infor ma tion in a compa tible way. Co m pute rization is the trend in financial reporting, and the CM's fina ncial man ageme nt co ntro l system must have sufficient flexibility to mee t re po rting requireme nts. In the ea rly days of CM, the U.S. Corps o f Engineers dev eloped a computerized ma nageme nt con trol syste m of thei r own and prov ided it to the ir con tractors on disks to en su re standa rdiza tio n be twee n pr ojects. Regardless o f the qua lity o f the co ntracto r's resid ent system. the Co rps' syste m had to be ins ta lled and used . Th e bra instormin g session is the time and p lace for all invol ved pa rties to inte rface. Th e ow ne r's purch asing and acco untin g persons will meet with the CM's finan cial manage ment control coordi na to r and co mp ute r prog ram mer to find ways 10 integr at e the CM financial reporting wit h the owne r's acco unt ing system. The owner's productio n and plant engineers will meet with their N E and eM counterparts to stra tegize ways to en su re that thei r needs will now smoothly into the design .

The majo r co mpo ne nts o f proj ect ma nagement ar e :

16.3

Brainsto rming Session

16.3.2

Meet in g l o ca tio n Beca use the seSS IOn will requ ire seve ra l pe rsons fru m each of the team member's o rganiza ticns. it wou ld be co nve nie nt for o ne of them to hold the meeting at thei r place of business. It is sugge sted that if the owner's pe rsonne l will be greatly involve d that the mee ting be held at the owner's location, (If the: owner will not have many people involved. the meeti ng ca n be held at the N E 's loca rion.) If geography is a major fac tor , the session co uld be held at any location that is acce ptable to al l. Sometimes a neut ral site is advan tageous because it promot es the und ivided attentio n o f the attendees, O n the o the r han d , mee ting at a team mem ber 's location (especially the owne r's) helps in the familia riza tio n process and could ad d to the purpose of the meeti ng.

238

Chapter 16

16.3.3

Project Manageme nt

Brainsto rming Session Agenda

8:.30- 9:15

Greeting (O wner's l evel 1 Pen on) Indepth project o ve rvie w ln trcd ucucn of NE lind eM Le vel I Persons

9:15 - 9'.30

Al E tea m me mber int roductions (Al E Level I Penon) Overvie w of the:NE firm/org anization Inde:plh overvie w of Al E learn c rganizaticn

9:JO-9:~5

The sale purpose of the Organizational Meeting int rod uced in Chapter 7, ACM Proced ures. is to pro d uce the Respon sibility Ma trix Cha rt. Th e meeting sho uld be attended by the Levell an d 2 Managers from the owner, Al E. and CM. Du e to the content of the mee ting, it is appropria te fo r the owner 's legal ad visor to be prese nt (specific activities relating to the owner- A lE and owaer-Cbt contracts will be discussed and may be minutely changed ).

CM team member introductio ns (C~I Lev el I Person]

O vervie.... of the

C ~llinnio rgan il:l tion

Inde pt h overview of CM tea m orga nization

9:45 - 10:15

Meet ing purpose/goals (C M Le vel 1 Pers on ] Meeting structure and limin g Break -out sessions, participcn wloc aticns/leade rs

10:15 - to:45

Coffc:e an d Conv ersation

10:45 - 12:00

Bre ak-ou t sessions [at sct focaticns]

1200 -13:00

Lunch (Oak Room . Acme Corpora tion cafeteria)

1J;(1t) - 1600

Break-cut sessions cont inue (at se t locollions)

16:00- t 7;OO

Plenary session (Level I Perso n) Questionslanswcn !'-lc:etin g Sum m.u v The next steps . Adjourn

Formulating Ma nageme nt Plans

THE RESPO NSIBILITY CHART MATR IX

239

Acme Co rpora tion . lID Pace St ree t. Ha rt lc w, MI Co nference Room201 February 12.1 99> 8:30am

chairp erson.

The goa l of having Cj-t per son s leading break-out sess ions is to guide thei r gr ou ps in interface decisions and prel imin ary pro ced ures for the areas in which they will function. The CM should review the prel iminary pr oce dure s and se nd the result s to the group memb ers for their inp ut a nd recommen dati on s.Th is excha nge shoul d be repeated until the procedu res ar e satisfactory to the group.Th e eM representat ive sho uld the n se nd it to the Level 2 Pers on for app ro val at th e administr ati ve and policy level. O nce approved. the proced ure is added to the CM pr oject man ual unde r its prope r he ad ing. Experienc e has shown that the formu lati on of manageme nt pla ns requires about two to three weeks. dependi ng mai nly on the complexi ty of the owne r's involvement. Dur ing that time. cop ies of the plans in progress will be used to assist decisio n making at the Organ izat ional meeting.

The Respons ibility Chart Matr ix

" ... i'Ulo nningSe~ion ,\grnd.. Loc a tion: Da te : Time :

assess that abili ty. It is useful [ 0 have the meeting sta rt in a formal mode and progress toward informality.Thi s will en sure that all esse ntial . formative project informat ion is p rese n ted to and understoo d by all at tend ees. The team will function as a matrix o rga nizatio n. and each elem ent must perform with in the establ ished criteria. As the agenda moves ahead . a bre ak is pr ovided and the b rea k-out sessio ns begi n. This is when attendee s will g el 10 kn ow ea ch o the r and begi n to feel comfortable at the me eti ng. A b reak and lunch pr ovide time for pleasantries and vo lun tary interac tio n. Experi ence ha s shown that the meet ing will lighte n up befor e the d~IY is ove r. A typica l brains tormi ng meeti ng agenda is shown in Figur e 16.1. On mor e involved projects. the brea k-o ut sessions co uld extend into th e eveni ng o r next day. O n less involved projects. break-out ses sions could end after o r e ven befo re lunch. Re gardless. every thing requ ired to achieve the p urposes o f the b rai nsto rmin g sess ion should be planne d for and executed .

16.4

Sect ion 16.4

The sess ion agenda will vary fro m p roject to p roject: how eve r. :l basic form at and list of item s 10 cover is evident o n ever y pr oject. A s the kn owled gea ble party b ut equa l team member. the CM's Level I Man ager sh ould act 3 S a facili tat or ra th er than as Th e sessio n's agenda sho uld be complete. well structured. a nd informa tive.Th is is the first of ma ny team meet ings. It is 3 11 ideal opportunity for the Cr-- t to dem on strate stro ng man agemen t ability and :1 good o ppo rtu nity for the o the r team mem be rs to

16.3 .4

f

Ntl l~: Su me ~llcn<.l e c $ ~1SI0 11

...HI h",J II " ctC\lOIry II} inter face ...ilh orh e r Jltcn<.lcc~ ~ I mille Ih;l" nile hrcnk ''' UI

tccanon. Break-cut session leaders mll.'ol arrange 10 m:lke thi$pCluible.

fiGURE 16.1 A lypic:al Brain stor ming Sessio n Age nda.

Th e eM contracting structu re joins the owner. N E . and CM in a thre e-party team. ~o ~ ~ r~c ts be tween the o wne r and N E and the o wne r and CM spell out the re.spo nslblillies ?f eac h to the owner. However . no agree me nt exists, formal o r otherWise, that coo rdinates the respo nsibilities o f the AtE and the C M. There is a documen t yet to be d eveloped (hat con clusivel y prescri bes the inter action s of the thr ee-party team . befo re construction co ntracts are awar ded . In suppo rt o f this. the GC system also has a thr ee-party team . It includes the owner. NE, and GC . There is a contract betwe en the own er and AlE and the owner and Gc. To specify coo rd ina tio n o f se rvices betw een the th ree. the General Cond itions o f the Co ntrac t for Con~ t ~ uc t io n. a ve r.y len gth y docu ment. is included as pan o f the owner-Gf contract a n~ IS included by reference in the own er- A lE agreement. . Th: CM contrac tin g structure also includes a general conditions doc ument. but it ~s o nly mcluded . as par t o f ow ner-cont rac to r con tracts. A conside rable amou nt of Impe rta.nt. ~e a m l~te rJ~tjon goes on during design. bidding, an d awa rd that req uires responsibili ty clarification in a simila r way.

240

Chapter 16

Project Ma nagement

Sect ion 16.4

E xperi en ce has repe at ed ly demon strated that pr ob lems resulting from the qu estio n. "who do es wha t, the owner, A/E,or eM?" frequent ly occur o n eM projects. The re is no docu men t that specifically spe lls out the in teracting ro les of the AlE and eM th roughou t the pr oject, especiall y du ring the ver y importa nt preconstruction phas es. The respons ibilit y matrix is an im po rtant document: it allo ws the proj ect to procee d with less discussion and mo re di rect io n rega rding "who does what" Eve ry CM project sho uld have a responsibility chart. r egar d less o f the familiarity tha t devel op s as a CM team wor ks togethe r tim e after time. Just as a G C project wo uld no t procee d wit ho ut a Genera l Co nd itio ns docume nt. a eM project sho uld no t pro ceed withou t a responsibil ity char t or anal he r docume nt tha t acco mp lishes the sam e th ing. 16.4.1

eM

NE

OWNER

ACT IVITY

The Respo nsibility Chart Mat rix

241

CONTR A CiO RS

I

FIGURE 16.2 Final/ Preliminary Respo nsibility Malri:t Form,

Creat ing the Cha rt Creat ing the responsibi lity chart takes time as much as a full day on p rojects whe re tea m members are wor king toge the r for the first time (3 little less, if the o wne r has p re· vio usly wo rked with the CM. somewhatless if the owne r has wor ked with the A lE on a CM p roject and m uch less if the A l E and CM hav e previously worked together}, O bvio us ly the time req uired depends o n the previou s CM interaction of the team mem bers a nd thei r kno wled ge of the CM svst em. A n importan t co lla te r;1 benefi t will" accrue to the owne r if the project is the owner's firs t Ct--l expe rience. It is not common for owne rs to unde rstand the ste p-byste p process of projec t delivery. Mo st owners are first-t ime use rs of the co ns tructio n industry, and few build mo rt: than one project in thei r ca reers. Few o wners ha ve an accura te int ima te kn owledge o f the co ns tructio n ind ustry and constructio n con tr actlng. yet they inves t large su ms of mone y when they con struct a facility. As the respon sibility chart IScrea ted a t the o rgani za tio nal m eetin g, mo stly by th e int eract io n o f the AlE and Ct-.'1. th e owner is exposed to the enti re CM pro cess in great de tail. When the cha rt is completed, the owner s ho uld und ers tand all the co n tra ct lan guage a nd exactl y wha t the A lE and CM will do in his/her behalf. The owne r. as well as the NE and CM. will also kno w the role he/she is to play and the importance of th at ro le to the success of the project. A s s ta ted in Chapter 7, ACM Proced ures. "the facilitator s ho uld never use a cornp leted responsibility chart from a nother projec t as a ba sis for modification." Thi s shou ld be a hard and fast ru le. Th e CM's Leve l l Manage r should be the facilitato r altho ug h. de pend ing o n CM experience. it wo uld also be appro priat e for e ithe r the ow ner or A lE 10 act in thut capacit y Co pies of a blank ma trix form and a list o f activi ties are ca lled for . Figure 16.2 IS a form that ca n be used as J final or p reliminary ma tr ix layo ut. It is a basic form whic h covers the activities of th e owner, AlE. Cr-.·l. and con tractors. The co ntrac tor co lumn is not necessar y but is a helpfu l refe re nce when assign ing contract o r respon sibili ties in doc ume n ts. Figure 16.3 is a final matrix fo rm that can be used if it is im por ta n t to different ial e the responsibilities o f the team 's three management leve ls. A single "contractor" column could be added to th is fo rm for the sa me purpose it se rves in the final/pre liminary mat rix in Figure 16.2.

Be th Figur es 16.2 and 16.3 'Ire exa mp les of fo rms which co uld be used . It is up to th e team to design a fo rm th at accomplishes th e best e nd re sult. The list of activities [Q wh ich team membe r responsibilities arc to be assign ed sho uld be listed chronologically r ather th an alp hab et ically, A projec t phase seq ue nce IS easi e r 10 follow and mo re edu ca tion al to team mem bers no t fa m iliar with th e e M sy~­ te rn or who ha ve not pre vious ly wo rked togethe r on a CM project, (Once the chart is completed in a chro no lo gical seq uence, it ca n be co nver ted to an alph a be tical seque nce for referen ce use. ) D uring the meeti ng. the activit ies are listed sing ularl y or in a pp ropriate gro ups do wn the left-hand col um n of the matrix form. Each ac tivity is disc ussed by th e team unt il it is fully understood and the responsibility for that activ ity is assigne d. A descnplive word o r phra se is then entered in eac h team member's co lum n to describe the team membe r's speci fic respon si b ility in that ac tivity.Th e process is repea ted for each ac tivity or gro up of activi ties.

OWNER MA NAGER LE V EL ACTIVITY

I

1ST

2ND

JRD

NE MANAGER L EVEL 1ST

I

2ND

3RD

eM :-'1ANAGER LE VEL

1ST

2ND

JRD

I

FIGURE 16.3 Final Responsibility Matrix Form .

I

242

Chapter 16

Project Management

f ~

Section 16.4

;

Many respo nsibilities will be de termined by the intent of the wording in each team member's co ntrac t with the owne r, producing a co nfirmation ra the r than a de terminati on action. Howe ver. co nstruc tion manageme nt creates team me mbe r situations tha t a re no t clearly defined and can only be settled by disclosure a nd deba te. For exa mple, th e AlE accep ts that it is his/her respo nsibility to produce and distribute bidding docume nts [0 contractors, and the owner accepts th at it is his/her responsibility to pay for production and distrib ution . The o wne r-Arli cont rac t sta tes that. However, if the owne r and Al E are new to the eM process, it is unlikely that they are aware that the numbe r of document sets to be produced, distrib uted. an d paid for could be ten limes the numbe r used on a similar GC project. Th is cou ld very well be the case o n an ACr...t proj ect using mu ltiple co nt racts. If the owne r and NE are not made awa re of the exten t of this responsibility. it can cause serio usly dis rup tive prob lems when it is lime to produ ce. distribute, a nd pay for 250 sets of bidding doc umen ts.The in-ho use facilities of the AlE may no t be ade quate to prod uce the se ts, and the o w ner wou ld q ues tion the large budg et item COve ring bidding docum ent cos ts. Ever ything shou ld be done by the ream to preclude ;1 " why didn't I know this befo re'?" q ue ry fro m a team member . It should be made abu ndan tly clear in the chart that the A l E always retains the respo nsibility for design, and the C ~ l's presence does not mitigate this respo nsibility. It is easy to get the impressio n from the o wne r's cont racts tha t the CM is res po nsible for checking desig n integrity and perf orm ing alter nate designs. These misconc ep tions. if they exist. sho uld be clarified in the cha rt. Co mple ting the chart should not be de terred by semantics. Expe rience has sho wn this to be a real possibi lity as responsibilities are discussed. Word- mea ning co ntrover sy usually stems fro m concern for the assign men t more than the wa), the word or phr ase might be construed. It is natural for team mem bers to try to minimize their contractual o bligations if given the chance. Many activities brought up for respo nsibility assignmen t o n a CM project ha ve bee n neglected or ignore d on tradition al projects (e.g.. value management ). How o ften does the AlE o n a GC project conscientio usly sea rch for alt ern ate design so lutions or less-costly const ruction details? The produc t. design, o r construction de tail which has been established in the Al E's technical tile is the o ne usua lly used in subse que nt contract documents. The CM system en forces value managemen t a nd the organiza tional meet ing detai ls it in the responsibility chart. IL is best to keep the action words an d phrases
The Respons ibility Chart Matrix

Typical Responsib ilily Chert Activity list Ad denda Adverl i5~menl

for B,ds

A ltern ates, Bidding Award oC ConlraCls

Bid Documents Bid Openings Bidders ' Lists Bidder Qualifi cation Boring:.. Soil Budget. Cunceplual Budget. Interim Budget, Ccnstrucnon Budge!.Contigendes Cash Flow Cereificale of Substantial Ccmplcuo n Ch:lngc Orders Change Oruer Re4uests Clean.up. Sue Ck",n.up. Final Conlraclilhilil\,Studici ConslruclabilitvSludies Construction ~icans. Methods,Techniques CORJttUclion SUPPOri hems Connac t Documents Contractor Coordination Contracto r Call·baeks Contracts, Contractors' Design Apprcvats Design Info rmation Document Review Drawings.As·Buill Drawings.Record Drawings. Workin!! Eslimilling.Concep tual Estimating.ConSlruction Expediting. Owner Purchases FidJ LaYOUI Field Keporling Field Testing.Qualily Contro l Insurances.. COnltaetors· Imurancc5.. Owner's leiters ot Inlcnt

Meel i ng. .~l on l h l y Project ,\-fecling. Pre-Bid Mcetmgs. Pre-Ccnstrucuon Meetings.Post-Bid Meeling, Progrnm Management Meeting.Team Mcelings.Wec kly Progress Mectings. Workshop NOlice to Proceed Pay Rcq uests, Contr:lcl(l(S' Permits. Building Plan Revie ws-Agency Prevailing Wagc.lntct\·lews Prevailing Wage. Reports Project Manual, CM Project Team Proposal Forms Punch Li.\t Pu rc h as~ OrJ ... rs, Owncr"s Quality Control Prog,ta rn Safety Sanitary Facilities Schedule Enforccment Scheduling Security.Site/Building Site Control Specifications.Division I Specificalions.. Front End Specifications,Instructions to Bidders Specifications.Outline Specifications. Special/Su pplemenla/ Specifications. Technical SUbminals.Samples SUbmittals.Shor Drawings Surety Bonds Survey,Initial Layout Sut\·cys. Property 'Iesung. Field value Engineenng Waiversof Lien Work-Scope Descriptions

FIGURE 16.4 'Typical Responsib,lity Chart AClivily List.

For a ll iot.e nts a ~d. pu rpos~s. crea ting the responsibility chart is the team 's first tes t of coo~e ratlve d.eclSlon.ma.klOgan d a precursor of the eM team 's relati onship. . .The. list of acno n words rn Figure 16.5 is provide d as an example. As with the acnvrty . h~~. the team s~ouJd co me up with their own words that describe act ion ~tspons' b.J1lt y. The po te n t l~ 1 pro blem with se mantics beco mes ap parent due to [he simI ar meanmgs and double Interpre tation of some words,

J

243

244

Chapter 16

Sect io n 16.4

Project Management Acknowledge

Advise Approve

Arrange

Endorse Enforce Evaluatc Ex ecute

Assemble Auist Auend Award Cho:ck Commen t

Expedite

Complete Com ply

Member

Conduct Conform Coordina te Determine Dis tribute D raft

Facih:a te Fil.: Hcad Include

Issue Moniwr Observe Obtain

Organize Originale

Participate Pc

Prepare Present Provide Procure Produce

fiGURE 16 .5 A sample li:\l of acrion wurds.

16.4. 2

16.4.3

Page __ ' _ _ D ES IG N P HAS E

eM

O WNE R

LEVI::L 1 14. S!X'elfieillions. Technical

RevI l:wl Co mm o:::nl1 Appr o ve

Revie w/ Co mmc ntl

A pp ro ve as Req'd

Recomm end

16. Val ue E nginee ring a nd Value ~ a n 3 ge mc n t

Approve as Req'J

17. ESl im.ll ing, Co nce ptual

Approv e as Re q 'd

R ecom mend

18. Plan Reviews. Age ncies

Monit or

19. Permits (NOI Assign ed in Bid Documents) 20. In surance , Build e rs R isk

IS. Alternates, Bidding

The Responsi b ility Chart's De po sit ory The completed responsibility chan should be included as parr of the CM Project Manual and referenced by the team when anticipating the next steps in the projec t. When team membe rs know beforehand exactly who is respo nsible for each part of a collective activity. the activity plann ing goes much more smoot hly,The responsibility chan facilitates this beneficia l pan of the management process. It was stated that [he organizational meeti ng and a GC pannering session were similar but a difference between the two is the absence of ad versarial positions. Another much more significant diffe rence can result if the AlE and eM agree to incorpora te the responsibility cha n into their contracts with the owner, In GC par tnering . the pan ne ring agree men t is no t con trac tual between par ties; it is an informal expression of good intentions. In eM. the responsibility chart is an explicit e xpression of coope ration developed on the basis of good faith.

,V E

CO NT RACTO R

LEVEL UJ

A d vise

Re vise! Cu mmen tl Ad vise

Prov ide

X X

AnOl lyzd

Recommend'

Recommend

Pr e pa re

Re,·iewl Recommend

Pro vide

A!tSi:\11

Re viewl

Provid e

Assisl1 Re view

X

Mo n ito r

l'o lo n ito r

Facilita tel Responsible

X

Pay

X

Arrang.: for and Obtain

As.<,isv Consult wi Agencies

X

Provide:

Reco m me nd

Assis tl Recommend

Includes in Sp ecifica tion s

X

X

Revie....

An Exa m ple o f a Compl eted Chart

The examples of cha rts in Figures 16.6a and 16.6b have bee n orga nized by phase in chro no log ica l order rath er [ha n alpha bet ica lly, As previo usly mentio ned. this is the recommended app roach because it allows the ac tivi ties to be discussed in their na tu ral sequence, It also makes the owner 's learni ng process easter and mor e under st anda ble. Only two phases are shown-Design and Bid/Award-and o nly so me of the man y activi ties inher e nt to each phase hav e bee n demonstrated. TIle responsibility perso nnel head ings used in Figure 16.6a a nd 16.6b arc unique for the particula r project they re pr esen t. The owne r has veste d respon sibility for bo th seco nd and thir d level management tn one pe rso n, and the re is no breakdown shown for eithe r the A l E or CM. This would be app ropriate for a small projec t (probably one sma ller than the optimum project refe ren ced in Chapter 8, The CM O rga nizatio n) ,

245

ResponSibility Chan

Purcnase Receive ge ccmmenu Record Reques t Respond Responsible Review Sign SpecIfy Sul:lmit Update Utilize

The Responsib ility Chart Mat rix

FIGURE 16.6a An example Responsibili ty Ch3 rt (Design Phase aeuvmes j.

8IO D ING/A\\'ARD I' U ASE

OW NER LEVEL UJ

C.\ I

Al E

CO !'lTRACT O R

LEVEll 10. Bid Openings

Attend as Req'd

Atte nd as Req 'd

Organizel Conduct

A ne nd

X

t I. Mec tings. Post-Bid

A ttend as Re q'd

Atten d as R eq 'd

Organ ize! Co nd uct

A tten d

All e nd

12. leiter o f In te nt, To Award

Approve/ Sign

Recom men d

Pre pa re! Issue

Approve

Revie wl file

Advise

Re1lu:w& Ap prove

Review & Advise:

Provide

Specify and A p pro ve

Ad vise

AJ visd Monitor, File

Include Requirements in Bid Doc 's

Pro vide

A pprovez

Advise

Prc p3rd

Recommend! Approves

Respond

Issue Re commend

Rec ommend

Rece ive

13. Sure ty Bo nd s. PlUM

14. Insu ra nce. Contractors

15. Notice to Proceed

I

Sign 16 . Awa rd o f Contrac ts

Awa rd

Advise

Recommend/

f iGURE 16.6b An exa mple Responsibility CharI (Bidding/Awa rd ;1clivili.::\).

Respond

• I

246

Chapter 16

Project Management

Section 16.5

An alternative to including the chart in the NE and eM contrac ts with the Owne r is to simply have it signed by ea ch Levell Manager as an additi onal agreement or ope rating by-law.

16.S

16.5.1

16.5.2

Te a m Member Comm itments The learn does not have a single o r pe rmanent tea m lead er . only leaders pro tern. The tea m member whose expe rtise is most ge rma ne a t a specific meeting or time pe riod is loo ked upo n fo r leade rship by the o ther tea m mem bers.Th e o wner is the titular lea rn leader by virtue of the Iacr that the shelhe hired the NE and CM to provide services. Howe ver, [he owner must accept th e fact that his/her expe rtise is limited and must agree to alternate leadership with the AlE and CM when the ir expertise is germane. . The CM. a~~umes the leader ship role for progra m man agem ent meetings. It is the eMs respo nsibility to sched ule. plan. chair. and record thes e meeting for the team. The Chi sho uld .no t come t~ the mee ting with preconceived activity dura tions. Howeve r. whe n planning the meeting. the eM should know what has to be done to reach a milestone as well as [he sched uled time to reach it. . ~c ~M sho uld as k for pe rformance com mitmen ts from (he AlE and owne r. preiJm.ma~ly accept the respo nses, and then attemp t to imp rove the commitments, by r.e vlewmg the com mon project goa ls of the tea m. If team consens us indica tes that a milestonefs} date shou ld be changed. the Cl\.'l should be prepa red to prov ide valid conseque nces.

Progr a m Management Meeti ng s The first program management meet ing shou ld be held as soon as possible after the organizational meeting, and attended by the Levelland 2 Managers from the owne r. NE. and CM. The pu rpose o f the meeting is: (I) to confirm the owner's time requirements. (2) to broad-scope the activities fro m the date of the meeting to the completion of occupancy, (3) to narrow-scope the sequence of activities which occur in the immediate future. and (4) to obtain scope and time pe rformance commitments from team members for the broad- and narrow-seeped activitie s. Between [he owner-AlE and owne r-Cvl agreements and the respo nsibility chart. team membe r commitme nts to progra m activities have bee n established. However. it is highly unlikely that either the NE-owner or CM-owne r agreements contain activity time-pe rformance clauses. othe r than the CM's commitment to an owne r-occupancy da te. This means that activity and team member commitments dales must still be established. Although there arc two scho ols o f thought with regard to how to schedule activity per formance. experience has proven one to be more productive. The lcss-producrive meth od reflects an o verall miscon ception of a CM as 3 dominating dictator rather .

247

tha n co~p~ ~ent leader. A ltho ugh a CM sho uld be proactive with regar d to project and tea ~ acnvines, the "carrot" has proven much more prod uctive than the "stick" when gett ing results On CM projec ts. Th e program schedule uses team member coope ra tion and the milesto ne con. cept to mo tivate time pe rfo rmance. The milesto ne concept sta tes: If you have to be at a c~rtaill P?i~l~ at a certain time . and progress is dependent on time consumed by intermediate actlVtllf:S. the surest way to meet the overall time commitment is to establish and meet each intermediate activ ity time commitment. Th is concept is not nc w to co nst ruction schedulers but is to tradi tional cont ract req uiremen ts (especially in the GC system. wher e the co ntractor agrees to a dale of substantial completion but is not contract ually req uired to establish inte rmed iate dates. from which potential compl eti on can be mo re accu rately measured). A typica l res~onse by a GC [ 0 a~ o wner's inqu iry concerning lack of prog ress is. "Not to wor ry. we intend to speed lhmg~ up." Whe n milest on e da tes arc a co ntract requ iremen t, progress can be assessed with cer ta inty at each ju nctu re.

THE PROGRA M SCHEDULE

The program sched ule is a management tool tbar expedites and tracks a project from stan of design to occupancy. The schedule is co vered in detail in Schedule Ma nagement. Chapte r 20. Ho we ver. its unique [unc tion in the manageme nt of eM projects compels additional coverage here . The trad itional GC contracting system separates design and construction as two distinct segme nts of the projec t-delivery process. This is because design , the prime function the AlE is hired to perform. virtually ends ,v'hen a contract is awa rded . and construction. the function the general cont ractor is hired to perform. begins when design is complete. Projec t-long continu ity is only attained by the AlE's responsibi lity for contract administration . The C:-'I system defines design and con struc tion as a cont inuum. a part of the design-to-occ upa ncy process, Con tinuity is achieved through the construc tion manager whose role and responsibilities are equally prominent during. design and construction and whose presence de-emphasizes the traditional switch from design 10 construction. The entire project is the co ncern: no one phase is more impo rtant than another. CM program management take s the position thai time lost at any point in the projec t delivery sequence is lost time. The design process is subject 10 similar time commitments as construction. Owner performance is scheduled no differe nt ly than the performance of the N E. Cfvl. and contractors. The management of constructio n pro gram participants is based on commitments to perfo rm and the collective monitoring of per form ance progress by the team.

The Prog ram Schedule

Expe rience has shown that parties are more apt to stick to commitments made themselves ra ther than those imposed by others.This rea lity sho uld be accepted bv the team and held as a tenet th roughout the project. • 16 ~S. 3

Scheduling Design Architects ~nd engineers have been ab le to keep rigid time co mmitme nts o ut of [heir c.ontracts wlt.howners. on t~e arguable premise that design shou ld no t be hampered by lime cons traints. The pre mise has merit. b UI extended design-time du rations are no t always caused by a sea~ch for a better design . They are often caused by an overextended work load or plai n procrastina tion.

248

Chapt er 16

Section 16.6

Project Management

When an lv E firm works on a GC project, the owner is the only'party to which the AlE is acco unt ab le. Most ow ners arc not suf ficient ly kno wledgeable in eith er the de sign o r pr oject-deli ver y pro cess to know if the NE is doing everyt hing poss ib le to expedite design. o r if the N E is taking more tim e tha n needed. Witho ut external acco untabili ty. A l E firms have the opportu nity to maneuver their wo rkload to fit their own requirements. Th is is a co mmon busi nes s practice in the Uni ted States and o ne that is preval ent in pr ofe ssiona l and non pro fess io nal services. The three -party tcaru structure of th e eM syste m prov ides external accountabilit)' to each te am mem ber's performance. Th e de sign, constr uctio n. and contrac ting expertise of the AlE and Ct\l o verlap enough to pro vide checks a nd balances to each o f their de cision s an d activ ities. and the requirem ent tna t all decisio ns be coll ective brings all team members und e r the checks and balan ces um brella. All program schedule activities involv e ei ther the te am or indiv idu al team mernbers. an d witho ut exce pti on each acti vity s ho uld be schedu led ju st as vigoro usly as the ot her. A represen ta ti ve list of program schedule activities is shown in Figure 16.7 on page 249. Th e list IS no t co mplete; each projec t will hav e its ow n listing. Howe ...'cr. acuvities o n the list that a re bo ld would be appro pria te for ever y e M proje ct. As th e list in Figure 16.7 indicates. no t all activities are meetings. Th e CM team concept requ ires more meet ings than the GC o r D-B systems: however, no t all mee tings m ust be face to face. Con fere nce calls o r wn tren exchanges a re both acceptable substitutes. Th e go als of meetings are informat ion excha nge and consensus decision s: the format used to achieve those goals is not imp ortan t. The inven to ry of activities and actions tha t m ust be accomplishe d to mo ve the proje ct fro m sta rt to finish is importa nt. Th e list is a checklist. a simple managemen t tool that keeps learn me mbers focused and on -task. The prog ra m schedule becomes a definiti ve plan of acti on by seq ue nc ing and assigning dura tio ns to the list of act ivities and ucrions. 16.6

DnilUlormin g Seuion BriCKSelection

Mrrting, Rhk ~l.an;,gemt'nl Plan MertinG, ln form ;tlion Ph.n

lI u tl l: "' I,CIH1~"'IlI l/ ;61

Mcc li n!:, RC)Ul UCC :'I h " lI~cll1l' nl r l:on Mecting, Post- Hid Meeling, Millerial M:onagemcnt Plan :Ioleelin\:, Pre-bid Meet ing. Con lrad ,\I :on;ol:r melll Plan Meetings, Weekly Prog ress Meeti ngs. Work shop Mee ting$.Team MeC' tjn~ Program Manage men t Occu pa ncy A pproval Ort:anil;.lliu n;ol :Io lecl inK O ...ner App ro villh;) Own er 's Boa rd App rov:ll{s} Phase 2. Docum ent Review Phase I. Document Review Pr0J;r;lIn M,iII01gcnn:nl ~Ieeli ll g P ropo ~1I 1 fonrn

Dudgel , COII)lruclinn Building Pcrmil (S), Issue Buildi ng P~rmi l( I),Applic:alion Commissioning Conslrudill n, Cumplt:lion CUllslructiun, S' ;6rt Cunlr;tCf Altltrtlb) C"lllr;u:l:Ibilil)' [) ('c h im l) Co nlr;lclab ilit) Rel ielt De) ign Pha-l e, Design Development De)ig n Appruval{sJ, O...ner De~ ig ll MCcfings, Own er Design Phase, Schcm alics Design ~l e rl in g, A rchih:clu r:d Oc) ign Ph~c. Co n l;lCI OUf;umenl Design Mf~linc, Eteclrical Design Mcc ling, ~fec h ..nicill Design Mceting, Site Civil Exit Con ference FinQI Doc ume nt Revie .... Fina lize Owne r Finances Fire Marshal lnspeclion Fire Marshal Re view Instructions fur Bi ddt~ /l fcel i n~. Qualil)' PI:.m Mec ' ing, Value /llana CtlllCnl 1'101.0 M ed ing. Monlhl y Pmg rt » Meeling. Decision :'tloln;,crmcnf PI.1ll

249

Purchasc(s).long. Le:ld Items Schedule, Detail COl\)lrUtliun Sched ule, Mileslune Sche dule, Occupancy Schedule. Shu(1 Te rm CA P Spco., O utline Sile Ci, il Sptcs. O ullin...A rchi' e-c'u ral Sp ec. , Oo uloe Mechani(,JI Specs. OUIlinr Electrical work-Scope Ol."~rrip lion... Wrilr Wnrk.Sc upe Dc~riVliun.s.lntle:l.

FIGURE 16.7 A rep rese ntat ive List o r Program Sched ule Acnvrncs,

efficient te am inte rac tion. Modern commun ica tion techniques make access q uick er and mor e credible . Co nsequ e ntly, the ir use will influence wher e the owner's and A/E's Lev e l 3 Pe rso ns sho uld be physically locat ed. A s proje cts incr ease in size and com plexity and time becom es a facto r, o wne rs a nd AlEs should cons ider loca ting their Level 3 Per son s o n-site. If st ro ng field starti ng is required. all team members must respond 10 expande d field per sonnel requ irements.

M ANAG EMENT OPTIONS

The major management decision is whet her to use a strong office or field staffing arrangement. The differen ce betwe en the two was cover ed in de tail in Chapte r 8. The CM Organi zati on , but the timing of this decision was not. Th er e are IWO opport unities to mak e the de cisio n. Th e best time is before the CM firms submit the ir proposals for services to the owner. Th e o ther opportunity is aft er the eM is selected and project. mana geme nt decisions are being made. A constructi on man ager is in the best pos ition to make th is decision . but the o wne r must make it if it is made prio r to receiving CM pro posa ls. Ow ners who are fam iliar with Cl\ 1 shou ld have no difficulty handling this dilemma. bu t first-time users of the CM syste m would unless they sough t expert adv ice befo rehand . The agend a for the first program management mee ting should include the disc ussion and resolut ion o f the team orga niza tio n, part icula rly where team mem bers will be located an d how the y will interact. On op timum-size projec ts, manned essentially by one full-time Field CM (Level 3 Per so n), the o wner and Al E shou ld make the ir Level 3 Persons very accessible for

Management Options

16.6.1

Tea m Int e ra ct io n The CM team concept changes the phil osophy o f field ope ra tions which traditio nally exis ts in the G C syste m. The CM team is dedi cated to co o pera tio n. Team members in a legal agen cy relation ship have a common goa l- the success ful co mpletion of the proj ect and the owner's bes t interest. Th e AlE 's an d CM's stake in the project is re p utatio n and the finan cial rewar ds derived from futu re pr ojects. Th er e is very little sta nding in the way of full coo pe ra tio n be tween team mem be rs. On a G C project, similar o rganiza tio nal circum stances can o nly be ob tain ed from a pa rt nering ag reement-a vo luntary commi tment to cooper at ion with out an agency fou ndat io n wh ich may or may no t be co nsis te ntly honored. Expe rien ce has show n that

250

Cha pter 16

Section 16.9

Project Management

THE PROJECT MAN AGEME NT PLAN

The program schedule is the graphic version of the project management plan. On ce in place and functioning, the program schedule directs the efforts of the learn in step-bystep orde r from project sta rt to finish. Most of the: activities in the program schedule have mana gement plans of their own which in turn have procedures of their own. The progr3m man agement meet ings det erm ine whe n the various managemen t plans must be started and compl e ted . and the program sched ule det ermin es when the activity on which they will be used will occur. What remains is to designa te the att endees at the various management plan meetings. designa te the lead team member s. a nd schedule the dates of plan co mple tions.A major action is 10 specify the schedu ling format for the program schedule and prescribe its upda te freq ue ncy, Furthe r information on this important schedule C3n be found in Chapter 20. Schedule Manageme nt. The team' s Le v el 1 Persons should provide the leade rship during the first stages of the project managemen t plan de velopment , at least unt il the re is team consensus that leade rship can be passed on to Level 2 Persons. 16.8

16.9

THE eM PROJECT MANUAL

The CM projec t manua l is the tea m's depository for the owne r-A'E agre e ment. the owne r-CM agree men t, othe r owner-consultant agreement s, the responsibility chart, the twelve management plans. an d the procedures developed to execute eac h plan.

251

Th e more CM experience a firm has. the easier it is to assemble a eM project manual, because each new manual is based on plans and procedures developed and used on previous projects, Mana gem ent plan and procedure development was covered in Chapter 7,A CM Procedures It is a major undertak ing for new construction management firms but not a problem for firms which ha ve several Cr-.·1 projects to their cred it. The physical man ual should be a loose -leaf binder (s) to facilitate updatin g. A t least nine copies should be produc e d and mainta ined: one for each of the three level managers of the owne r, N E, and eM.There will be frequent manua l updati ng. and it is important that the nine official copies be identical and contain the latest information . Jf more copies are nee ded by a team member. they should be produced and maintained by tha t tea m member from herlhis own official copy. The informa tion manageme nt plan should include procedures for producing and upda ting the manual. Accurate and timel y management plan updating is important, especially in the early stages of a proj ect while team decisions a nd procedures a re fluid. eMmanu al update s should be handl ed just 3 S formally as con rrcct document change s, Exper ience has shown tha t five to ten CM projects must be compl eted before an entrant CM firm produces a complete CM project manual . and that the project manua l is one of the most neglected part of a CM's services. regard less of how many projects the firm has completed. Experience has also shown that the qu ality of managemen t se rvices on a project is di rectly prop orti onal to the qua lity of the CM project manual produced for the project. The on ly w3Y ( 0 form an appreciat ion for the CM Project Manual is to understand tha t good managemen t requires that everyone involved in the project know exactly what 10 do and when to do it, and have the assura nce that everyone else is equally informed and dedicated. A constructi on manager's fce is for ma nagement as the last hall of the title states, not just for consulting or advice on how to handle prob le ms. Good manage men t anticipate s problems and has proced ures in place to mitigate problems or pre v ent them. The CM project manu al co ntain s the solutions.

some gene ral con tractors hono r the spirit and commitmen t of part nering agre emen ts more consistently than o the rs (in the public sector, the appare nt low bidder can be one or the othe r). Ad dition a lly, the GC's stak e in the projec t is profit as well as performance. Unde r certai n circumstance s. coo perat ion with the owner and the N E may be sacrificial and difficult to accept. A significan t differe nce between a GC and CM projec t is site man agem ent . On a CM project. the person in charge of the site is the Field perso n, a team mem ber whose infcrm at icn can be relied upon by the N E and owner as being credible and accura te. When technical probl ems arise in the field. and thcy ofte n do, the re ca n be an exped itious e xchange of informa tion be tween Lcvcl Z team miln~lge rs as 10 which timely decisions can be made and forwarded 10 the field. Efficient project man agemen t depen ds on the exchange of credible informa tion. time ly discussions. and the providi ng of timely sol utio ns. The:person in cha rge: of the GC project sire is the GC's project manager o r superintendent. When a pro blem arises. the G C co ntacts the A l E for a solutio n. A pan nering agreement not withstandi ng, the GC 's status as an indepe ndent contractor provides no incentive for the AlE to accep t the deta ils of the proble m as stated by the Gc. The NE's inclinat ion is to visit the site to co nfirm (he co ndit ions before arriving at a solution. Because the AlE is the owne r's age nt in regard to the design. the A l E must check the pro blem' s validity befo re providing a solu tion. There are oth er examples where the CM team concept facilitate s valid information exchange. exped ites decisions. a nd enha nces the man agemen t funct ion .The assur ance of credible team inte raction under all circumstance s is <1 major factor when selecting the managem ent option for the project. 16.7

Exit Meetings

I

!

EXIT M EETINGS

Exit meetin gs should be shown as activitie s in the progra m schedule.They should coincide with the te rmina tion of vario us participant s in the project. Th e purpo se of the mee tings is to determine what co uld be done differently on the next projec t to impro v e the results obtained on the currenl project. Th e CM and AlE will probably benefi t the most from exit meeting s because the owne r's selection process for the: ne xt pro ject is (or should be) dependent on past performance references. A se rvice organization must become more proficient from project to project.The N E and CM sho uld welcome critiq ues from con tracto rs. the owner, and each oth er so that adjustme nts ca n be made for the future. Entry firms have the most to ga in. ve teran firms, however, regardless of ho..... long the y have bee n providing se rvices. can use exit meetings to determine if some of the energy is going out of their performance or to determine how new personnel ar e affecting the orga nization'S standa rd o f performance.Th ere is much to be gained from a .....ell plan ned and conducte d exit meetin g.

252

16 .9.1

Chapter 16

Section 16.10

Project Management

253

As noted earlier. meetin gs facilitate the opera tion of the CM system: there will be many meetings of one type or ano ther during the course of a projecLAs long as they are prod uctive. thei r freq uency should never be ques tioned. Those who feel that meetings should be held to a minimum in a ny coope rative undertaking do not understand the intense interac tive process upon which the CM project-delivery structure relies. The st ren gth of the eM system is vested in the successful inte raction of project pa rt icipan ts with the same goal and similar interests bu t different e xpertise.The mult itude of decis ions which mast be made to move a construction project from sta n. to finish shou ld take full adva ntage of each team member's expertise an d will then rece ive the ben e fit of the all.imponant check s and balances provided by a CM team stru cture. Meetings would not be necessary if all the expe rtise assem bled for a CM project wer e vested in one part y ~', no could be relied on to make every dec ision in the owne r's best inte rest. If this were possible. decisions would be unilateral and o the r parties would not be involved. However, if it were possible. a co ntracting system structured ar ound the single party would produce maximum efficiency and provide far superior results than eithe r of the rnree contracting systems current ly available . Such a system is no t available o r possible in the co nstruction ind ust ry. Th e o nly way to ap proach this perfect level of efficiency (and the superior results which wou ld accrue) is to assimilate a o ne-party system as closely as possible. In the CM system . this tran slates to collective. o pen. frequ e nt. communica tion between the AlE. CM. and owner. If .t were practical to have all pa rties physically together on a da ily basis throughout u.e project . it would be closer to the ideal than eM practices

Exit Mee ting Fo rma ts Exit meenngs sho uld not be collective; the CM shou ld meet separat ely with the o wne r. the A lE. and selected contractors. The Cvl-ownc r exit mee ting shoul d be att ended by the th n~ e I~ v el man ager s fro m both organizations a nd any othe rs tha t may ha ve cons tructive mput. The AIE-CM ex it mee ting sho uld be str uctured the Same way. C M -~o n t rac tor exit mee tings could be collec tive but on a selected basis: thev could also Include the A l E. Owner at tenda nce O1 t eM an d A l E co ntr acto r exit mee tings serves no useful purpose un less the owne r intends to unde rtake anothe r project in the near futur e. . Exit mee tings sho uld be located . planned. and con d ucted in a non-confront aticnal m ann ~r. Th ey should be held o n neutral gro und in an info rma l atmosphe re (a r~trc al .l ~cat~ on such as a restaura nt or club). The y should be conducted in a coo pe rauve S PI ~1t . with the understanding tha i bo th parties will bene fit from the ir experience of wo rking toget her o n the.project. Not o nly will pa rticipan ts find ways to improve performan ce o n t he nex t project. they cou ld discover why certain things thev ex pected were not. don e ~nd why cer tai n things the y did no t expec t were. • EXIl m e ~tlO gs s ~ou ld b ~ unstru ctu red. and each pa rty at the meeti ng sho uld have t~e opportunity to bring up Items fo r discussion . Eno ugh backgrou nd sho uld be provided to gene ra te recall a nd response. A t a CM-A/E exit mee ting. the logica l discussio n leade rs would be each firm 's Level .2 Person: TIley will be most aware of the course of the project. However . the scl.ecuo n o~ a dISCU SSion leader sho uld not discount the q uality of re la tio nships which existed ~u~lO g the course of the project A Level I Person would be a seco nd choice. . I,t IS lm~ o.r.lant to remind .those at an c~ it meet ing that a constructio n pro ject is untq uc. that II IS ~ manufacturing process. with out wea ther pro tect ion. a static work (o rc~ . or the benefit of proto type guidan ce, It produ ces a on e-of-a-kind st ruc ture. buill by v.mu al strangers ,:"ho are qu ickly asse mbled for a rela tively short period of time. Until the project beg.lns. usually very litt le is known abo ut the parti cipant s. . Each constructio n project . reg ardle ss of the contrac ting system used to del iver it IOclude~ firs.t-time ~~~king re.latio~ships to o ne degr ee or an other. Mor e tha n like there Will be more initi a l rela tio nship s than recurring relationships. Const ruction projects represe nt o ne of management 's most difficu lt challenges. One.of the CM system 's ma~ o r potentials lies in the fact that its con trac ting st ructure pr?~ld e s the best 0PP0rl UOlt)" to com bine op timized design and equi table cost co ,:"pet lt l ~n b~ t w~en t r~ d e contractors with an un precedented level of man agemen t. This combination IS de signed .to bring o ut the best in con struction ind ustry pract itioners .... ho are part of a CM pr~je c t. Exit meetings should co nfirm this fact to one degree or another. lf they do not. adjustments will most cer tainly have to be made.

currentl y provide. As explained in C hapte r 13. Infor mation Mana gement . a ll communication from one team membe r to anothe r must be cop ied to the third team membe r. Face-to-face meetings are an expen sive but necessary way to achieve this objective when major de cisio ns are being pon dered. Howe-ver . if it is practical to mee t by con ference call. a co mputer network. or team circu lated letter . one of these op tions should be chosen. Mee tings shou ld be look ed upon as essential. not an inco nvenie nce.

I;

16.10

Meetings

OTHER M EETINGS

With vcry few except!o ns. mee ~ings ~ho u l d be well planned, have a predis tributed writage nda. p r~"'l d e ,timely notifica tion to all partic ipant s. and be cond ucted as expediuously as possible without compromising the intent of the meet ing. t ~n

t

•

Section 17.2

CHA PTER

1 7

The eM contracting struc ture provides new opp or tunities for achi eving o wne r-specified cons truct ion qua lity, These opportunities ar e coll a te ra l ben efits and inherent to the system . They stem from the uniqu e alig nment of traditiona l pr oject participants which eM prod uces. The eM structure places the Clvl. the cc nstrucu on/co ntracung-o rier ued party. on the same ideo logica l side of the p roject 's we ll-be ing as the owner and desig n profes sional. Qu ality in the projec t is pur sued th rou gh the commo n efforts of all project team members. The eMsystem's a ttribute s also provide a logical answe r to a qu esti on which has persisted fo r a long time: "Wha t is co ns truc tio n q ua lity?" eM philosoph y promotes quality as "conformance to plan s and spe cificat io ns." thus leaving littl e roo m for debate ab out high o r low q ua lity materials and wo rkma nship during co nstruc tion . If a quality debate occ urs. it will be: be twee n the pr oject team members before quali ty is doc umented by the A lE in the techn ica l spe cifications. In the GC system, it is common for co ntracto rs to interp re t specifica tio ns as the maximu m req uiremen ts they must me et, wh ile A lE s and o wne rs interp re t the same words as the min imum re quire ments the co nt racto r mu st meet. CM phil osophy acce pts that qua lity can be sp ecified at vari ous levels d ur ing design but. once spe cified. co nformance dic ta te s con tractor performance. The inte nt of Clvl Quality Managem en t is to acc ura tely pinpo int an d record the owner's quality needs and decisi ons as early as possible. ensur e that the ow ner 's choi ces are specified, and extract con form ing pe rforma nces from cons truc to rs in the fie ld. In so doi ng, the C!'vl neit her preempts the sal e respon sibility of an AlE to write technica l speci fications for CSI D ivisions 2 thro ugh 16 nor rel ieves the co ntracto rs o f responsibility to conform to speci fication s during co nstruction .

17.2

THE QUA LITY M ANAGEMENT NETWORK

Q ua litv. like safety. ca n o nly rely o n con stant aware ness.for success. ,Il is im p~r~a n~ that all project par ticipants become pa rt of a co llective qua lity c,ffort a nd that quality IS the p rimary goal of da ily proj ec t act ivitie s from the stan of design to.owne r ~cc~pancy. To acco mplis h this, a bo ld new a pproac h m ust be co nside red. The diag ram 10 Figure 17.1 . . sho ws the quality co nforma nce ne two rk, The qual ity manageme nt ne twor k is st r~~tu red. arou nd five, maJ,or m ~e~d e pen . dent co rnpc nents.Th ey bring each pr ojec t participan t tnto lhe ,net wo rk 10 a n: ~sona ~Ie way and presc ribe prag mat ic procedures tha t int erface q uali ty awareness with da lly activities throughou t the projec t.

,.-_~

Fee d bac

~------------,

AlE

Owner

Div 1· 16 Tech Specs

Pre or Post Contractor Qu alifications

Post-Bid Proposal

Evaluations

Evaluatiuns

eM

THE QUA LITY MANAGEMENT AREA OF KN OW LEDGE

The quali ty management area o f kn owledge e ncompasse s all elements of e M proj ec t delivery that co n tribute to the q ualit y o f the end prod uc t. Quality is s tipulate d by the client , des igned in to the pr oje ct by the A lE. re viewe d by the tea m, and co nstructed in to the projec t by con tracto rs. During desi gn, qua lity has varying level s from high to lo w. O nce spe cified. quality must con form to the levels specified. Qu ali ty managem e nt is a conti nuing process originati ng with clie nt decisio ns and end ing with contractor con fermance. A eM m ust be capa ble o f de signing, insta lling a nd d irecting a q ual ity managemeot system that fits the ne ed s o f the project. Th e CM mu st ha ve kn owledge of con -

254

255

st ruction ma teria ls and products. understand their us~ ~nd capa.bilities, and the available means, methods , and techn iq ues applicable to their m~talJallon. . .. Th e eM must kn ow how to in terp ret contract d rawi ngs, technical specifications and sho p dra wings. understand field and labo ratory testing p roce du res. and stay c~r~ rent on constr uctio n mea ns, methods. and techniq ues and the latest procedures o r assessing ma te rial an d inst alla tio n q ual ity. . ' . . Th e quality man age ment are a of knowledge includes tech nica l spe.clficatlo n w~t. in mater ials tes ting and mea sur ement procedu res. product and ma teri al chara~t.e ~s. ti~' a~d ca~3bilities.. manu factu ring tol erances. con tr~ctor insta llat io n capabl1lt~es, b uild ing codes. and desig n standa rds.Th is area also requires exce llen t commu nucat rcn sk ills and performance et hics,

Quality Management

17.1

The Quality Manag emen t Netw or k

Thc CM Proje ct

Manual

Design

Bidd ing/Aw ard

Conslruction

Phases

Phase

Pha se:

FIGURE 17,1 The Quality Management Flow Network.

,

i

256

Chapter 17

Quality Management

Section 17.5

,

;-

possible.

. Alth ou gh so me of the components ar e directly ap plicable to G C and D-B contracting, the ACM form (with multiple co ntracts) is [he stru cture th at accomm od ates them all and has the potenti al to provide the full benefits from the q uality management networ k.

17.4.2

The major co mpone nts of qual ity managemen t a re the:

17.4

THE QUALITY STANDARDS

~tab ~ishing ~nd r: co rding the o wner 's q uality standards, as ea rly in the project as posSIble, 15 the linchpin of produ ctive qu ality mana gement. The quality expected by the owner upon the comple tion of the projec t must be ca tego rically ext racted from the owner by th~ AlE an d C~ . Wha t the AlE misses. the CM must pick-up. Th e establishment of ~ua~IlY stand ar ds IS a team obligation ; the mai ntaining of qu ality st anda rd documentanon IS the respon sibility of the CM. The quality standa rds are definitively recorded as the y are established. This record of owner de cisions produ ces docum en tat ion which must be reviewed an d am:nded as design prog resses and the Owner deve lops increasing intimacy with the project and constru ction e le ments. 17.4.1 The Goal of Quality St an dards

When setting quality standards, the goal is to never hear the owner say that she/h e did not get what was wante d or expecte d. Somehow, even the owner with the minimum level of construction kno wledge m ust be consta ntly and progressively ed ucated in o:de: to achieve this goal. This places the burde n of success o n effective tea m cc mrnumcatrcn and a constant awareness of exactly how well the o wner under stands what the end result will be. There are many ways to en sure owner understanding. Th e best is to sho w the owner examples of design, materials. and equipmen t as they actually are in completed

Quality. Cost . and Value

When establishing the owner's qual ity sta nda rds, cost is usually a consider ation in eve ry de cision . Th is is where value management inte rfaces with quality manag ement. It is a very impo rtant in ter face tha t ca nno t be sidelined. Th e A lE and CM must co nstantly reme mbe r tha i cost and value a re not the same. The ideal project wou ld be o ne specified solely on the bas is of value, no t cost. However . it is highly unl ikely that rhe ideal projec t will ever come alo ng. Therefore qu ali ty standa rds must be established with a balance be tween the two; where value is too expen sive. cost must provide a solution.

17.3 MAJOR QUALITY MANAGEME NT COMPONENTS

Quality Sta ndards proposed by the team Ouali ty Design Plan proposed by 'h e Al E Qual ity Value Plan proposed by the CM • Quality Co nformance Plan pro posed by the team Con tractor's Qu ality Plan prop ose d by each cont ractor.

257

facilities and rela te their re ality to the specifications developed for his/her project. The pursuit for understanding need no t be exhaustive but must be sufficient to convince the AlE and CM that th e owner knows what to expect whe n co nstruction is complete. Architects. engineers. and con tractors relate to specifications and dr awings: they ca n visualize space, sha pe. appea rance. qua lity and the ir re lated costs.They can usuall y communicate on alterna tives without additio na l visual depe nde ncy.To use this leve l of com m unication with owners when discussing the att ributes of the project would be a grave mistake.The NE and eM mUSI provide more.

As allud ed to in the quality ma nage ment area of knowledge, this action area

dem~~ds I~ e. CM 's communication skills and ability to o rganize the net wor k and admln.lster It In a P,rod uct ~ ve mann er . Q ual ity is difficult for most o wne rs ( 0 definitively pre~cnbe and at tun es difficult for N Es to re tain at its pre scribe d level througho ut desl~. Th e networ k com ponents are design ed to alleviate these problems as much as

The Quality Design Plan

17.5

THE QUALITY DESIGN PLAN

111t: objective of the Quality Design Plan is to e nsure that the o wner's documen ted q uality standards ar e first and forem ost in the minds of e veryone involved in project design. To produce a project from feasibility thro ugh design to the co ntract document phase requ ires the efforts of the many individ uals on the des ign team . Every one responsible for decision s that could reflect the owner's pre fere nces must be made aware of those prefer ences throu gh docum ent ati on. Th is can be accompl ished by distributing upda ted quality standards to all those involved. Howe ver. the structure and inter de pend en t o pe ra tions of a de sign teem present a co mmunication problem that must be overc o me. A plan must be formulated to bring all de sign inte rests toge the r in a timel y and effective man ner. Th e plan should provide fo r design team and des ign review meetings on both a sched uled and as-nee ded basis. The projec t team de te rmines when these meeti ng sho uld be held and incorporat es the m into the program sched ule as part of project managem en t. Wha t is sugges ted here curre ntly takes place to o ne deg ree or ano ther on all proj ects. It is refer red to as design coordination, Th e difference be twee n the CM approach [ 0 this respon sibility and wha t is comm onl y practiced is that a CM is available to inject pra gmatic con struction e xpertise and comp ara tive cos t information and ad d checks and balances to design decisions. Ad di tionall y. the: design coo rdination responsibility of the A lE is emphas ized and form alized , mak ing it more effective: from the owner's pe rspect ive. Th e Qu ality Design Plan sho uld be develop ed by the team under leadership of the CM. with principa l input and stra tegy supplied by the AlE rep resenting the interests all design learn members.Th e plan sho uld clea rly sta te when a nd how the q uality standa rds ar e to be upda ted and distri buted to design team mem be rs. hov...· the AlE

2S8

Chapter 17

Quality M anagement

Section 17.6

i~t end s to monit o r des ign coo rdina tion, how the team will be invol ved in quality d ecisrons. an d how the Qu alit y Design PI,In will inte rface with othe r qual ity p lans and the

THE QUALITY VALUE PLAN

Th e goal of the Quality Value Plan is 10 en sure that owne r values are incorpora ted into the project and. whe re applicable. that alt ernati ve d esign s be developed and evaluated for cons ideration by the o wne r. Co nstruc tability, valu e engine ering. and life-cycle costing ar e pout o f the CM 's respon sibility under the b road er heading of Value Management (C hapte r 15). The CM:s pri~e ~ons(ruct ion ex pe rtise and support ive design expe rtise facili tates pr agma tte desig n Inp ut and has the pot ential to im prove the ove rall value o f the pr oject from the own er 's perspective. Project design is a movi ng targe t that expa nds as it p rocceds-c-simil a r to a snow ba ll rolling down an incline. Each time a des ign d ecision is mad e. it bec omes pa rt o f the total de sign . compl icating any alte rnative that surfaces in the future. With thi s in mi nd. the CM m ust formulate a Quality Value Plan that will dis cre tely incorpo rate value assessment activities into the de sign phase which min imally inte rfere with the rnomentum of the AlEs de sign activities. A process of stop. red~sign. and restart should be avoided. -

17.6.1

17.6.3

Design Reviews

Plan Devel opment

!he C?uality Value PLa n shoul d be develo ped as ea rly as possible by the eM with signiftca nt rnp ut from and the co mple te co ncurrence o f the NE. The brainsto rming se ssion

Desig n an d Value Tea m Represe nt at ion Figu re 17.2 on page 260 gra phic ally s hows the q ual ity and value expe rtise that can be effec tively used to produce value- based q ual ity in the constructed project. Tea ms and subteams can be formed from the stru ctu re to fit the coope rativ e require ment s. when using subreams. one of the mem be rs of the subteam s ho uld be design ated coord inator and be responsible for passing informa tion to o ther subtearns and the Level 2 Manager.A typica l mechanica l des ign sub renm is shown in Figu re 17.3 on page 261. It shou ld be un der sto od that th e boxes in Figures 17.2 an d 17.3 do no t imp ly that a n ind ivid ua l m us t be pr o vided for each of the d esignat ed a reas o f ex pe rtise . A pe rso n wit h mor e than o ne area of ex pe rtise ca n fu nctio n in as many ar eas as his/he r capabilities and ca pac ities permit. . Figure 17.2 s hows the owne r as one with design an d val ue expe rtise on -staff. Th is is th e e xce ption rather t han the ru le. H oweve r. the s truc ture welcomes o wne r expe r tise if it is available. In any case. ow ne rs sho u ld prov ide q ual ity/val ue rep rc· sentarlon at the Leve l 2 Ma nag e r position to vali da te the se tting o f qua lity sta nd a rd s and crit ique de sign as it deve lops. The qual ity standards, q uality des ign. a nd Qua lity Va lue Pla ns m us t be inserted in the CM pr oject manual and wo r king before the design phase mov es ahead too far . The value decisions fo r architectu ral . st ruc tu ral. and site design sho uld be made ea rly in the preliminary o r schema tic phase. Value deci sions for mechan ical and e lect rical design sho uld be made as soo n as poss ib le the reafte r bu t no la ter tha n the ea rly pa rt of the de sig n de velopmen t p hase o r mid-p art of the p rel imina ry design phase. Th e two p lans shou ld cov er proba b le activities durin g bidding. award. and co n s tr uc tion p hases as well. The sta nda rd s and the two pla ns th at maint ain the sta n d ar ds will faci lita te tec hnical changes tha t are req uest ed o r required afte r final design o r the contract do cument p hase is comple te.

Period ic Projec t Design Rev iews involving the owner. the A lE's design team. an d the CM 's value te am ar e neces sary. Ho wev er. unless the revie ws ar e numerou s and close togeth er . significant redesign cou ld result. a situatio n whic h sho uld be avo ide d if at all possible. It is im portant that each team kno w what the o ther is do ing o n a curre nt, o ngoi ng basis so their input ca n be integrat ed into the de sign in a timely man ne r. Th e solut ion is to o rganize the Al E design team a nd eM valu e team into subteams to microm ana ge the specialty areas o f de sign (mec hanica l. electrical. architectu ral' .civil site . s t r~ c t u ra l. e t.c.). If the proj ect is of such a nature that an owner des ign t~a m.l s also to be involved. Ir too should be similarly o rganized. With this ma trix or ga· nizati c nal st ructure. speci al ty de sign reviews by su b teams can occu r at a ne cessa ry Irequency, thu~ maximizing the effic iency o f the de sign review process and minimizing the extran eou s involvement o f others in project de sign team meeti ngs. To facilita te the absolu re need to inte rface all subte arn de cisions on a cu rre nt bJs ~s. a team hierarchy sho uld be created to q uickly pass o n the information to the project design revie w team and other subteams that ma y be affected . Project D esian Reviews should be sched u led by the proje ct [earn based on o verall de sign progress a~d the consequen tial im pact o f sub tearn de cisio ns at an y point duri ng de sign.

17.6.2

259

covered in Chapter 16, Proje ct Manag ement. is the mand at ory start ing poin t for the plan 's de ve lopment. All A/ E de sign team mem bers and nil CM value team members sho uld be p resent a t the sessio n to meet and to find co mmo n ground for their irnpo rta nt role s in the value man agemen t pr oce ss. As with all ma nage me n t pla ns. th e owne r sho uld fully und e rsta nd what the pla n will acco mplish and how :t will be carried OUI. Thi s is pa rtic ularly true o f the Qu ality Value Pla n. It is an a rea of eM respo nsibility tha: owners o fte n q uestio n and an area that is o ften remote from the owne r's design/construc tio n expe rtise. It is common for owners to q ues tion if value ma nageme nt co ntrib uted to the suecess of the proje ct or if the val ue ma nagemen t function was eve n pro vided . Value managem en t ha s the pote ntial to be the most proli fic val ue-prod uc ing attribute of the eM co nt rac ting structure. and e ve ry effort sho uld be mad e to ap p ly it generously :1Od to demo nstrate its effective ness to the owne r du ring design.

proj ec t managem en t pla n.

17.6

The Qua lity Value Plan

17.6.4

The DesignlValue Notebook

As pre vious ly ment ione d . whether o r not the eM is respon sibly bringing cost/value equity to the project thro ugh value e ngineering and life-cycle costing is oft en que stioned by owners. It is importa nt to show the o wner that they are . To this end . it is

260

Chapter 17 Owner

Penon Project Manager

C~ I

Primary Coordination

Le~'d2

verne

Section 17.7

Quali ty M anagement

Secondary - - - - - - -c~~ili ~~~ ;-----

Architectura l Value

PrOlect Value r-.1 :lOager

Levd 2 Person

Secondary ---- - C~~~; ~o~- - - - -

~l:lnage r

Architectura l v atue Manager

Mechanical Value Manago:r

Mechanical Value Manager

Electrical Value :o.lanager

Electrical Value Manager

Electrical Engineer

EleClrical Engineer

Ci\'il Value Manager

CivilSile Value Manager

Civil Engmccr

Civil Engineer

Arc hite ct

ArchlteCi

~lech;lll ical

Mechanical Engineer

Engineer

261

AlE

Primary Coordina tion

l evel :: Person

The Quality Conformance Plan

Prujeci Design Manager

Project Value

Manager

Mechanical Subtcam Coord inalor Mechanical Engineer

FIGURE 17.3 A typical Design and Value: Subream Structure. Structural Value Manager

Structural Engineer

Slructura l Engmeer

Technical Specification Divisions 2 through 16 as developed by the AlE during the design phase.

Others

Olhers'

Others

Ownl'r's Yalce Team

C;\ I\ V:li lll' T C:lllI

Al E 's " lillieTeam

FIGURE 17.2 Trric:l1 De ~ ign and ValueTeam Structures.

suggested that some or all of cost/value studies be docum ented by the CM as Ihey occur and filed in a design/value notebook , with copies of each study distributed to the owner and NE. This documentation not only assures owne rs that the CM is providing cost! value studies. it also becomes an effect ive sates tool.when looking for new business. 17.7

THE QUALITY CONFORMANCE PLAN

The goal of the Quality Conformance Plan is [ 0 extr act specifi ed mate rials and workmanship from [he contracto rs funct ioning on the project. The plan must recognize the con tractua l responsibility of the con tractors to provide specified qua lity and must no t assign quality con forman ce responsibility in who le or part to parties other than the contractors themselves. The Conforman ce Plan sho uld include the usual precc nstruc tio n reviews and app ropriate on-site and off-site testing. But it sho uld also include a process for de te rmining contractor conformance from the per spectiv e of the dr awings and the CSJ

17.7. 1

Precc nsttuct lon Reviews Preconstruction reviews include sho p drawi ngs. produc t da ta. and samples. As part of the Quali ty Confo rmance PIan, a procedure shou ld be developed by the AlE and CM to expeditiously move these items through the review process. The NE 's cont ractual responsibility for technical review of shop drawings, produc t da ta, and samples provid es ample reason for the proced ure to be finalized to the AlE's satisfaction. A collateral benefit of the CM contracting structure is the pot enti al to accelera te the submi ttal re view pr ocess. In the G C cont racting str ucture, the GC is the focal point for sub mittal transmission .The GC rece ives them from subco ntractors and suppliers, reviews Ihem, and forwards them to the NE who in turn forwards them to the app ro· priate design team membe r for technical confo rmance review. It is a five-step, linear procedure that starts with a supplie r and progressively moves submi ttals to the ultimate reviewe r. The re turn of reviewe d submit tals followed the same pat h in reverse. Even when using every availa ble transmitt al convenie nces (FAX machines and sameday mail), the process consumes time in transit an d often delays de livery of material/ equipment. Cont ractually.the Al E's review respon sibility docs not include checking the com patibility of interfacing components; each component is re viewed on its own merits.

262

Chapter 17

Section 17.7

Qua lity Man agement

Respon sibilit y Cor checking int e rface co rnpru ibility is left to the GC as th e party responsibl e for ultim ate project con form an ce. A G C' s failure 10 co mpletely o r co nscientiously check submittals often causes constructio n coordin ation problems. with acco mpanying delays. It is common for GCs to discount submitt al obligation s whcn pressured by o ther ope rating problem s. GCs often have thc a tti tude that someone in the su bmi tta l chain will ca tch what the G C may miss. Few general co ntractor s perform p rec o nst ruc tio n submittal respo nsibilities e nergetica lly or en th usiastically. Th e specific co ntrac t respo nsibility and the thru st of the CM's purpose o n the proje ct ca n turn submittal reviews into the effec tive process it was meant to be.

3 Part Subm ilta l Form

2

The Qu a lity Conform a nce Plan

263

(Prov ided by eM)

3

Contractors

17.7.2 eM Pre construction Reviews Figures 17.4a a nd 17.4b o n pages 263 and 264 de scri be o ne way preco nstr uctio n submittals can be ha nd led ex pedi tio usly and effecti vely. T he re art: o the rs that work as well.Thi s syste m redu ces traditional subm ittal turna ro und time by having cont racto rs send submi ttals direc tly to th e A lE at the sa me time they are sent to the C ~'t. Th is action pe rmi ts re views by the A lE and the CM to occur simu ltaneously a nd e limina tes dep ende ncy o n time ly successive party action as well as one tra nsm ittal inte rval. TIle time between the date a vendo r's initial submi ttal goes to a cont ractor an d the dat e thc vendo r receives a satis factory review is essential 10 planned co nst ruction pr ogr ess. Portion s of the work that require reviewed subm ittals cannot be sta rted unless a satisfactorily re viewed s ubmittal is in the co n tractor's hands. Th e fab rication or man ufacture of many item s will not com mence unless the sup · plier has an "npprove d 't sub mitt al in IIand. It is common for suppliers to designa te delivery time as so many " days after receipt of an app roved shop d rawing." Co nseq ue ntly. the sub mittal review process cou ld beco me a major factor in th e projec t schedu le. A few o the r Ieruur cs o f the submitta l syste m in Figure 17.4 sho uld be obse rved. The: first is that tWOsta ndard subm itta l for ms sho uld be d eve loped by the proje ct team. O ne is for use by con tracto rs when t hey initiate a submi ttal; th e o ther is for the A l E when returning submitta ls to the Cf'i l and co n tracto rs. Co mp uter software is readily ava ila ble that faci litat es cus tomized. inexpe ns ive fo rms. Because the re will be n umero us sub mit tals Cra m man y con tractor s invo lved in severa l projec ts, it he lps if the co ntracto rs. A l E . a nd CM ha ..'c a simple visua l mea ns of recognizing which project the submittal belongs to an d the sta tus of the subrniua l whe n it a rrives. Co lor cod ing by project. as well as color codi ng multiple -copy forms. is a simple way to efficiently handle the vo lume of pa per involved. It is an example o f good manageme n t tha t simply smco rhes the proce ss. The use of bar codes can also keep an impo rtant paper trail con veni ently in orde r. The system in Figure 17.4 also provid es a convenient approach to exped iting th e sub mitta l process. As tr ansmittal forms arc received by the eM. they can be logge d int o a com put er ized expedi ting file and tr acke d while they proceed thr o ugh the review process. The Cto.'l sho uld be able to de termine at any time, whe re e ach sub mitta l is and, if it is bogged down. take appropria te ac tion to exped ite it.

-

2

(Form Only)

(Sub rnlna t Only)

Review ed Submi na l File

- - ----1

c j

Pan

(Provided b~,v El

Re rum For m

[Submittal ... Fo r m) -~---' '----~

[Submittal

... Form)

(Sub milta l ..- Fo rm) -~---'

Architect I Engineer

FIGURE 17.4a pr econ str ucticn Sub mittal Review Proce dure (for - Revic wed. 0 .":.- or " Re viewed. O.K. as noted "

submittals).

,

. :~

2 64

Chapt er 17

..

Quality M anagement

f-- - - - - -

Resllbmil l a l l - - - -

Section 17.7

Co ntra ctors

,.

17.7.3 Qua lity Conformance Responsibility

[Submlna! Only)

Re vie w

There arc two sepa rate responsibilities when dea ling with qu ality conforma nce: providing quality conforma nce and determining if qu ality con formance has been achie ved. The party tha t signs the contract for constr uction with the owner is responsible for providing construction that con forms 10 the drawings and specifications covered by the scope of wor k sta ted in the contra ct. De ter mining if conformance has bee n att ained by a cont ractor should remain the responsibility o f the party that developed the drawings a nd wrote the technical specificat ions from which the contractor constructed and by which conformance must be measured. Dep art ing from these two well-foun ded principles when de veloping the Quality Co nformance Pla n is neither pruden t nor appr opriat e. However, under pressure from disor iented owners or advice from those not thoro ughly knowledgeable in the eMsystern, (he de parture sometimes hap pen s.

Construction Man ager {Subminal

_

Ollly)

C

J P;Jr! Return Fo rm

26 5

To accomp lish this, the sub mitta l forms prov ided to contractors should be consccuu vely numbered and distribu ted to cont ractors in blocks of numbers. This eliminates the option of recipients assigning thei r own logging numbers. The submitta l number printed on the initiating form can be used by the AlE and entered on the re turn fonn issued by the Al E. Communication and tracking will be simpler with a single numbering system . Another feature of the syste m shown is the positive separat ion of unreviewed and successfully revie wed submittals in the possession of the CM. If the transmittal forms provide sufficient information. the eM can tile the forms coming from cont ractors separately from the submittal itself. Th is will prevent unp rocessed informa tion from mixing with processed information , especially when CM submittal review occurs both in the horne office a nd the field. Lastly, if the CM or NE re view unco vers a problem with a contractor's submittal. a tele phone call might be sufficient to relate the specifics of the proble m and perhaps arrive at no expe ditious solu tion . It must be remembe red that the NE and eMa rc rcp~ rese nta tives of the owner and ha ve a common goal in solving project-related prob lems. \Vhile a sho rtcut such as this would be risky in the GC system. it is a logical alte rnative in the CM system.

--1

{Pro vided by eM )

CM

The Quality Confo rm ance Plan

[ I'ruv idcd by ME)

C

L

[Subminat + Form)

{Submittal + Fo rm ) - - - - . J Rej ec ted Sub mitt:lls File

f--------'

Architect I Enginee r

FIGURE 17Ab Precon struction Submin al Review Proc ed ure Ifor ··Re\·it\\ed.N,G: · submiIl3Is).

17.7.4

Inspe ct io n by Convenience TIle fact that the CM's Level 3 Pers on is in residence on the construc tion site tends to influence owners to assign day-to-day inspection responsibility to the CM.This assignmc nt for shea r conven ience ca nno t be supported by logic.The day-to-day responsibililies of the site manage r leave no time for more than cursory construction inspection oppo rtunities. This is not to say tha t inspection is not important. The on-site manager (as well as othe r team members on site for whatever reaso n) has a responsibility to point out

266

Chapter 17

Section 17.7

Quality Management

Qual ity Conforma nce o n ACM Project s A closer look a t the usc of multiple co ntracts on a C~ 1 project should lesse n the owner's concern s ror quality conforma nce. Involving mult iple cont ractors be neficially alters the manner in which contractor conformance is reviewed when compared with the GC system. This benefit is derive d from the fact that the re will be as many substantial completion date inspections as there are prime contractors on the project. On the typical GC project, there is one substa ntial completio n da te for the prime cc ntractor-c-the date on which the project can be beneficially occupied by the owner in whole or in part. A con tractor 's application for da te of substa nrial comple tion triggers se veral ad ministra tive eve nts that grant, den y, or change the da te req uested. An inspect ion is conducted by the AlE and owner 10 de te rmine if the contractor's work is acce ptable. and a list of uncomple ted work or work that requires cor rection is made (p unch list). 111e dollar value is retained by the owner to sec ure final completion. Obviously. when multiple prime contrac tors nrc involved, the accepted , literal interprc tntion of that definition no longer applies. Ea ch con trac t has a unique d ate of substantial completion. many of which have nothin g 10 do with physical occupancy by the owne r. However, each ap plication for a date of substant ial completion must be followed up by a n inspection of the contractor's work by the ArE a nd a decision on contract conformance. If the re are thirty pr ime con tractors on the project. there will be thirty substan tial comple tion inspections (concei vab ly at thi rty differen t limes) . There is no comparison belween the value to the owner of this multiple-q uality conformance proced ure und the single-qua lily conformance procedure stipulated for the typical GC project. One obvious advantage is tha t there is less chance that nonc onforming work per formed early in the project has bee n cove red up and is no t visible when the AlE inspection takes place toward the en d of a G C project.

17.7.6

Substanti al Co mple tion Requ irements The conditions that determine contractor sub stantial completion should be defined in the cont ract documents and will vary from contractor to contractor, depending on the

267

type of construction performed and the e nsuing inte rfaces with other contra ctors.Th e pro cedures which lead to determ ining the conditio ns of contracto r substantial completion shou ld be a pa rt of the Q uality Assu ra nce Plan. One only has to lake inventory of the variety o f construction services perfor med by the many trade contractors on a project to de ter mine the comple tion requ irement s for each. For examp le, the substantial completion requireme nt for a pile driving contracto r actually coincides with final completion. If ea ch pile was dr iven according to draw ings and specifications, there is nothing left for the contracto r ( 0 do except clea n up and demobilize. Conse quen tly, there is no need to establ ish extensive substantial comple tion criteria for a pile driving con tractor or other contractors with obvious cornplericn definition . On the othe r hand, the contractor who perfo rms masonry work has considerab le control over quali ty conforma nce. which must be a consider at ion for substan tial comple tion .The masonry con tracto r also has inte rface responsibilities with other contractors. which also must be valida ted before substa ntial completio n is granted. Consequently. the mason ry contrac tor, and all contractors with similar individual con tro l over their work, shou ld have very explicit substa ntial comp letion requ iremen ts in thei r contrac ts with the owner.

nonconformance to contractors when observed. However, inspection 's perc eived imparlance converts to virtual unimportance when it is assigned as a convenience. If the owner deems it necessary to have Iull-covernge. day-to-day const ructi on inspection by the eM, additi onal personnel tra ined specifically as inspectors could be prov ided by the eM (and paid for by the owner). bette r solution, howeve , would be (or the owner to add amnspecrto -ft to the-project team.The inspection firm would be responsibl e for both visual and physical qu ality assurance and involved in the Quality Conformance Plan. The standard CM app roach to con struction inspection calls for no mo re than a cursory involvement by the field manage r bu t requires that the Quality Conformance Plan designa te those specific construction activiti es where surveillance by the AlE , CM, or bot h is required. Deciding which activitie s should be listed is the preroga tive of the A lE. On ce the activities are decided upon , notice sho uld be served on con tractors thr ough the cont ract documents.

17.7.5

The Qua lity Conformance Plan

17.7.7

Contractor Qual ification The Q uality Con forma nce Plan should include proced ures that assure as much as possible that the contractors engaged for the project a re compe tent a nd capable of conforming to the dr awings and specifications. Alt hough legal restr aint s often supp ress conseq ue ntial prequal ification of con tructo rs on public sector projects.ther e is still value in ale rting potenti al bidders to the fact that quality confor mance will be a major perform ance requ irem ent on the projec t. T her e a re no laws against ob taining a tteste d inform at ion from co ntractors with refer c nce to their past perform ances. In fact, such informa tion may be of significant value in the eve nt that pe rform ance pr oblems de velop with a contract or who pro vided questionable informatio n. Whe re pe rmitted , contracto r qualification should be prequalification, not postqualifica tion. II is much less "t rauma tic" 10 deny bidding privileges to a contractor tha n to withhold an award from a contrac tor who submits the low bid. Comprehe nsive pr equalification questionnaires should be developed as part of the Qu ality Con forman ce Plan. A proced ure that will assure fair and eq uitable comparisons and noncontr oversial selection of contracto rs who file them should be documented .

17.7.8

eM Qua lification Efforts

Aside from cont rac tor qua lification by form . the CM must screen potential bidde rs in eve ry o the r possible way to e valuate their availability and specific pe rform ance posslbilities.The 0-.1 should research the con tracti ng field in an object ive manner and substa ntiate que stionabl e refe rences with additional effort. The re are a number of informa tion sour ces available in everv area: local trade contractor organiza tions, cooper ative general contractors who have worked with

268

Chap te r 17

Se ctio n 17.8

Qua lity Ma na ge men t

Contra cto r Supervision A final inclu sio n in the quality conformance plan should bc a stip ulation to include the name s of acce pt able on- site supervisors of key con trac tors in their owne r-contractor agreements. Instituted to rem ove self-se rving sup er visor y cha nges from cont ractors, this practice hJ S beco me q uite com mon in th e G C syste m. One of the signa l att rib utes of the CM system is that owne rs ca n select the ir project man agers on the basis of q ualifica tion an d demonstra ted a bility. To extend this attribu te de eper into th e system. it is logica1 for o wners to have the o ptio n of control ling the key pe rso nnel th at co ntractors ass ign 10 the project. Th is is nor necessary for all con tract or s. o nly th ose who are pivotal regardin g timel y or qua lity perfo rm ance. To accomplish this, th e C M must extend con trac tor researc h and q ua lification to incl ude the pros and co ns of the ir supervisory per sonn el. 'Ole availability of the se person s to supe rvise the con struction sh ould be facto re d into the contractor selection pro cess. and cont rac t provision s sho uld be inserted to require compli an ce. For pra ctical purposes. more than one preferred su pervisor sho uld be named for each contracto r selected to function unde r this provision.

17.8

_

17.8.1

_

_ _ _ _ _ _ _1

Pre constru cti o n Mee ti n g Every co ntracto r's Qua lity Plan sho uld mandate that the contractor 's supervi sor meet with th e CM's Level 3 Ma nage r a week or so prior to bringing a crew o n-site 10 con struct. The purpose of the meeting is to review the terms of the co ntract docum ent s, especially the drawings and technica l specificat ions. and go ove r the contractor's pre vio usly submitted and revie wed qu a lity plan . Thi s preconsuucrion meeting between an ind ivid ua l co ntractor and the CM is of utm ost importance a nd sho uld not be 'vaived und er any circumstan ces. On e of the major pro ble ms with tr ade con tractor performance is blat ant disrega rd for a project's specific req uirements. Th e constant repetition of special ized work , da y in nod day OUI, fro m proje ct to proj ect. installs a mind set th at every project is the sa me, when in fact they Illay be q uite different. Mo st trade co ntra ctors need a wake-up cnll o n CM projects. especially if it is thei r first invol veme nt with CM or with the specific co nstruction ma nager. The preconst ructio n mee ting provides th is oppor tuni ty,

THE CONTRACTOR' S QU ALITY PLAN

To enh ance co ntrac to r qua lity confor ma nce re spon sibility, ea ch con tractor should be required to subm it a Contracto r's Quality Plan- i.} de tailed desc riptio n of how the co ntracto r plans to accompl ish cont ract resp on sibilities and meet the speci fied qua lity confor ma nce cri teria . A Con tracto r's Qua lity Plan sho uld not ec ho the requirements of the drawings and specificat ions. It sho uld explain how the co ntr actor intends to coo perate with inter facing con tractors and maintain co nstruction progre ss. and it sho uld detai l the construction mean s, met hod s. and techniques to be e mploye d. Contractor Quali ty Plans are not new ; they have been requ ired by so me owners for man y yea rs (mos tly o n en gine er ing projec ts) an d have pro ved th eir valu e time and agai n.The maj or det errent to their mere freque nt use is that the GC sys tem and its single prime contractor form at turns crea ting a quality plan into a major burden for the GC on an architectu ral projec t. On architectural projec ts. th e majority of the cons truction will be pe rfo rmed by subcontracto rs. This mean s that each subco ntracto r must develop a plan and submi t it to the G c. Th e GC mu st then com pile all th e plans into a single plan that cove rs the entire proje ct. Th is becomes time-con sum ing fo r the GC at the sta rt of a project

269

when efforts are con centrated on getting con structi on underway. As a consequence, a nd in spit e of thei r va lue, Contractor Qu ality Plan s ha ve not be com e a standard on G C pr ojects. In the C M contracting structure, where GC subco ntracto rs are now prime contractors, crea ting Contractor Q uality Plan s is no longer a problem. Each cont ractor creates a plan co vering her/his own wo rk and submits it to th e CM within a reasonable time before interfacing of the initial contractors begins. Co ntractors who do not interface with the initial performing contracto rs need not submit plans unt il later in the project. Each plan is a fra e.ion of a total GC plan , so none are significantl y burdensom e, H owever, the CM must se« th at the contract documents perm it ample time [ 0 review the plan s and coordinat e re q uireme nts betw een inte rfacing co ntrac tors,

vari ous trad e contrac tor s in the area and be yond , and own e rs who recently bu ilt or have ext en sively bui lt in the recent past. A C M that is know ledgeable in the co nstru ction ind ustry should have no mor e difficulty inves tiga ting and accura tely assessing the co nt racting market place in areas rem ote [Q his hom e base than in his o wn backyard . In fact, the chance of a CM pro d ucing a mor e co mplete and ben eficial objective assessment of co ntractors away fro m his home ba se is much be tte r, due to the amount of o riginal effo rt that will be expe nded and the abse nce of preconce ived opin ions of loca l co ntracto rs. 17.7.9

The Contractor 's Quality Plan

17.8.2

Co ns t ruct io n Me ans, Me t h o ds, a nd Te chn iq ue s It is common pr actice to place as much resp onsibility . IS possib le for construct ion me ans, me thods, and techniq ues in the ha nds of the con tractors. Co ntractors a re most familiar with wha t wo rks and wha t does not and ha ve the ability to come up with econom ical solutio ns to constru ction ope ra tions. TIle CM sys tem su pp orts th is. However. unchecked freedom of choic e in this a rea ca n lead to problems. A contrac tor's con struct ion operat ions intentio ns should be known before he/she mo ves onto the site and begin s work . As an example, it will help the CM 's cont ractor coordination efforts to know the seq uence and timing of pours the concrete contract or intends to make , the equi pment to use, and the sou rce of concre te supply. Co ord inatio n planning may change if a conveyo r, concrete pump . or cran e and bucket system arc to be used . If a conveyor is the co ntrac to r's choice, additional information con cerning how segregation is to be co ntro lled will be good to know bef ore th e first po ur is sche d uled. Th e contractor's Qu ality Plan sh ould include a deta iled explanation of how the work is to be done with little omitted o n the pre te nse of comm on practice.Th is part of

_

270

Chapter 17

Quality Mana gement

the plan serve s three purposes. first , it grea tly assists the eM in planning the coordina tion of con tractor ope rat ion s.Second. it provides a n o pportunity for contractors to pointedly review their p ro posed construction mea ns, methods, and techniq ues in the co n text of the immedia te project' s req uirem ents. And third , it instills confidence in the co n tractors that the projec t is to pro ceed in a co ntro lled a nd o rderly fashio n-a way tha t will allo w them to extrac t their expec ted profit.

17.8.3

Int erfa ce Actions On all p rojects, efficie nt int erfacing o f trade co ntr actor wo rk is a major cha llenge to ge neral co ntrac to rs (o r cons truc tion manage rs, as the case may be ).The fact th at trade contracto rs arc prim e co n tractors o n CM pr ojects p rovides o ppo rt unities 10 re duce the frequ e ncy of int erfaces and directly enlist trad e co n trac tors as coo perato rs ra ther than co mpetito rs. The con tra ct or 's Qu alit y Plan sho uld expla in how the co ntrac tor plans to interface with any preceding. concurrent, and following contractor s. The plan sho uld slate how th e co ntrac tor plan s to verify the condi tion a nd dim en sion s of pre ceding construction before begi nning wo rk, and how the pr ogress. co ndition and dim en sions of the work are to be d ocu ment ed as it proceeds. As an example . in a n a tte mp t [0 red uce a n in terface, assume it maso nry cont ractor has been assigned to se t holl ow me tal door fra me s in masonry walls, a task nor mally assigned to a carpentry con tracto r. Th e ma sonry co ntracto r's wor k-sco pe stat es this. and th e technical specifications prescrib e the dimen sional toleran ce cri teria that must be mel to successfull y hang the do ors in the futu re. The masonry co ntra ctor mus t include in his Qualit y Plan how he int en ds to assure the con trac tor who will ha ng the doors that the Irnrnes have been installed according to specifica tion s. This co uld be accompl ished via dime nsion do cu men ta tion . periodically ver ified by th e doo r contracto r while the ma so nry con trac tor is ac tive on the project. If th is is the so lutio n, the doo r co nt rac to r must include in his qu alit y plan that the se verifica tio ns will be pe riod ically made. It would , howe ver, be simple r if the CM verified the dim ension s, a nd ther e is no reason why this canno t un officially be d on e. Ho wever, ultimate resp on sib ility for dimen siona l inte rfac ing must remain with the co ntracto rs.

17.8.4

Contract o r Quality Plan Su bmitta l For the gro up of co ntracto rs who must be e n-site a t the sta rt o f co nst ruction. the Contracto r Quali ty Plan s should be sub mitted to the CM as soo n as possi ble a fter award. The plan s for th e rema ining co ntrac to rs sho uld foll ow the first gro up on a schedule thai permits eM p roc essing p rior 10 1I co n trac to r's move on -site. Submittal lead time sho uld conv enien ce the er-.rs need to review, coo rd ina te, a nd com me n t o n the plans and include time for the co ntractors to respond to the CM 's comments. The CM 's respon sibility to the contractor in the review proce ss sh ould be the same as the NE's respo nsibility to the co ntract o r in the sho p drawing, product da ta and sam ple review process. The own er-cont ra ct o r contracts sho uld includ e similar lan-

Section 17.8

The Contractor 's Quality Plan

271

gu agc to el iminate eM liability for " ap prov al." Th e eM d oc s not accept resp onsibility for a co ntractor's success; the CM is using the information to manage the project. TIle plans are imp ort ant a nd s ho uld be liste d as a co ntra ct requirement to assure resu lts. It is also prudent to require cont ractors to have their plans complet ely p roc esse d as a cond ition for their initi al pr ogress pa ym ent or e ven the sign ing of a contrac t. In the case of the initial gro up o f con trac tor s, a p roces sed Qu ality Plan could be a co ndition for award. Co ntra ctor Qu ality Plan s should reside in th e CM 's file at the projec t site to assist the CM' s Lev el 3 M an ager in con struction planning an d sched uling and for one-on one use with contractor s that requ ire motiva tion .

17.8.5 Wa rra nties a nd Guarantees Although th e warra nties and guarant ee s pr ovided by co ntrac tors s ho uld not be co nside red q ualit y managem en t tools.jhcy do play a ro le in th e ove ra ll qu ality mana gem ent pla n. The y provide s ta tic risk pr ot ection for the owne r agai nst lat e nt problems with wo rk ma nsh ip, mat eri al. a nd eq uip me nt. Two type s of wa rran ties/guara n tees are ge ne ra lly req uired by con struct ion ca n-

tracts: 1. Warranties/guarantees provided by thc co n tractor and usu ally backed by a sure ty bond tha t assu res the ow ne r that quality conforma nce failu res (tha t reveal themselves du ring a speci fied peri od o f time afte r su bsta ntial co mp letion is cer tified o r final payment is made to Ihe con trac tor} will be corre cted by the co ntra ctor without co st to th e o wne r. 2. Wa rra nties/gua ra ntees provided by the ma nufactu rers of AlE selected materials an d equipment that assure the ow ne r that if their p rodu cts furn ished und er the contract do no t perform to the ir warrant ed standa rd o r cap acity, co rrection s will be mad e with out cos t to the o wne r. p rovidin g the failure occurs within a specified period of time .

17.8.6 Team Involvement in Warranties/Gua ra nt ees With the AlE's lea d. th e project team sh ould see tha t all available wor kmanship, materia l and equipm ent warrant ies/gu arantee s are listed in the speci ficatio ns. Pr oced ure s to acco mplish this sh ou ld be included in the Qu alit y Design Plan . The eM sho uld include the co llec tio n of requ ired warranty/guarant ee doc ume ntat ion from cont ract or s ( incl ud ing the ir final dispo sition ) in the qua lity man agem en t plan . Warranties and guarantees are d ocumen ts that remain do rma nt un less the occasion to activate them nrises.They hav e explici t star t dat es and durations which limit the lime peri od during which claim s can be made agai nst them. Their wording is precise re gard ing what is co ver ed and what is not. While the y pro vide ce rta in pr otection to th e owner, they p ro vide as mu ch if not more pro tection 10 the ir issuers. To ex tract the most protect io n from warranties/guara ntee s, the tech nical spec ifica tions in nami ng the dat e or con di tions th ai start their cove rage should be specific.

272

Chapter 17

Qua lity M') 'l.agement

Although most manufa cturer's warranties /gua ra ntees consist of unbending "boilerplate " provisions, the start da le or the conditions that stan the cove rage can some times be specified by the AlE. This shou ld be do ne if ut a ll possible. IL m ust be rem ember ed tha t on multiple-co ntrac t eM projects, the traditio nal ~a[e of substantia l completion is never certified. The re is a dale of substantial complelion for each contractor. Consequently. a dale of substantial completion may not be an appropria te date on which to start a warranty or gunran tee. For exam ple, the site electrical ut ility contractor's date of substantial completion could o~cu r befo re the project is 20% comple te. H a tra nsfo rmer furnished by the co n. tracto r IS cove red by
17.8.7

Section 17.9

273

of the first component of the bidding documents to the team for review. It sho uld continue until all compone nts have bee n sub mitted a nd reviewed a nd the biddin g docu me nts asse mbled. Th e mu st-da te for re view comp letio n is in time fo r th e issuing of a pre -bid addenda to bidd er s, if o ne is requ ired. The cont rac t doc uments are th e produ ct of the projec t tea m. Each team membe r co ntributes 10 the ir devetopme nt.n nd the checks and halnnces of team intera ction he lp to ass ure that 4C req uire ments an: met in their publication. Ho wever, the explicit expertise of each tea m mem be r m ust e xclusively prevail when it co mes ( 0 the cont ract docume nt's co mp leteness and co rrectness.

17.9.2 4C Responsibilities Figure 1.1, Responsibility D istri butio n: ACM. G C and D-B Systems (Chap ter I, Fundame ntals of the Roo t Fo rm of CM), places sale responsibility for design whe n using the ACM syste m o n the A/E. Design is exclusively de lineat ed o n the drawings and prescribed in the techn ical speci ficatio ns. Co nseq ue ntly, [he eM an d the owner ca nnot assume nny responsibility fo r the cc mplete ness/corrccmess of the drawi ngs or technical speci fica tions whe n assessing the contract doc umen ts' q uality. Both can and a rc responsible for the cla rity of the d rawings and technical spe cifications. Th e CM has exclu sive respo nsibility for con str uction coordina tio n, an d all the bidd ing doc umen t co mponents tha t deal with co nstructio n coo rdi na tion must be de veloped by th e CM. Cha pte r 20, Multiple Bidding and Co ntract ing, expoun ds o n these compon ents. Fo r example, top prio rity for (he eM is dc terrnin atin g and desc rlbing work-scopes,Th e e M is the o nly te am membe r with expe rt ise in this area. and th e e M is responsible for th e co rrectness/complete ness of the work-scope desc riptio ns and their interfaces.Th e A/E and owne r ar e respo nsible for the clari ty and concise ness of th ese bidding docum en t co mpo ne nts but not for the ir correc tness or co mpleteness. TIle owner is respon sible for the cor rectness an d comp leteness of the bidding doc ume nts in tot al. A lthou gh the co mponents will be de veloped by the N E and e M , the owner must cer tify the ir legality and their con formance to the o wne r's co ntrac ting policy. To guarantee this, the own e r's atto rney m ust review the docume nts and mak e changes as necessaryThe AlE and CM can o nly ad vise o n th e cla rity a nd co ncisene ss of the wordi ng, not o n its adequacy, Th er e will be times when the AlE o r eM might have (0 familiarize the a nomc y with te rms and proced ures used o n ACM projects, but the a tto rney has the fina l say.

Warranty/ Guara nte e Follow-Up As the flnal ste p in carrying o ut the qua lity ma nagem ent plan , the e M shou ld place copies of all warranti es and guarantees in a tickle r Hie. Chap ter 14, Material/Eq uip men t Manage ment . cove rs war ra nty/gua ram ee fellow-up as part of M/E management.

17.9

Contract Document Quality

CONTRACT DOCUMENT QUALITY To this poin t. th is chapter has covered the proced ures fo r designin g q ualit y into t he project and for extr acting q uality from the pe rfo rming con trac tors. An add itio nal a rea of qua lity sho uld be considered: the quality of the cont ract documen ts pu blished by (he team tha t co ntractors will use to estimate the cos I of the project fo r bidd ing pu rposes and to e ventu ally cons truct the project. Th e con tract doc uments consist of th e d ra wings and the project ma nual. The project man ual cons ists of the contract fo rm, general condi tions. supplementa ry and special co nditions. and the technica l specifications. In o rde r to receive bids for the construction work. bidd ing documen ts must be dis. rributcd 10 con tracto rs.B iddin g documents co nsist of th e cont ract documents, pro posal form, instructions 10 bidde rs, a nd other informa tion tha t clarifies bidding procedu res.

17.9.1 The 4C Requ irements 17.9.3

To properly serve th e owne r. bidding doc ume nts must meet the 4C req uire me nts of suitable document ati on; they must be: Clear- to e nsure th at all con tracto rs int er pret th em the sa me way; Co ncise-so they can be prope rty inte rp re ted in a re asonable length of time; • Complete- 50 that the tot al requireme nt is presented; Correct-e-tc ensure against er rors and a mbigu ities, To achi eve this. a majo r review of the bidd ing do cumen ts is necessary.Th e re vie w should start in the call tract docu men t phase of desig n, co incide ntal with the sub mitta l

eM Input to Document Review

T he C M's respo nsibility for bidd ing docum ent revie w shou ld be carr ied o ut in a man nc r that pre cludes the need for large o rga nized int ern al meet ings. Dra wings a nd tech nical specificatio ns re views can be be tte r achieved by individu als wo rking alone ; there is no nee d for collaborat ion unless qu estions arise o n a possible correction . This more inform al arra ngeme nt allows the revie we rs flexibility to devot e time to respo nsibilities that may be more pre ssing. Howe ver, bidding docu me nt review canno t be accomp lished witho ut planning a nd assignme nt of responsib ilities. Its impo rtance a nd lime req uire ments ar e (0 0 sizeab le to do oth e rwise.

2 74

Chapt er 17

Sectio n 17.9

Qua lity M anagement

Biddi ng document reviewi ng is one

eM activi ty

that can pr oductbvely utilize

Contract Document Oualit y

275

Bidding D o cu m e nt Re view Co m menls

most all operations, resource, and administra tion sta ff.The review essentially cove rs the clarity an d co ncise ness o f the drawings and techni cal speci fications (the bidding docume nt component s d eveloped by the AlE). A rev iew oCthe e M o rga niza tio n covered in Chapter 8 ind icat es that most perso ns emp loyed in opera tion s and reso u rce, and so me in administra tion . sho uld be capa b le of this type o f review. I! expedites the review process if the dr awings and spec ifications arc assigned by

N E Project No._ _ CM Project No._ _ Dale

'";'

I--.J

Reviewer:

AlE

eM

Proje c t Name:

O wner:

Revie wer's Initials:

Phone:

Ui~pll.

No.

Disci p li ru:

D OCUIIll"1I1

LUCillioll

Review CUlIllllc.: nb

discipline to memb ers of the resource group. Mechan ical VE and VM person s should review the mechan ical dr awings an d spe cificatio ns. electri ca l VE and VM persons, the electrical sectio ns, etc. It is no t necessary that those assig ne d to review th e bidd ing documents Cor clarity and conciseness to ha ve been invo lved in the pr oject they are reviewing.This revie w is strictly based on the documen ts iJS prese n ted . II is bes t if ope rations/ad ministration person s who have been involved in the projec t are assigned to rev iew the ge ne ral co nd itio ns, supp leme ntary and spec ia l con dftlons, proposa l forms. and instru ctions to bid ders. H o wev er, to ge t an obj ecti ve opinio n, it is best if per son s who have not bee n involved in the pr oject rev iew those parts o f the proj ec t manua l developed by CM personnel (such as wo rk-sco pe d escript ion s and supple me nta ry and speci al co ndit ions that apply to multipl e co n trac ting and bidding).

17.9.4

Communicatin g 4C Comme nt s

One meth od of effecti vel y co mm unicatin g bidd ing docume nt re view inf or mation [ 0 the team is to use a sta nda rd Conn. On this form. ea ch item that could be nefit fro m a re vision wo uld be capsuliz ed,Th e form also ide ntifies th e sour ce o f the informa tion. if furth er com ment is need ed . Figure 17.5 o n page 275 is a typical Re view Co m me nt Form. Ea ch reviewer would log hislhc r co mme nts as each page of ea ch assigned document compo nent is scru tin ized . Sub mitta l dates wou ld be schedu led during the d ocument review pe riod . o n which cu rrently com ple ted form s wo uld be forwarded to the {cam's document review co o rd inato r (se c Chapter 8. Fig ure 8.5).TIle submitta l process would continu e until th e rev iew de adl ine es tablished in the program schedule. TIle Document Coordi nat or (either a CM o r AlE learn member ) wou ld review the comments when recei ved and forward them to team members with the authority 10 make changes, if necessar y. If add itional informati on on a comment is req uired . the reviewer can be co ntac ted . A notat io n o n th e review fo rm wo uld ind icate the fina l d isposi tion o f every co mme nt. The Docu ment Coordinato r would main tain the revi ew commen t file.

17.9.5

Typical Biddi ng Docum ent Revi ew Com ments Figure 17.6 o n page 276 shews exam ples o f the commen ts th at co uld be made du rin g a bidding docum ent review.

I

Number. D iscipline: DlXUnlenl: l...ocalion:

RCYleWen sequ ence nu mber Arch; SIr. Me..:h; Ek c; Civ; Othcl O,,'gs:Tspcc: GC,pcc; SSspce: PropF; InyB; O ther 0 ....' .; Page; Pilla: ~b rilril

Oispw.;lioll, UscJ: :-;01 UKd fIGUR E 17.S A typi ca l Bidding Dccumeru R e view Commen l f o nn.

sitio n

2 76

OS

Chapter 17

Arch

Qua lity Man ag ement AOO8

Dwgs

I 06

A rch

TS pec

().I200f.l

07

Ar ch

Dwgs

AOOI

East Wing Plan-'Tot al dime nsion (162' - 0') does not agree ....ilh subdimensions (24' - 6" + 24' - 6- + 48' - ()"' + 4.~' - ()"' ;. 16' - 6") Bela .... grade foundation blocks specified as Iighlwe lghl instead of sta ndard,

CH APT ER '.

Resource Management

A rchite ctura l abbreviations ere difficult to read . luge r Iont be used .

SU~C SI it

"

eiv

Dw gs

S002

Ca tchbasin . 8 in Dclail1.Q.4 is 1I0 t lcc eted on the park ing lot layout plan. (Sho uld be in NE comer. j

IS

Civ

TSpecs

0205Q19

Dem olition requ ire menu arc nOI included for the guardho use .11 Easl Gal e.

06

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EOOS

Indic atc new br eak er size in u isting switchboard ~ D S W " l h a l feeds ne w p:mcl ·'!'olBA."

07

Elcc

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Indicate A .I.e rOiling o f busss of clus ling lOOA swnchbe ard "DS W" (or corr ect sizing of new breake rs,

01

LndS

Dwgs

UlOI

Add note adja cen t to irrigation co ntroller in ele ctrical room 10 refer 10 Dwg E(J(17 for electr ical connection.

02

LndS

Dwgs

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"Nolc 1" regcr s 10 an alte rn ate bid item not in TSp ec. TSpe e 014SO, para 2.07 Sod indica tes ty~ sh all match exist ing. Odel e no te I.

1 8

FIGURE 17.6 Ex ample s o f Iypical Bidding Doc ume nl Revie w com ments,

Construction projects are uniqu e in thal each is physically different and typically located on a different site. The only repe titive features are the types of construction resources, and while the types are the same. the required resources differ on every project. The real challenge of construction is not its physical accomp lishment bUI the pla nning and mobilization of the reso urces that are required. and these resources are key to project success. However , success cannot be claimed until resources are properly converted to actions duri ng construction. A resou rce is so mething that C.IO be called upon when needed ; a person, a firm. au organization. a piece or equipment. a too l. a sched ule." pool of funds. and so on. 10 specific matching tertn st a co nsulta nt, a contr actor, a labor union, a crane, a hammer. a Short Term CAP. a con tingency, etc. arc all resou rces. Chapter 19. Risk Manageme nt. sta les that the alternat e title for a constru ction manager could be ..Risk Manager.t'Thi s chapter suggests yet anothe r uu er-Resou rce Manager."

18.1

THE RESOURCE M AN A GEM ENT A REA OF KNO WLEDGE

The resource manageme nt area of knowledge enco mpasses the selection, organization, direction and use of all project resourc es. both human and physical.The CM contr acting struct ure places all consu lting, des ign, management. contracting, construction and construc tion services in a coopera tive or team environme nt, focusing team coordinalion activities on the constr uction man ager, Additionally, the CM's own multifaceted resources must be maint ained in the flow of the project.These ubiquit ous ob ligations make resource knowledge and resource management essential part s of successful eM performance, TIle eM must have the ca pability to proficiently understa nd, organize. and motivate the projec t's resources in orde r to extract the best resul ts. The eM must possess good j udgment and excellent communicat ion skills. and exhibit leadership quali ties in one-on -one and team situa tions. The resource management area o f knowledge includes but is not limited to an understanding of human resou rce disciplines, physical resource capabilities, orga nizationa l structures. human nature. conflict management. motivational factors, productivity factors, and overa ll hu man relat ionshi ps.

18, 2

_

_______J

H UMAN RESOURCES

For the purposes of this chapter. available resources can be conve niently categorized as human, physical. and financial. On ACM projects. the AlE and CM provide human

_

277

278

Ch apt er 18

Sect io n 18.2

Resource Management

re50~ rces, the.owner provides hu man and financia l reso urces, and con tractors pr o vide services that includ e both hu man and physica l resou rces. Beyon d the projec t team , constructio n support suppliers provide physical reso urces, sureties and insura nce compan ics provide financial reso urces. and testing labo ratories provide human resources. It is import ant th at the project team has a clea r unde rsta nding of the contribu tion resources make La the projec t duri ng design and cons truc tion . Con trary to the concept of qu ality management (where it is accepted that varying leve ls of pe rformance by contractors do not exist. only conformance). the performance o f resources, especially human resources, varies considerably. Th e project team must recognize the capabilities and inclina tio ns of their resou rces whe n making decision s or assign me nts.

18.2. 1 Manag ement l evel l ead ership Th e Mana gem ent o r Level 2 eM Pe rson m ust have the acume n to quic kly an d accurat~I ~ assess the ab ilities and de mea no r of the owner's a nd AlE's team representa tives. This IS the best way to extra ct the ir maximum a nd timely perfor man ce d ur ing the course of the project. TIle CM's team mem ber qu ality assessme nt shou ld begin a t the brai nst orruina scssi~n, de velop duri ng th e or ganizational meeti ng, and expa nd du ring subsequent ".'eetm gs. Const.ant contac t be twee n learn membe rs will confirm o r cha nge first imp ressions as the pr oje ct mo w s 10 the design phase. . Auth orit y an d assigned responsibiliti es arc no t adequ ate in themselves 10 pro v.lde maI1:lgelllcntsuccess in privateinu uslry. Fe w peo ple produceto their eap.lcity simply becau se the y are ordered to do so. When mana gers succee d in extracti ng maximum performance. it is be cause of their ability to lea d and the respect they earn from those t hey mana ge. Und e rstandi ng the probl ems and idiosyncraci es as well as the abilities of those be ing managed makes ma naging easier and more produ ctive. To this end. the CM should pu rpos efully learn as much 'IS possible about the ream represen tat ives of the AlE a n~ the owner. Knowi ng what to ask for, and how and when to ask for it, has much to do With th e qua lity and timeliness of a response. . It was pointed out earl ier that the team 's prime leader ship sho uld no t be assigned to nny o nc team membe r. The leade rship role sho uld be pro rem. shifting fro~ one mem be r to an ot ~ cr and com ing to re st on the memb er whose e xpe rtise is pe rtinent to th ~ cu rre nt circumsta nce. Ho we ver , the c~rs manageria l leader ship is germane at all times. The refore, it is the CMos responsib ility to constantly and con sistently mot ivate team members to act coop e ra tively on the tasks a t hand . For example,.d uring th e design phase when the AlE is the primary team lea der , the CM must motivate both the o w nc r and AlE to pe rfo rm acco rding to the constra ints of the program sche d ule and make dec isions that co mply with the budoct. This m ainmust be acco mpl ished in a timely, positive. and unobtrusive mann er in orde r tain the team's rapport. A similar challenge exists within the CM o rga nization whe n the management level CM represent ativ e refer s project ma tters to ope rations. reso urce, adm inist rati on , and SUppOTt perso ns within the C M firm. Alt hou gh it can be assum ed that the CM representative's leadership has bee n es tablished by virtue of pro motion. it still requires

;0

Human Resources

279

a pp ro pria te motivation al tactics to expediti ously e xtrac t maximum perf ormance from in-ho use personnel.

18.2,2 Admin istrat ive l evel Leadership Mana gement of contracto rs presents a different challen ge. Th e project team is composed of members with different abili ties but with a comm on o bjective-to complete the project as designed and fund ed .Th e project te am mem ber s are agents of the owne r and a re pledg ed to consist ently act in the owner 's best inte res ts. Th e constru ction te am is composed of members with different abilities but with individua l objectives: to complete their work -scop e and extrac t a profit while doing so. Const ruction team members are independ ent co ntractors pled ged to conform to the co ntra ct documents but when doin g so, act in their own best interests. The field CM can cite vari ous terms of the co nt ract docu me nts to compel con tracto rs to perform . However. o rde ring co ntracto rs to co mply will not alwa ys prod uce success. Leadership earned as the resull of demonstrated co nstruction knowledge an d an ob vious sensi tivity for trade co ntrac tor success is the determinant. This criteri a shoul d not be tak en to th e point where co ntracto r per form an ce and the cont ract requirement s a re comprom ised. but to the point where contractors understand that the field eM has concern for the ir best inter ests as we ll as the owner's. Partn er ing. the formal team -forming process recomme nded for GC projects, is a n inherent part of ACM projects and is most effectiv e in fie ld o pe rations,The CM con str uc tion team is an intui tive par tnership compose d of the project team and led by the field CM and the contract ors. By work ing cooperatively, all team membe rs will derive the maximum benefit from the project. For the contracto r, the path to profit is efficient operations; doing things right the first time, according to the Shor t Term Constru ction Activity Plan. and in co operati on with the oth e r con tractors. A field CM must let trade contracto rs know that thei r efforts will not go unnoticed and that th eir individual success is closely tied to the success of o ther cont rac tors and ulti ma te ly to the succe ss of the project. Chap ter 11, Con trac t Man agem ent. a nd Chapt er 22. Multi ple Bidding a nd Co nt racting. expand on co ntracto r mot ivation.

18.2.3 The Project Team To ex tract the best from a project's availa ble resources. persons assigned to the proje ct team at all three levels sho uld be professio nally and socially com patible.Th is is a large o rder, co nsidering the temporary co nditions und er which the parties are brought togeth er. It is understood tha t pe rfect matchups are improb able. bu t every effort should be made to ap proximate the se idea l cond itions when making per son nel assignmen ts. Proj ect team mem bers must fun ction in co ncert. Their productiv ity relies o n mutua l respect (or each o the r's abili ty. work ethic, and pe rsona lity. Th ey must be knowledgeab le in their area of expe rtise, resourceful. have good judgment and excelle nt com mun icati on skills, an d appro priate leade rshi p att ributes. Each project team me mbe r must a lso ha ve a desire to coope rate. The CM 's hirin g practices sho uld take these att ributes into considera tion. AlE hiring practices. though not always o riented to the eM contrac ting sys te m, usuall y

280

Chapter Hi

Resource MJ nagement

I.e _el

1

2 3

Funcliun E xec uti ve: Ma n3ge me nl

Administ rative

Section 18.2

CMTi llc

AlE Tille

Executive Pr oject M:mager Fid d CM

Executi ve ProjeclNE Field AlE

OloIllerTillc

18.2.4

Project Representative Field Representative

attrac t the same calibe r person, Owne rs do no t alw ays have cons tru ct ion p rojec ts in mind when emp loying people-they have a bu sin ess to o pe ra te and hire aceordinglybut persons of the requi red caliber to serve on the project team can usually be found in the ir organ ization. A descriptive nomenclature for the three-tie r eM management structure is shown in Figure IS.1. Bri efly, the ma nage me nt leve l manage s the proj ec t a nd the Level 3 managers; the admi nist ra tive level coordinates and adm inisters con struct ion : and the cxecutii..c level deals with issues and p ro blem s th a t for whate ver reason ca nnot be handled at the management level. It is imp ossible to rate the thr ee level s in o rde r of impo rt ance becau se each contributes in its ow n Wily. How ever, the e M Level 2 Person is the most ubiqui tou s; the one involved in the project for the longest period of time ; the one that int er faces wit h the widest var iet y o f res ources, makes the mo st dec isions , and must possess the broadest ran ge of kn o wledge and experience , a nd serves at the manage me nt leve l. Of all three, this position is u niq ue to con st ruct ion coutru rt iug : the re is no prototype ill the GC co ntracting sys tem . Th e Field eM co nce n tra tes o n co nstr uct ion acti vities and cont ract or inte rfacing. Alt hough the stage and thc cha racte rs have been prese t, the Fie ld CM must put it all togethe r and make it work . There is no doubt that the SUCCeSS o f the project is primarily in the hand s of the Field CM once cons tr uction begins. The dut ies of the Field CM are listed in Chapter 8, The eM Organizati o n. Altho ugh some appear to be sim ilar to those of a superinte ndent in the GC sys tem, th e app roach to the ir execu tion differs significan tly, as th e field CM 's de dicated allegiance is to ihe owner instead of to a gene ral co ntractor. O ne o f the curly lesso ns const ruction manage rs learned was that the best GC field superintendents could not alwa ys be s uccessfully convened to effective Field CMs. The supe rinte ndents that could make the switch understood the differe nce be twee n the "carrot" and the "s tick" and instin ctive ly knew when and how to use one or the other. The C~1 has little to say abo ut the o wner's and AlE 's personnel assignmen ts to the project team. However , the CM sho uld do all po ssible to make them understan d the im po rtance of team member com pat ibi lity to make them realize that in -house posi tion and technical competence ar e import an t bu t on e o r the other rna)' have to be sacrificed for the sak e of the proj ect's succes s, Whcn a mismatch occurs, the C M has no choice but to somehow tactfully mo ld d iscord an t owne r and A lE rep resentatives in to a functio ning team , an d coer cio n will no t wor k. Tea m mismatches challen ge the CM 's ma nagement abi lity to the fu lles t. They can on ly be solved by assigning the very best Cr.-'f represe nta tives ro (he th re e leve ls of the project team. Th is is a prime eM responsibility.

281

Execut ive leve l leadership Le ade rship at the executive level requ ires greater in volvem en t in in-house man age ment th an in team management. The executive level is usu ally not immersed in day- tod ay project activity, unle ss the 2nd or management leve l person s e ncounte r un solvable p roble ms that must be addressed. Ho:vevcr, th.e deci.sions o~ the ex~c~t ive level t e ~m persons shape the future of the project by installing p roject po licies and maki ng human resour ce assig nmc nts. Day-to -day involve men t o f owner, e M, and AlE execut ive le vel pe rso ns is usu ally of short duratio n bu t very important, especia lly in the early stages of the project. The co nt ractual a rra nge me nts be twee n tea m members, assignme nt of responsibilities, and adoption of project policies mus t be fo rmula ted between them before the Level 2 and 3 (earn members ca n bec ome actively invo lved. Th e CM's executive level person mus t initiate the team concept and get the project team started quickly and he aded in the right direction . Execu tive level pe rson s select the management and administrative level sta ff for the project. Th ese select ion s shou ld not be made witho ut ver y ca ref ul con sideration o f the required techn ical a bilities and necessar y compa tib ility. Each execut ive must be intima te ly familiar with their firm's hu man resources and be able to properly assess the hu man resou rce needs o f the pr oject.

Executive

fi GURE 18.1 Desc riptive th ree- tier project lea IIIuomc nclarurc.

Human Resources

':

18.2.5

De signated Huma n Resources Chapte r 24, Acquiring eM Se rvices, po ints out tha t it is not unusual for the selection of the CM 's management and administ rati ve level persons to precede signing the contract with the owne r (and at the insistence of the owne r, have the names of one or bo th persons inserted in the owne r-CM contract ). Jf naming is an owne r requirement, at least one alte rn ate shou ld be designated in each category in the even t thai medical d isa bility prevents pe rfo rmance. It is also advi sable to includ e a p rovision that permits replaci ng a pe rson for other reaso ns with the owner's concurrence. If the ow ne r and Al E ar e sufficien tly convinced of the need for compa tibility, it is enti re ly poss ible that (he eM exec ut ive level pe rso n can pe rsuad e them to have th e na mes of their re presentat ives inser ted in the co n trac ts as well. Preselecting a nd des igna ting team me mbers is desi rable but not witho ut d raw backs. It is co mm on for CM firms to resp ond 10 ow ne rs' proposal requests without pre determining if they have the human reso urces re adily available to handle the proje ct (if awa rded) . Because lt is e xtremely difficult for a eM firm to control its work load , clie n ts must be so ught a fter at eve ry opportuni ty. \Vhen a proj ect arises, it can not be ignored.especial ly whe n a firm is in an expansion mode.

18.2.6

Huma n Re so u rce File As owners become mor e knowledgeable abou t eM and its critica l dep e ndency o n co mpete nt and compa tible Le ve l 2 a nd 3 Persons, they will beco me more insistent o n meet ing the persons assigned to the ir p roject and ha ving th em named in the co ntract. I t is no t difficult to visualize an owne r's po te ntia l reactio n if the CM is asked to introduce their proposed ma nagement or adm inist ra tive persons and the owner is told tha t

282

Cha pter 18

Resource Manag e ment

the CM has yet to figure that out. Hopefull y the CM has othe r projects which arc co ming to an end, ma king ma nagement and adm inistra tive pe rsons ten tatively availabl e. Ho~'ever, the coinci.dcnce is rar e, especially when ad ministrative pe rson s ar e firmly obligated to on e project througho ut the entire co nstruction phase. To avoid sit uatio ns such as this, CM firms sho uld create an d maint ain a dual file one con sisting of a current listing of ad ministra tive leve l applicant s who have been interviewed and ar e under se rious considera tion for employment. The seco nd file should be a preferred pr om oti on list o f in-ho use pe rso ns who ar e re ady for ad vancement based on peri odic per forman ce evalua tions. If it beco mes necessa ry to identify the Lc.vel ~ manager and. none a re available, it is possible [Q insert one of the top candidates I ~ eithe r file, mak ing the award of the contract a condition of employm en t or promotion. O wners are inclined to accept an orga nized, preplanned app roach to CM human resource needs. It de monstrates credibility by showing good mana gemen t instinc ts and indicat es a high degree of concern for qunht y in the se lection process. Experie nce has revealed that it is better for the eM to be ca ndid with ovvncrs a bout st:lfling sho rtages than to try to co nceal a probl em. . Of course: it .will be necessary for the CM's execu tive level person 10 prov ide a Viableand convmcmg plan to the owner and AlE tha t shows how the newcom er will be Sup~o!t ed ~y the e M team mem bers. This sho uld not be a pro blem co nsidering the explicit cham of responsibility and authorit y in the project tea m structure. If the newcom er is the mana geme nt level person, the executive level pe rso n will have to be marc closely involved in the day-to-day activities. If the newcome r is the admini strative level person , the management leve l person will have to be more closely involved in day-to-day site activit ies. If both ar e newcome rs, it will be difficult but not impossible to provide a sa tisfactory plan. 18.2 .7

Section 18.2

~

.~

~i, "

~.

,~ .

18.2.9

Employmen t Ag reements

To prevent the possibility of a defau lt (in the e ve nt the nam ed pe rson decides to leave the CM 's em ploy befo re the term o f the ow ner-C xt contract expire s). a form al e m'plo~'m~ n t agrce ~l ent s ho ~ l d be entered in to at least for the dur at ion of the proj ect. This binding commitment will preclude the na med person's pre matu re depa rt ure a nd the unde sirab le effect of an owner-Cxt co nt rac t def au lt. However. it could affect the person's perform an ce if ther e is a strong desire to leave. In-House Resources

~t has been pointed out that a eM is a firm, not a n individual. The CM firm is a pool of Interre lated human resour ces that pe rform in conce rt to meet the demands of a con. struction proje ct. Th e CM's mana gement leve l learn member is the dire ctor, the one

Scheduling In-Hous e Reso ur ces With severa l projects running simultaneously. each in different phases, the timely utilizution of resource s shou ld not be d ifficul t. Howe ver, if two o r three of the projec ts ar e in synchro nization, timely ut ilization ca nnot be achieved without formal sched uling. O ne resource person is usually designated as the chief or head pers on for the reso urce responsib ilities. Cr...t ope rati ons persons should only have access to re ~ou rce s th rough the chief resource person. Th is will provid e control of resource commitment s and en sure qual ity input. In small organiza tions. this level of co ntrol is difficult to maintain because of the close relationship of all personnel; howeve r, it is wise to establish control from the . . be ginning in preparation for inevitable growth and expa nsion. To provide better control o f the in-house resource area work load, It IS suggested that a composite schedule be deve loped that combines the prog ram sched ules of all projec ts into one maste r resource schedule. T his is easily do ne, assuming a prog r~m sched ule exists for each proje ct curre ntly under con tract. Th e master resour ce or 10 house resour ce schedule shou ld be updat ed each time a project's program schedule cha nges. Ope rations persons shou ld cons ult the in-house resour ce schedule whe n face d with prog ram sched ule changes on their projec ts. TIle ch ief reso urce person should co nsu lt with ope ra tions per sons to keep the resource dema nds of eac h projec t on the ir program schedules. It is obvious that one project's prog ram schedule change could se riously interfere with the work load of the resource people and disrupt the scheduled progress of oth er projects. The in-house resou rce schedule will pe rmit the chief reso urce person to load-level resource activities. prepare for high-impact time periods. and use low-impact time periods to good advant age. It is doubtful that an owne r would excuse a schedule change that result s from a CM's inability to manage its own work load.

An other considera tion when naming specific pers ons in an owncr-Cja co ntract is an assurance that Ihe pers on will re main in the em ploy of the Cr-.l for the duration of the contract . While emp loyee depa rtur e may see m a rem ot e possibility, emp loyees have been known to accep t.otlte r opportu nities when see mingly obligated 10 finish the proj ect they have been assigned to, a nd owne rs have been known to void eM cont racts as a consequ ence.

18.2 .8

283

who coordina tes the actions of the firm's human resourc es. A s described in Chap ter 8, Th e eM Organization. the operationa l pe rsons dep end heavily o n the reso~rcc persons an d to a lesser degree on ad ministra tion and support pe rsons to accomphsh many o f the project requirements. The resource persons are schedulers, est imat or s. value managers, value engineers, and pla nner s-pe rsons who do the [asks that operationa l pe rsons could do themselves but have no time to accomplish. A n ancillary benefit of this arra ngeme nt is that reso urce persons become specia lists in the resources they provi de, making them mor e capable in these a reas than the operational perso ns. Compa ra tiv.e l ~, o~e ra lions per sons a rc gene ralists in all resource a reas; resource persons are specialis ts III at least one resource area.

'f

'~

Human Resources

18.2.1 0

Human Resource Education Cha pter 9,The eM Body o f Knowledge. point ed ou t that there is no single source of many so urces an d galvanized with experience. 111(: eM body of knowledge can be divided into two categories: technical knowledge and management know ledge. Ma nagemen t knowledge is primarily vested in a

eM knowl edge ; it must be gleaned from

284

Chap ter 18

Section 18.3

Resource Mana gement

CM firm.'s. ope rations pc rso~ ~c1 a ~d technical knowledge in a firm's reso urce pe rsonnel.A,ddltlon:llly,some administra tive person s contribute mana gement knowledge and technical knowledge to ope rat ions personnel. . ~pc ra t ions persons arc technical gene ralists, a nd resource persons a rc technical specialists, Resource.pe rsons require a much grea ter depth of knowledge in the tec hnical areas of CM se rvlc~s than the opera tions persons.TIle list of questions in A ppen d ix A, A Suggested Tc,:hl1lcal Knowledge Base far Clvl O pera tions Perso nnel, illustrates the depth of tec~ n1 ~'1 1 knowledge that individu al ope rations perso ns, as genera lists. should have (which IS far sho rt of the know ledge the resource area personnel sho uld have as specialists). . A fU ~ ly-s~arred C~1 resource depa rtmen t provides an ideal platform for transfer~mg tech~ lcal l.nformat.lO.n to ?perational generalists and for exchanging ma nagemen t mform.atl~n. with administrative and manage ment personnel. Unlike design , whe re each discipline (stru clUra.l. r:'echan.ical,electrical, etc.) is a separate licensed spec ialty, eMhas no con tainm ent limits to dissuade educa tion in all tec hnical a reas. On the co ntrary, the more knowledge an opera tions pe rson acqu ires in the technical areas, the marc valuable thai pe rson is to the CM firm and her/his projec t team .

285

ing sessions and produces posi tive ancillary results tha t canno t be gained from in-office sessions. Whene ver a nd where ver sessions a rc held, eac h sho uld be well orga nized and prese nte d in a business-like ma nner.The demeanor o f the sessio ns contributes to their success. Continuing edu cat ion should be foster ed by the CM firm and become second nat ure to all employees. A nother learning op por tunity that shou ld be included is se minars presented by credible institutions and association s. Picking the right ones to atte nd is difficult without investigation: many seminars are pr esent ed to make money rathe r than to tran sfer knowledge. Referen ces (rom past att enders can assist in sele ction. Those who atte nd sho uld pass on what was learned to o the rs during in-house sessions. A not he r significant ben efit of a functioning information and techn ology transfer progra m is improved confidence when dealing with owners and AlEs as team peers.To effectively provide checks and balances in the team decision-m aking process, CM persons must be factually conversant on topics exclusive to the owner and AlE. This is particularly helpful when discussing design options with the AlE and project req uire me nts with the owner. Addi tiona lly. CM service s mus t be perceived as abo ve the competitive image of contracting services and estab lish a pee r sta tus that is accep ted by AlE firms and owners withou t restriction . A br oad base of knowledge and skills in the area s of management, business, finance, design, contracting, and con struction will mainta in the eM firm's image as an organiza tion of informed expe rts a nd extract pr ofessional respect.

18.2. 11 In-Ho use Education Progr am Currentl y, a fully-.staffed C:vr firm is the only com plete source of CM kno wledge. Althou gh ac~de m,a theorCllCall)~ produces sound resource perso ns. it does not produce ~heorellcally sou~d operations perso ns. To fill this critical void and injec t tht.' exp: ne ncc t ~at galvanizes knowledge. eve ry CM firm should have an on-going internal IOformaho~ and tech nolo~y transfer program. The program will provid e a viable path to upgradmg and expansion. if not survival. in the CM mar ke tplace. The prog ram sho uld be developed and admini ster ed by en officer of the CM firm to give it prom inence and credib ility.The conte nt of the program should coincide with the ~rm's curre~ t human resour ce needs and accommoda te new empl oyees and those see kl~g promotion.I nstrucrors C,1Il he anyon e in the linn whose expe rtise is considered superior und who has Ille talent to put lesso n plans togeth er and make informat ive intere sting presen tation s. • ~1os[ sessions ~eat ure resource persons transfe rring generalist-le vel knowledge to operauo ns persons {i.e.ccom putcr-assistcd sched uling instruction for field CMs and lifecycle costing exa mples (or project managers). Improved me thods for estimating the cost of field changes and extra wor k will make operations pe rsons more effective.Additional knowledge of bonding a nd insurance will improve manageme nt confidence. Instr uct ion in electrical and mechani cal systems will, of co urse. make Level 2 and 3 Persons more credible when dealing with the AlE and with electrical and mechanical con tractors. O ther sessions. perhaps critiques of recently completed projects, where unique expe rie nces Can be shared a nd compared, will also prove productive. There will be morc sessio ns on the compiled list than lime to prese nt them . A~tendance should be ~l andat ory for those se lecte d; the pr ogram should be it high prion ty. Some eM firms include one and two day retr eats away from the office in their p~escn[.ation schell.ulc. This is a n effective app roac h to learning (albei t expen sive and disrupting for the held Cvls). Ho wever. a retrea t adds a social componen t to the learn-

Physical Resources

18.2.12

Asso ciation/Soci ety Membersh ips To stay current with the indu stry and in all CM service areas. selected CM personnel should be: actively involved in rela ted associations and socie ties. Membersh ip in most construction industry gro ups is exp ensive but beneficial. providing mem bership include s active participa tion on comm itte es and cont ributes to the firm's networking effor t. A t least one association o r socie ty exists for e very huma n resource discipline req uired to provide CM services.

18.3

PHYSICAL RESOU RCES

A pr oject 's physical resou rces consist esscntia lly of gene ral condition or construction support items and the construction site itself. Multiple prime con tracts and the elimination of the gene ral contractor lea ves the manner of providing physical resources to the owner's discreti on. The eM budgets. a rranges for, a nd manages the project's physical resources accor ding to the project team 's decisions. 18.3.1

Cons truction Support Items Physical resource mana gement begins by det ermining the necessary resourc es a nd ho w long they must be availabl e.This an alysis prod uces the cons truction support b~d­ get that is tracked throughout construction as
286

Chapter 18

Section 18.3

Resource Managemen t

resources ar e e ither pro vide d by designat ed contract ors as part of their wo rk-scopes or provided di rect ly by the owner and managed by the e M . Th e co nstruction suppo rt item s on :l Cr.- I proje ct nrc rbc same as items on a GC projec t. b UI ther e is a difference in how they are paid for. A GC include s the cost of con structi on support items in the bid submitted to the o wner a nd is pa id fo r th em if used or not. On multipl e-con tra ct projects, co nst ruction support ite ms are budge ted and the owner o nly pays for th ose used o r consumed. Item s such as sa nitary facilities, tempora ry power. temporary water. field test ing, signing. and site secu rity a re arrange d for by the e M and paid for o n a d irect bi lling basis by the own er . Ite ms such as tempor a ry lighting. wiri ng tor te mpo rar y po wer. pipi ng tor te mporar)' water , te mporary road s a nd pa rking . securi ty fencing, tem porary st airs. specific safety item s. wo rk layout, daily and final clea n-up sho uld he: assigned as pan of th e defined work -scop es of selected contractor s and listed as Sched ule-o f-Valu es item s. Item s such as tem po rary warehousing. te mpora ry sh elter. hoisting. te mporary elevators. refu se rem oval, a nd first aid facilities ca n be assigned to a wor k-scope di visio n contracto r, bid as a sepa rate con trac t. o r re tain ed as the ow ner's d irec t respo nsibility and managed by the Cxt. If the project requ ire s co nsiderable cra ne se rvice, it co uld be:

1. Provided and cre wed by a crane con tra cto r, available for the use of all co ntrac tors at no charge und er pre-p ublished pro vision s. 2. Provided and crewed by a crane co ntractor; available for the use of all cont ractors at a pre-published hourly rate paid d irect ly to the crane contractor , 3. Re nted and crewed by the owner; available for use by all contracto rs at no charge un der pre-pu bl ish ed con d ition s. 4. Ren ted and crewcd by the own er : available for usc by nil contractors at a n hou rly rate paid to the Owner. 5. Supplied and crewcd as part of a mult iple cont rac to r's work -scope and available for the usc of all cont ractors at no cha rge unde r pre-published conditions. 6. Sup plied and crowed <1 $ part of a mu ltiple contract or's work- scope: and avail able for the usc of all contractors ,II a pre-published ho urly rate paid di rec tly to Ihe multiple contractor. 7. Provided a nd crew ed by ea ch multiple co nt ractor according to eac h cont ractor's hoisting needs, Of the possib ilities listed . items 3 and 4 nrc the least favo red on a risk-m an age. ment basis because the liability fo r the cra ne. when idle or in use. wo uld belon g to the own er. Item 6 cou ld be the least expen sive to the owner; item 7. the most expensive to the owner. Item s 1, 2. 3 and 4 wo uld be tracked as cons truction support expense. Item s 5. 6 a nd 7 wou ld be tracked as di rec t expense, unless the ho ist ing por tion of the cont ractor's price prop osal is listed se pa rately from the cons truc tio n port ion of the work -scope. Whiche ver app roa ch is selected. the CM has the responsibility to assess the costs and liabilities, see Ihat all of the physical resources are ar ranged for in the contract docum en ts. and ensu re th at they arc provi ded on -site in a time ly ma nner .

18.3 .2

Physical Resources

287

site-u se Pla n Th e co nst ructio n site is a phys ical resource that requi res proper man agement durin g contract o r occupancy. 111e eM is o bliga ted to sec tha t this is accompli shed in the o wne r's best interes t. To achieve th is. a de finitive site- use plan that a ntici pa tes the seq uence and du ra no n of con tr actor occ upa ncy accord ing to the de tailed co nstructio n sched ule sho uld be deve loped. The plan sho uld a lso co nside r th e, work ~h~ contrac~ors "'ill be doing and . the office and sto rage space requireme nts d uring th eir tim e on-site. . . . Site-use plans have been in use for many years. However, the ~ncltnatlon IS t? have a site plan in mind but not on pape r (except o n very lar~e or on s.lt.e·st~T\·ed projects) . The complexity of a site -use plan relates to the locati on. condmon',lIlfluence s. and size o f the site and the limitat ion s put on its use by the owner. When usmg the CM syste m, e very project shou ld have ;;J site-use plan th at is writt en do wn and dis trib uted to co ntracto rs as part of the bidd ing documents. On GC project s. the owne r tempo rarily relinquish es the physical site to the Gc, and the GC man ages site use within the term s of the co ntra ct as th e GC see s fit. Arrangement s for ; ubcontrac tors is th e G C's rcspo,~si bili.ty. no t the ow~ e r ·s. and if a . site- use problem ari ses with a subco ntrac to r. the GC IS o bliged to handle It . Site-use plan development on a e M projec t is more c ri lical l ~an on a GC pr~Jec l. Each trade contractor is e ntit led to adeq uate access to and con venient use of the site. Jf adeq uate access and convenien t use are not provide d. the trade c?ntraclO~ can. loo k to the ow ner for be tterment or sa tisfaction . With th e o wne r's best inte rests m mind. an d the possibili ty that the CM could be held accou ntabl e if contractor. site occupan~y ca used a problem. the e M has eve ry incentive to dev elop a pra gmat ic plan that will facilitate site use by con trac tor s. A e M site -usc plan is develop ed exac tly the sumc as a GC site- usc plan . with the possib le excepti on o f the am ount of deta il includ ed . Th e CM plan shou ld indicate t he spaces rese rved and the facilitie s avuilnble for each trade co ntracto r while o n site. If the site is large en o ugh . one plan might suffice. If the site cannot accom mod a te all co ntrac tors at one time. it will be necessa ry to dr aw thr ee o r fo ur Chro no logical pla ns. sho wing sp:lce vacated :IS sta rting co ntrac tors com plete the ir wo rk und new space assigu rucn ts and Facility ar ra ngeme nts ns subsequent contrac tor s arr ive on site . Site-usc plans should show import an t feat ure s such as sire-acce ss roads, parki ng are as. office traile r sites. storage areas. wa rehouses. powe r and water supply points and capacities. site lighting. telephon e jacks. first aid faciliti es, potable water supp ly po~nts. staging and sha ke-out areas, e M , AlE and owner offices, hard hat a reas , ba rriers, fen ces. fire lanes. and sanita ry facilities. As soo n as possible aft er an award of co ntrac t. ea ch co ntra cto r should re view the space an d facilities show n in the site -use plan. If deem ed inade quate . changes to better acco mmo da te starti ng contrac to r needs shoul d be made. As with scheduling co nstruetio n. onl y the initial site. use plan must be validated to sta rt the projec t. When it is sa tisfac to ry. a mended pla ns ca n be issued to con trac tors who will subsequently occupy the site. When issuing ame nde d plan s. ca re should be tak en not to change maj or co mmitme nts made to con tr actors in the plan issued to the m for bidd ing purposes.

288

Chap ter 18

18.4

CONTRACTIN G RESOURCES

Resource M Jn agement

C HA P T E R

Contrac tors are resources a va ilable to the project to provide its construction. A s with any resou rce. it is important to know its cap abilities and potential for performance before putting it 1O use. Chapter 22, Multipl e Bidd ing an d Con tract ing, refers to the advantages of prcqualifying trade contra ctors rather than postqualifying them . Either way. the qualifying process provides insight as to wha t to exp ect from a contracto r during a pr oject. From a resource perspective, contractors should be viewed as a combination of physical. resour ces and human resources. A contract ing firm's overall performance reflects Its exe cut ive leadershi p and ope rat ing policies, but pe rformance on each proj ect reflects the leadership and a ttitude of the pe rson selec ted to run the project. Th e firm 's overall performance establis hes its reputation. Th e average pe rformance of the firm's projec t leade rship estab lishes its overa ll per forma nce. A ltho ugh it is possible that eve ry supe rinte nde nt and fore man handles projects the sa me. the cha nces arc that a ra nge of on-s ite per formance exists betwee n them. Q ualification of trade contracto rs shou ld not o nly establis h a firm's rep utation as a contractor but shoul d a lso pro vide insigh t as to the bes t per for ming project leade rs. Th is inform ation can usually be obtained fro m AlE s. GCs , an d Clvls who have worked with the trade co ntrac to r in the past. If these so urces do not produce ans w c rs, it may be possible to int er view the project leaders Ihe trade cont racto r is co nsidering for the project. Whe n discuss ing an award with a contractor, eve ry effort shou ld be made to extra ct a firm comm itment 10 provide one of the cont ract or 's better performing project leaders-one comp atible with the Le vel 3 team represe ntat ives. especially the field eM. It is no t going too far to request that the person selected be desig na ted in the owner-cont ractor agreement. When acq uiring contracting resour ces, the CM shoul d do all possible to establish a cooperati ve relationship that will respond to the static and dynamic co nstruction needs from sta rt to finish. It is a given tha t const ruction proje cts arc seldom co mple ted without problems an d times when the co mmon goal of completion is obsc ured . It is under these condi tions tha t the CM's effor t to crea te and maint ain the best poss ible relationship with trade co ntracto rs pays divide nds.

1 9

Risk Management Risk management addresses the innate and coincidental risks which ar~ pa n of every project. Sta tic and dynamic risks are co nstant ly present and must be disposed of, one way or ano ther. in the manner which best se rves the own er 's interests. . U nlike the gene ral contract ing and desig n-build system where most all n sks a rc assig ned to an indep ende nt co ntracto r for a Iee. the CM syste ~ permit s the o~" ne: to contractually shed risks which call more eco nomically he ass igned and ret ain risks which C'ID more econ omically be man aged. TI1C Risk Manage me nt Plan prescribes the mean s by which bot~ statIc. and dynami c risks are iden tified . evalua ted, an d ha ndled th roughou t the project-delivery process.

19.1 THE RISK MANAGEM ENT A REA OF KNOW LEDGE The risk manaaement area of know ledge encompasses the dynamic and static risks that are part or e very capital expansion prog ram . Dynamic risks (ris~s directly tied to team decisions) and static risks (risks simply inheren t to a construction environmen t} mus t be identified, evaluated and disposed of in a manne r which will minimize econom ic loss to the owne r in the even t a risk with attached liabili ty occurs. The co nstruc tion man ager must be able to ant icipate and analyze static an d dyna mic risks as well as iden tify.e valua te. and rccommen~ ma nners ~f t~ci r, d ispos~1 in the best interest of the owne r. D isposal can be acco mplished by elimination , assignment. or by acce pti ng an d man aging them to minimize the conseque nces if (hey accrue. The risk management area o f knowledge includes suret y bo nding and insuran : c in the static risk are a, a nd cont racting a nd construc tion processes and procedures in the dy namic risk are a.Th e Clvl must underst and co nstr uction related insurance coverages, performance bonds, labor and mate rial bonds, bid securi ty. and other forms of available sure ty prot ection . . TI1C CM must thoroughl y understa nd the dynamic risks inherent to construction contracting. con tractin g proce du res, co nstr uction plan ning, con struc tion means, mc~h. ods. and techniques, and be ab le to evaluate potential consequences and offe r advice for minimizing .This area also requires excellent communication skills and high ethical standa rds.

19.2

I

PROJECT DELIVERY RISKS

When contemplating risk man agement, the word "risk" could cause undue alarm to tho se in the CM con trac ting struc tu re (es pecially the project te am members and 289

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290

Chapter 19

Sect ion 19.3

Risk Mana gement

certainly the owne r) . Risk is a wo rd that em its do ub t rath er th an co nfide nce. However , risk is a part o f c; very b usiness undertaki ng. A con st ruc tio n pr oject simply has mor e areas where risk mu st be deal t with . no ne; o f which ar c less mana geable than those faced in o the r bu siness vent ures. When considering ris k management, it helps to reali ze that a con struction manager is essentially a risk ma nager an d ob ligat ed to guide an o wner through the pr oject without suffering inordinate mishaps. A mor e accurate title for a co nst ructio n manager would be "Project D elivery R isk Manager ," as th at is precise ly th e o rienta tio n a construct ion manager 's expert ise.

It is imp ossible to sep ara te dynam ic risks fro m static risks, beca use determining sta ticrisk action depe nds on a dynamic-risk decision. Tn the fire insu rance example, the dccisio ns to assign the risk of loss by fire to an insurance carrier, and to select coverages and co ve rage amounts, are dynamic decisions, based o n the risk-take r's evaluation of the risk involved and the cost o f th e ava ilabl e cover age options o ffered by the insurer. An other exam ple of a static-dyn amic risk connection would be a company th at is sel f-ins ured. In thi s case, ra ther th an assigning the risk to an insurer and pay ing pre miu rns, the risk-taker invests would-b e prem ium dolla rs in to managed pre vention and abso rbs the cost of losses when they occur. Th e risk-take r's dynamic-risk decision no t to resort to a static-risk solu tion is ba sed on the risk-t aker's considered opi nion that the costs of managed preventio n and ensuing losses wou ld be less e xpensive than the cost o f insurance premiums., minu s any re imbursemen ts from losses which m ight occ ur. In effect, risk-ma nagemen t decision s are a special ca teg ory of value management d ecisio ns. Ba sed on the circumstances and avai lable expe rien ce and expe rtise. the issue of how maximum value can he receiv ed fro m pr oject doll ar s spen t by the owner is an important o ne.

Dyn am ic a nd Stat ic Ris ks Dyn amic risks are risks that challenge the risk-ta ker's resp on se to a spec ulative situa tio n. Once a risk is identified, the risk-taker mu st evalu at e its gnirsloss -pot ent la l and determine how o r if to tak e advant age o f the situa tion. Dyna mic risks arc speculative risks. A non cons tru ction exa mple woul d be whe the r or no t (an d if yes. ho w much) to invest in add itio nal manufacturing facilities in anticipat ion of add itio na l pr oduct sa les. If sufficient addi tion a l sales materialize. the risk-tak er made a property calcu lated dynamic-risk decision and will experien ce n gai n. If add ition al sal es fall sho rt , the risktake r made II wrong dynamic-ris k deci sion and will ex perie nce a loss. A con struction -oriented example might be wh ether or not to quali fy the con traclors bidd ing a project in n j urisd ict io n where qualification is pc nnincd and co rn ructs m ust be awa rded to the low bidde r. A d ec isio n to qualify bidd ers ensures that a co ntract will he aw ard cd 10 a qu a lified contracto r; a d ecisio n no t to qua lify bidde rs could result in a contract or be ing awa rded that cannot not perform at an expected leve l. Re cognizing that ,1 specific dYllC1I11ic risk exists, an educa te d evalua tio n o f Its cooscque uccs, fo llowed hy an expe rie nced -bused deci sion or ac tion . will mitigat e if no t e limina te adve rse co nsequences and increa se the possibility o f o vera ll gain . Static risks arc fortu itou s c11an CI.:S for loss without the opport unity fo r gain. Once a risk is identifi ed, the risk-take r mus t evaluate its loss-potent ial nnd dete rmine how to bes t d ispose o f it by one or more o f the following alt ernati ves: eliminati on. a voidance, preve ntio n. red uction, assig nment , expen sing, or by retenti on and ma nag em en t. Static risks arc pure risks. and unl ike dynami c risks, ha ve defin itive so lutio ns. A unive rsal example or a stati c risk is loss h.y lire. Fires arc unpredictable o ccurrences which result in financial loss in capi tal p roperty and loss o f usc, 111L' common approach to handling the risk o f loss fro m fire is assignm ent an d pr evcnuon. Properly placed fire and loss-o f-use insu rance can alm ost put an owne r in the same financi al position a fte r the fire as before . As well. a cred ible fire-l oss preventio n program cou pled with fire -pr oof con struction and fire-protection dev ices will either reduce the pr em ium s o r increase the limits for a loss. A s a sta tic risk. there is no ch ance o f financi al gain and ther e is also no ch an ce o f maj or financial loss. Fina ncial rei mbursem ent docs not mea n th a t a s ta tic- risk loss such as a fire has no negati ve co nsequen ces. Alt hough the repl acem en t cos 1 of the bu ild ing a nd rental costs for altern ative space a rc pro vided by the ins u re r, time is not recove rable in kind . Th er e is no way to recove r time [rom an ins ure r.c nly doll ars,

291

19.2.2 The St atic-Dynamic Risk Co n n e ct io n

of

19.2.1

Major Risk-Management Components

19.3

MAJOR RISK·MANAGEMENT COMPONENTS 111e major componen ts of risk managem en t are the : ~ ..

+- '

I '~'

• Awareness of risk Iden tifica tion of dyna m ic ris ks " lde ntif lcntion of st atic risks Risk disposal de cisio ns • Risk Management Plan includ ing co ntractua l assignm ent s, projec t ma na gem ent p roce d ures. and risk managemen t meetings.

19.3.1

Aw a reness of Risk s Ri sks con nec ted to the p roject-de livery p rocess exist th ro ugho ut the projec t and a rc not limited to con struc tion . To chose fa miliar with the general co ntracting syste m, the risks of GC project de livery an: wel l known ; they have been es tablis hed thr ough usc of the syst em over the years. Man)' of {he inh erent and un avoidable risks of the GC ccntra ctin g str ucture have been addressed in the sta nda rd con tract documents used in the GCsyslcm. Fo r example, when the GC syst em is used in the public secto r, standard cont ract documents stip ulate that an awa rded contractor must provide a labor and mat erial bond to the o wne r. This bo nd is a stat ic-risk co vering device thr o ugh which the owner assign s paymen t respon sibili ty to a th ird pari)' (the surety] if the general contractor fails to pay subcon trac to rs an d supp lie rs for wo rk, se rvices. material and equ ipm ent tha t ha ..-e bee n incorpora ted into th e pr oje ct. Awar e ness that this risk can occur on any pr oje ct pr omp ted a sta nda rd clau se to be written.

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292

Chap ter 19

R j~k

Sect ion 19.5

Manageme nt

19.4

In the ea rly des ign ph ases, valu e e ngi nee ring and life-cycle costin g s tud ies red uce th e dyna mic risk of overdcsign . • Informed estimat ing contro ls the dyn amic risk of exce edi ng the co nstruc tio n b udget. Emphasized and co nt ractor-co lla bo rated sched uling avoids the dynami c risk of m isd irec ted effo rt. D ocu ment reviews avo id the risk of error and ambi guity and red uce the risk of Ch ange O rder gen era tion during cons truction. • Multiple bidd ing e nsures agai nst th e risk of not gett ing the lowest competi tive cost of con struction . Prequahficat ion reduces th e risk of awardin g a co ntract to an unqua lified con tractor. Pr oa ctive bidder re cruiting reduces the risk o f no t havin g adeq ua te biddi ng compe tition. • Dir ect con tr acto r progress payments reduces the risk of lien s made by co ntracto rs. Ind ividual work-scope definition s elim inat e cos tly con tractor wor k-scope ..... .,,. ove rlaps . Multiple sched ules of va lue s red uce front-l oading o n lump sum contracts. Te am syne rgism and checks a nd balances red uce the risk of making bad dcclsions.

Earl y Id e n t if ica t io n o f Risks The primary risk ca tegories in every con structi on project are cost and lime ov~'r~~"ns, qua lity d eficiencies. and bus iness interrup tio ns that resu lt fro m project-re lated dispu tes. Th ese can occ ur at an y time d uring the cou rse o f a pr oject, and risk awa reness should focus 011 them at nil times during the project. It is assum ed her e that the co nstruc tion manage r is providing se rvices d uring the feasibility phase.Thi s is o fte n the case because the info rma tio n that the owner needs to make a deci sion o f whe the r and how much to build can best be provided whe n bo th a n AlE and CM firm part icipa te in the feasibi lity study. The risks which devel op d uring the feas ibility pha se of a project arc us ually t he combined res ult o f o ver-o ptimis m and incom ple te o r flawed info rmat ion . E ventual prob lem s in two of the fo ur pr ima ry risk ca rcgorics-ccost and time overru ns-s-can be e liminated (o r at leas t mitigat ed ) if the co nsequences nrc addr essed befo re design starts. The risks created by ever-op timism and inco mplete o r flawed infor mation ca n be redu ced o r eli minated thr o ugh team member ex pert ise a nd the checks and ba la nces of projec t team action . Syn ergism s ho uld pro d uce a viab le proj ec t bud ge t complete with conti nge ncies and n pra ctical projec t sche dule with reali stic time continge ncies. The se two attrib utes ar e the go..t1 o f feasibilit y studies on every pr oject. rega rd . less of the con tracting SYSICI11 used . Ho wever. C tv1 is the o nly syste m with a conuacriug structure tha t assur es single goa l ded ication to the task a t hand with a minimum potential fo r confli ct o f int e rest a nd provid es expe rt checks and ba lances during the Ieasibility phase.

IDENTIFICATION OF DYNAMiC RISK S Dynamic risks are those tha t cha lleng e the risk- takers response to a specula tive su uation . Th e proje ct-deliv ery p roc ess has nume rous dynamic risk situa tio ns. all of which can hav e posit ive or negati ve result s. Once ide nt ified and evaluated . a pr ocedura l de cisio n to brin g ab o ut thei r most advan tage ous d isposal usuall y can be made Th e C~1 system p ro vides decision checks and balan ces a nd co nstruction und contracting expe rt ise d ur ing des ign, beginning with the sche mat ic phase. As a responsibil ity of all pr oject team members, and especiall y the Cr--.l. risk awaren ess adds a

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293

pro tective dime nsio n to the early d ecisi ons which will affec t the project in later ph ases (especially those relat ing 10 designability, ccntrac ta bili ty, and co nst ructabilh y). Th e following is a small sa mple of the many risks thai ca n be ident ified ea rly in the p roject and pos itively disposed of via risk-man agem ent proc ed ures..

As stated in Chapter 3,The Devel opment o f the CM System. e M was or ganized to incor po rat e the bes t practices of genera l and design-bu ild co ntracting and e limi na te the undesirable pra ctices oCeach by SU bstituti ng new prac tices. A main con siderati on was how project -delive ry risk s were handled. Consequently, new app roaches to handling risk have been installed in the CM syste m-s-some static. so me dynamic-and risk awareness has become a major ac tivity o f the CM project te am . CM 's unique contracting structu re allows owners to participate in more risk -taking deci sion s than either o f the o ther two syst ems . Con sequently, 0 v1 pla ces greater emph asis on risk awareness and offers many new opportunities to accrue COS [ savi ngs fro m risk- ma nage ment dec isio ns. t..c"lo J .:.t. 19.3. 2

Identificat ion o f Static Risks

19.5

IDENTIFICATION OF STATIC RISKS Stat ic risks are for tuitous chances for loss witho ut opport unity for gain. Every projec t ha s two maj or owner-risk exposures : monetary loss resulting from death, injury, or pr oper ty dam age; and mone tary loss resulting from a performance failure on the part o f a con trac to r or cons tructor. Both of these risks ca n be transferred to a third party in exchange for owner dollars. De ath. injury. and property· loss risk can be assigned to an insurance company. Co ntrac t-pe rfo rma nce failure risk can be assigned to a sur ety company. The owner's assoc ia ted dynam ic risks affect th e decision s of wh et her to tr an sfer the se risks and in dete rmin ing the insu red and bonded amounts. Fr om the owner's perspective, liability an d pr operty-dam age insurance is mand ato ry on every project. Bonding is required on public sector projects bu t optional on private secto r projects. When bonding is optional , an owner can use qualification o f contract or s o n a pe rforma nce and financial basis to d ecide whe the r o r no t to bond.Th e d ecision to bon d is a respon se to a dynamic risk . a nd th e bond itself is a sta tic-risk co vercgc de vice.

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294

Cha pter 19

19.6

SURETY BONDS AND INSURANCE

Sect ion 19.7

Risk Manecerncnt

19.7. 1

Su rety Bond Types

dat ed damages). A s liqu ida ted damages, the am ou n t forfe ited ca nno t exceed the differen ce be twee n the bid s o r the face value o f the bid sec u rity, whiche ver is less. If a bid bo nd is pro vided as sec urity. the surety is p le dge d to pa y the d ifference, if the contractor fail s to do so . The exten t o f the su rety's inv olveme nt is sta ted in the bondi ng documen t. A performance bo nd backs up an awarded contract or 's pled ge to complete his co nt racted obligation to th e exact req uirements and terms o f the co ntract documents. In the event it is de te rmin ed that the contractor will not o r ca nno t complete his obligation s, the sure ty is pledged to accept the ob ligat ion in kind for the co ntrac te d amount. Th e sure ty ha s several opti ons. The co ntractor can be re tained by the surety and subs id ize d to co mple te the project.The sure ty can replace the co nt ractor with ano ther cont ractor (s). The surety can pay the owner the face valu e of the pe rform an ce bond . In either of the first two option s. the outstand ing.amount d ue the contractor a t the poin t of default is pa id to the sure ty when earned , acco rd ing to the terms of the contract. The nature and exte nt o f the surety's inv ol vem ent and its specific options are sta ted in the performan ce bo nd . A labor and mat er ial paym ent bo nd protects th e o wner fro m paying twice fo r the la bo r. materi als. and se rvices in proj ect co nstruc tio n: In the eve nt a pa rty th at does no t ha ve a con trac t with the o wne r but who has o ne with a part y that has a contract with the owner is not paid by the party with the contract , the party that was not pa id usuall y has a legal right to tr ansfer the unpaid amoun t to the o wne r for d irect payment. Most s tates have me chan ic's lie n laws that allow un pa id parties to effectively become co -ow ners of an ow ner 's pr op ert y to the dolla r valu e of th e unpaid amoun t.To shed th e co-o wne r's financ ia l righ ts under the lien . the owner m ust pay the am ount o wed , regar dless o f whether o r not it was p revious ly paid by th e owner to the party who owed the mo ney to the claima nt. Th e labor and mat eri al payment bo nd s hifts the respo nsibility for payment to a s ure ty, relieving the o wne r of the claim. In so me jur isdiction s, liens against pu blic pr operty are not permitted. To pro v ide the same financ ial claim opport unity to con tra ct ors and suppli e rs Involved in pu blic projec ts, part ies who hold cont racts with owners mu st p rov ide a lab or and materi al pa ym ent bo nd .Th e ext ent and terms o f the sure ty's respon sib ility is stated in the bo nd prov ided to the owne r by the cont rac tor .

SURETY BONDS

Unlike insuran ce, a sure ty's acceptan ce o f a con tract o r as a clie nt is ba sed o n th e contrac to r's finan cial reso urces a nd performa nce re cord , no t on ability [0 pay pr emiums. Th e cont rncror's capaci ty in bo th of these areas m ust be es ta blis hed and main taine d to the satisfaction of th e sure ty if a surcty-conuacto r relat ionsh ip is to ex ist. Ge ner ally, su re ties do not see k out co nt rac tor s as clients; co n tracto rs must seck out sure ties. Th e asset s o f a co n tractor a rc an indic a lion of ab ility [0 repay the surely if the cont rac to r defaults on a pro ject a nd the su re ly bec omes invol ved . Co nseq ue nt ly, a cont ractor 's financial conditi on determ ines the size o f the p rojec ts which the co ntrac to r can bid. A co ntrac to r with cons idera ble assets will be perm itted by the sur e ty to bid projects that co ntrac to rs with lesse r asse ts will not. By esta blishi ng bonding capaci ties, sure ties d et e rmi ne which contracto rs ca n bid which proj ec ts. The contractor is obligated to repay all co sts expended by the sure ty to complete the cont ractor's o bligat ions . e ven if il forces the co ntractor into bankru ptcy. If th e co ntractor defers to its sure ty, even though the contracto r full y rep ays th e sure ty, the surety will se ver its relati on ship with the co n trac to r. O nce d ro pped by a su re ty, a contractor will have great difficulty finding an oth er s uret y willing to provide bon ds. Beca use bonds ar c required o n mos t pu blic sec lor proj ec ts an d many private sector proj ect s, losing a bonding so urce e xclud es a con trac to r from a lar ge sha re o f the co nstruc tio n mark e t place . It takes considerable time and resources to ree stabl ish a bon da b le positio n.

295

Th ere are many types of s ure ty bonds an d thr ee o f them ar e signally import ant to con st ruc tion p rojec t d elivery: bid bo nds. perfor mance bon ds, and labor and ma teri al bon ds. Hid bo nds replace cashier's checks on projects whe re a bid security is required as pa rt of a contractor's bid. The bid security back s up a bid de r's p ledge to accept a contract aw ard if o ffered . If th e con tract o r ref uses an award, or for some rea so n can no t enter int o the co ntract, an a mount equa l 10 the d ifference between the contracto r's bid a nd the ne xt highe st bid is forfeited b y th e cont racto r to the owner (usually as liqui-

Although surety bonds and insurance are bo th static risk transfe r devices paid for by p remium s. the similarities e nd the re. They functi on differen tly; insurance co m panies pres uppose that los ses will OCCur, sure ly companies do not . In su rance is a pool o f money, sustained by premiums pa id by an analogous group of insureds. that is culled upon 10 cover spec ified losses when they occ ur. Pr emium s fluctuate in respons e to losses as a means of ma in tain ing the level of the po ol. Insura nce is a competi tive busi ness where insurers are co nsta ntly seek ing new insur eds. Pr em iu m char ges ar e co mpe titive from insurer to insurer and adj usted acco rding to the Joss experien ce of the insur ed s. On the o the r ha nd , s ure ty bon ds unde rwrit e a fiunnciul o bliga tion of one pa rty 10 ano ther mu ch the same as when a note co -signer backs up a b orrower o f funds. If the borrower fails to repay the funds acco rd ing to the note's st ip ulat ions, the co-s ign er is legally obli gated to do so. When this occu rs, the co -signer's reco urse is to seek restitution from the borrower . In the co ntext of construc tion, a sure ty bo nd is a pledge fro m a third party ( the Surety) to co mple te a contracted o bligatio n [ 0 a second party'[th e O wner) made by a first part y (the Contra cto r) who cann ot, for whatever reaso n, compl ete the con trac ted o~ l ~g a t io n to the seco nd party. TIle su ret y is pa id a pre miu m by the co n trac to r for p roviding the bond to the o wne r, and the cost o f th e bo nd is passed o n to the owne r as part of the con tractor's cost of the project.

19.7

Sure ty Bon ds

19.7.2

su re ty Bonds in th e

eM Syst em

The eMsystem provid ed a pr oductive opportunity to re eva lua te the tradit io nal bonding co nce pts .o n co ns truc tion projects. A s exp lained in Cha pt er 22. Multiple Bidding an d Con tracting, multiple co n tracting is a major fact or in provid ing this oppo rt un ity.

29 6

Chapte r 19

Section 19 .8

Risk Manage ment

eM multiple

contracting significantly reduces the size of construction con trac ts held by the o wne r, because each con trac t re p resents a portion of the to tal cont ract amo un t A SlO million con tract held by a gencra1 contracto r is usually covered by a S10 million performance bond and a $10 million la bo r and ma te rial bond , although it is becomin g co mmon for the labo r and ma te rial bo nds (0 be red uced [Q 50% o f the co ntra ct amo unt. On a Ct\·1 project with a mult iple-contractin g fo rm at, each cont ractor is o nly respon sible fo r a port ion o f the wo rk and is o n ly bonded for thai contracted a mou n t. Con sequently. the o wne r will have as ma ny bo nds as co n tracts. and the tot al o f [he bonded amou n ts will rep resent the tot al of the mul tiple con tracts. It is commo n for the owne r to ho ld thirt y o r forty bo nded co ntracts when mul tiple contractin g is used to its op timum . 1l 1~ increased numbe r Clod red uced size uf the bonds whe n using multiple contracting docs several th ings:

19.7.4

-

-

-

Wai vin g Bon d Requirem ents

O bta in ing Mu ltiple-Con tract Bon d s TIle adve n t o f C M has crea ted a ne w type uf sur e ty mark e t by virtu e o f the size and n umbe r of the bonds req uired by the multiple co nt ract conce p t. Most s ure ty comp anies pa rti cipated in the large. single -co n tract bo nd mar ket. Few wer e int ere sted in pro vidin g bo nds o n small cont racts until th e fed era l gove rnm ent be gan to assist small and mi no rity co ntrac to rs. Additionally, losses in the earl y 1970s (whe n man y co ntractors experienced the ills of overexpa nsion . ma teria l s ho rt ages. and labor p roblems) led to sure ties becom ing more co nserva tive regar d ing who they bonded an d fo r how mu ch. Trade co ntractors we re no t con sidere d a p rime market fo r sure ties. bu t the pop ularity of eM and gove rn men t interv e ntion in be half o f sma ll and minori ty con trac to rs conv inced [hem [ 0 pa rticipa te. A colla ter al benefi t o f th e C 'vl system I h ~1 1 is no t app ro p ria tely ap preciat ed is that m ultipl e-co ntra ct bon ding has fo rced trade con tracto rs to mo ve to a new level of busine ss awareness. In o rde r to be bon ded. the)' ha ve to dem on stra te financial stabilit y an d pe rforman ce ability: this imp rovem en t has p roved beneficia l fo r the co nstruc tion ind ustry nnd its users.

Th e first item mentioned above IS a benefi t to the o wne r. Con trac tor pe rfo rman ce failure liability, while just as comple te an d secu re as und er a single bo nd , IS sp read amo ng the mu ltiple con tractor s, Nonperfo rman ce by 1I co ntrac tor ca n be qu ickly det ected an d deal t with dir ccuy in the ow ne r's be st intere sts. A ge ne ral con tra ctor who is havin g difficulty with a subco ntrac tor will cxpcctedl y ac t in his own best inte rests, no t those of the o wne r. If cont racto r rep lacem en t is required . it is much simple r to repla ce a trad e co n trac to r than a ge ne ral con tracto r. As ment io ned. gene ra l co ntra cto rs nrc often requ ired to bo nd their subco ntractors in o rde r to be bond ed fo r the to tal projec t by the ir sure ty: this is referred to as doub le bonding. ILpr ot ects the genera l co n trac to r a nd the ge ne ral con tracto r's s urety but pr ovides no pro tection to the owne r. in spi te of the fact that the ow ne r pays all costs of second-tier bo nds. Alt hou gh the co sts of bonds increase as t he COS I the y co ver de cre ases. eM multiple -contract bonding is less ex pe nsive for th e ow ne r than a G C single bo nd because of dou ble bo nd ing requ irement s. An importan t po int is th at the sum o f all the mult iple bonds on a eM project will be less than the value o f the single bond on a G C pro ject. Th e o verhead. profit, a nd ge nera l co nd ition co sts of the ge neral co ntracto r are pa rt o r th e single-bo nd amo un t. On a eMmulti ple-co ntract proj ect, th ere is no G C o verhead o r GC pr o fit to bond , a nd

- - - - --

19.7.3

When using the G C syste m. bo nding o f cont rac ts is prac tically mandatory because of co n tract size. In the p rivate se cto r. wher e con trac to r reput at ion s are known to an o wner , bo nd ing is so me times wai ved by the owner as a dynam ic-risk decisio n. O n public projects, bon d ing is usually manda tor y o n co ntracts grea te r th an a sta tutory limit. Co nse q ue ntly, most pu blic G C pr ojects req uire tot al bond ing. eM mult iple contractin g o n med ium-size b uild ings ma y include co n tracts belo w the stat utory limit. Th is pe rmits an o wne r to exercise bo nding pre rogati ve on some of the con tract s. The adv ant age o f not bond ing is in saving premium s. On a project where a sizeable numbe r o f cont racts fall belo w the statutory limit, sig nificant savings ca n accrue. A dynam ic-risk dec ision must be made by the owne r as to whethe r o r no t the sa vings are wo rt h the exposu re.

1. It covers th e static risk of co nt ractor failure on the p roject at the trade contracting level; the leve l whe re most cons truc tion con t rac t fa ilures originate. 2. It red uces the dyn amic risk o f awarding u con tract to an unq ual ified co n tractor; the abili ty to be bonded ca n be viewed as a n indicator of pot ent ial per formance. 3. It redu ces the size o f a su re ty's po ten tial liabil ity o n a single pr oj ect (so me sureties do no t con sid er th is a plus d ue to increa sed paper wor k per bond issued ). 4. In many instan ces it co nside rab ly lowers th e cost o f bo nding to the ow ne r; it is co mmon fo r sure ties to insist that ge ne ral con tractor s bo nd their s ubco ntractors as a condition for bond ing the ge nera l co nt ractor .

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297

the gen eral co ndi tio n costs a re usuall y an o wne r-reimbursable expense p rojected as a b udget line ite m. Sure ty bond economics are discus sed furth e r in Ch ap te r 22. Multiple Bidding a nd Co nt rac ting .

, ;.;

Insurance

19.8

INSURANCE Co ns truction ins ura nce is req uired in three areas: Owne r Pro tection. C:-'l a nd A lE Pro tection. and Con tractor Pro tection.Th e CM sys tem and mult iple co nt ract ing do no t cha nge the traditio nal for ms a nd co ver ages b ut d eal with so me o f them d ifferen tly. Co nst ruction ind us try insuran ce is a highly spe cialized field and co nstruction mana ger s arc usu ally not e xpec ted to have insuran ce exp ert s o n their sta ff. However . a broad kn owledge o f insur an ce is ne ce ssar y to hel p the own er es tablish a sta tic-risk p ro tec tion p rogr am tha t provides eff ecti ve cove rage a nd is co mpa tible wit h the 0 v1 co n tracting str uct ure.

...L-

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_

298

Chapter 19

19.8.1

Risk Management

Section 19.8

19.8 .2

Type s, Form s a nd Co ve ra g e s T)ptS or Insura nce:

A . Property Dama g.e I , f u rnls o r Pru pc:rly D am age In surance a. Standard Builder's Risk

(1)

CO\-" rllgc of Standard Bu ilder's Risk (a ) Fire and Lightning (b ) E xte nde d Coverage (c) Vanda lism and Ma licio us Mis ch ief

(d)Addilional Endorsements b. All Risk Bu ilder's Risk (I)

Cm e rlll:'" of All Risk Builder 's R isk (a) Standard Builder's Risk Ccvercge

( b) Broa d Form Co verage (c) Addi tionoll Coverage

c. Boiler, Ma chinery and Power Plant d. Floate r Policie s ( I J Co ,'c rag l: of Floater Pul icie s

(a) Contractor 's Equipment (lI) Trilnspontl tion

• j

Insur ance

2 99

Ow ne r Prote ct io n w he never emba rking on a building p rogra m, an ow ne r is exposed 10 a var ie ty of liabilities ag•.rinst which p ro tection must be secured , rega rd less of the projec t-de livery sys te m chosen .The eM co ntracting s tructure does no t crea te exposu res or risks which a re no t a lready present in the general con tracti ng and design-build contracting struc tu res , but it d oes create new co nt rac tual rel atio nships (especially when multiple con tracting is used) wh ich must be acco mmo da ted. It is the owner's respo nsibi lity to review, appr ove, and inst all an insura nce p rogra m for the project that sa tisfies the ow ner's needs. It is assum ed that an insu rance age nt or co nsult a nt will advise the owner , with ass ista nce from the co ns tr uction ma nager and NE. Th e types and forms o f insurance usually arranged for , and suppl ied throu gh contrac ted parties or d irectly by the ow ne r, arc : Liabi lity Insu ran ce E rro rs an d O missio ns (A rch itecl1E ngi nee r; Co ns truction Manag er ) Compre he nsive. Ge ne ra l/P ublic Liability worker 's Compen sation Properly Dam age Ins urance I\ II-R isk Builder 's Ris k

(c) Insta lla tion

B Liability

I

'f'

I... )

I. f orm) of liabililYIns urance

a. Worker 's Com pen sation (I )

Co oera!:c fur Wo rker's Campe Rs'll ion (a) Injury. Dls" bility. Deal t.

(b) Em p l.)p:r'~ Liability 1I. Compre hens ive GencrallPuhlic Liability ( I)

Cm c ral:c of Co mprcbcnstvc GPL Insu ra nce (a ) Premise s-O pera tio ns (h) El\p l.. _~iun, Col bps< anJ U nJergro unJ D,ulI.lge

(c ) Per so nal Injury (d) Co ntract or 's Protective Lia bility (e} Ccntracrual Lia bility ( f) COlll rl~' le Li Opera tions (~)

Umhre lla E xcess Li"Ilil ity

( h) r-olluw ing·Fllrm Excess Liability

(i) A uto mobile Med ica l Pa yme nts

PhysicOiI Damage c. Professional Liability (I) Co ~ u " g e of PrcfessicnalLiubility (a ) Ar~hit e clura l/En ginccr in g

(b) Co nstru cti on Mana gcmer u

Errors a nd omissio ns. £ &0 (or p rofession al liability co verage) is com mo n in arc hi tec tural and e nginee ring practice, It pro tects the owner from liability when a n AlE makes a mistake o r fo rge ts some thi ng re lated to de sign. It usually d oes no t p ro· teet agai nst AJE misju dgme n ts in are as o the r th an de sign. such as a imp rudent co ntrac t ad ministration decision o r misd irection to a co nt ractor in the field. Fo r this reasonplus the opin ion tha t A lE fees we re no t sufficien t to com pensate them for co ntrac t ad ministra tio n respon sibili ly- A/E firms d istanced them sel ves from situatio ns whe re decision erro r was nOI co vered. A l E firms. esp ec ially architectural firms, sta yed away from co ns tructio n site invo lvem e nt as mu ch as possible. In fact. in th c laic 1960s, a rch itec ts were con side ring the possibility o f exclud ing cont rac t adminis tra tion resp on sibiliti es and termi nating thei r se rvices afte r the bidd ing phase , Co ncern for how shop d ra wing a pprovals and des ign cha nges were to be ha nd led. and how the co nst ruction ind ustry woul d respo nd to this br ea k from trad ition , slowed the de cision-making p rocess o n th is issue. In the meantim e. the CM sys te m, which succi nctly pr ovided some o f the ser vices that A lE firms were trying to avo id. ca me into the pict ure, No w, if the Al Es co uld be pai d a fee for tak ing the ris ks connect ed with contract admin istration and field direc tion .their concerns migh t be re versed , In fact, in the mid· 1970s the Am erica n Instit ut e o f A rchi tect s pub lished a set of sta nda rd con trac t documents for e M that allowed AlE firms to pr ovide "co n tract a dmi nis tra tion" se rvices for a fee as e Ms. TIle services rend ered by a co nst ru ction ma nager p ro duced an additional professiona l Iiability policy: E&O insu ra nce to co ver the p rac tice and perform ance o f co nstr uction manage rs. Th is pol icy co ve red imp rude n t con tract ad minist ratio n decisions and misdirection of con tracto rs in the field but not de sign deci sions .

300

Cha pt er 19

Risk Manageme nt

Sect ion 19.9

. It should he und er s tood thal E&O Insuran ce d oc s not p rotect the insured against negl ~gcnce, only e rro rs and omi ssio ns. As well, E&O insuran ce is not a hedge agai nst ~ ed locre e M o r ~IE per form ance. Most E&O policies ha ve d edu ctibl es to ge t them IOta the cost -pr act ical premium range. E&O po licies al ways carry exclusions, and car e shou ld be exercised to e valuat e the possible con seq uences of ea ch. An example excl usion in an E&O policy is as follows:

person."

Builder' s Rlsk. D uri ng co nstruction opera tions, the structure is vulnera ble to ce rtai n perils such as wind. rai n, fire, and o ther acts of G od . Unde r the G C system. the ge ne ral co ntrac tor is usually req uired to pr ovide and pay for <1 Builder's Risk policy which protects t he owner aga inst finan cial loss fro m th ese perils. Th c ge neral co ntractor ob tains the po licy and includes its cost in his bid o r proposal to the own er. The pr emium indir ectl y paid for by the owner is based on the size and accident exposure of the p roje ct. Whe n using mu ltiple co ntracts, th c o wne r replaces th e general cont ractor in ma ny ways. In th is ca se, the ow ner provides the builde r's risk policyThe own er bene fits by th e opport unity to o b ta in the cove rage compet itively an d minimize premi um cos ts. The o wne r may sa ve e ve n more premium costs by p roviding the coverage th ro ugh en dor sem ent o f exist ing pr operty-protecti on poli cies.

19.8.3

To e limi na te liability for a n uni nsu red loss o r for an inadequate insured am ou n t, n il ow ner sh ould c;ury co verages in :1I110un ts Ih ;l ( will prov ide pr ot ection if co nt rac tually-p resc ribed insuran ce coverage does not .This insurance is in add ition to rcqu irin g all ~~nt raclors to nam e the owner as a n addi tionally-insured part y o n their liabil ity poli cies. Owncr 's protect ive liabili ty coverag e p ro vide s (his prot ection . Owne r's Pr ot ective Liabili ty, Eliminat ing a general co nt rac to r on a eM mu lti. ple-co ntract project removes the insur ance layer betwee n the GC and his su bcon tracto rs. To ret ain the cred ibility of the ins ura nce ne two rk. the ow ne r di rec tly p urchases cov erage [he GC p ro vided. Simi lar to t.he co ver age refe rred to as "Contrac to rs Prote ctive Liability" (under the Com prehensive Genera l/Publ ic Liability form of insura nce on page 298), Ow ner's Pr~ tecti ve . Lia ~ili ty coverage pr otects the owner again st liability res ult ing from th e acti on s or ina ction s o f th e co n trac tor or contracto rs wo rkin g o n the owner's project. . The liability c~uld be contributory, resulting fro m a contractor no t carrying sum. crent ~ove ragc to Withsta nd a loss or working u nde r an expired po licy. It co uld also occu r If the o wner crea tes an attractive nuisance wh ich res ults in injury to an on-site tre spasser.

30 1

Owne r's p rotect ive liability cove rage is o ften ign o red when using the GC system . This occurs o n the theor y thai if high e no ugh limits ar c req uired o f the GC o n his p ro tec tive liability po licy, and an owner indemnification ag ree me n t is incorp orated in [he con tract, the owne r will hav e ad equ ate protection. However, higher-th an -normal limits a nd indemnifi ca tion are addition al cos t factors to co verage which crea te a n unecon om ica l cost/coverage valu e rel at ion ship. Nei ther pro tect the ow ne r agains t inheren t expos ures. nor do they pr o tect him/her in the event thai co ntr actor cov e rage lapses o r is cancelled. By not carrying o wne r's pro tective liability on G C projects. the owner faces exposure that she/he co uld well do wit hou t.

-l~e Insuring Agreement s, and all ot her provisions of this insuran ce, shall not apply [ 0 claims f~r or arising out of [he advising or requiring o f. or failure to maintain any farm of insurance, suretyship or bond. either with respect 10 the insured or any e ther

Comprenc nsrvc Ge ncral/ Puhlic Liahllity Cove rag e. Cov erages und er thi s form of insur ance ar c provided by both the owne r and the co n trac tors in accord ance with the contract d ocumen ts. Double cove rages a rc common in const ruction beca use o f the number of pa rties simultaneous ly invol ved at the site . Whe n an acciden t occ urs , it is often d ifficu lt to assign ultimat e respon sibility to an yone. part y. Fault cou ld be passed from o ne pa rt y to anothe r. consuming co ns iderable tun e an d effort. In add ition, numbe rs alone ma ke it imp ossible to ensu re th at all the contrac tua lly req uired coverages are in force at anyone time, or if the claim on a policy will exceed the insured amo un t. Fo r this rea so n, it is usual that contr ac~ors indemnify the .owner from liabili ty by contra ct a nd that each insuran ce po licy In force on the proj ect have a warver of sub roga tio n clause to pre ven t "fing er-po in ting" reactions from one insu rer to another. The s ubrogation waiver eliminat es the right of the prim e insu re r to claim co mpensa tio n fro m ano the r insurer whose ins~rcd might ha ve been invo lved in the occu ra nce . The pr ime insu re r pays the claim .

Contract or Req uirements

Risk Pa cka g ing 111e owner's purchasin g po we r in the ins urance indu stry o ften pr ovides pack aging pes sibilities with p remium disco unt s no t available lO contractors. Ca rriers can base pH:: mi um ra tes o n special fillings and no t o n the ma nual listed rates applicable to co ntractors. Th e pa ckagin g of insurance req uiremen ts prod uces ,111 effec tive competitive premium situa tion. O n large p rojects there may be an o ppo rtunity for the own e r to arra nge a " wrapup" insurance pol icy; one that co vers th e Owne r. AlE. CM . and all co ntractors on th e site. A wrap-up po licy can reduce ove ra ll insuran ce cos ts and e limi nat e the q uestio n of wh ether co ntrac to rs are currently an d properly insured.

19.9

CONTRACTOR REQU IR EMENTS TIle followin g su bstitut ion for an insu rance articl e. typically found in standard gene ral co nd itio ns of the co nt rac t forms. has been pr eviou sly used o n multi ple-contract CM pr ojects. While: this article sho uld not be used with out scrutiny a nd mod ificat ions (especially in the are as o f insured limits), it stands as a n exa mple of the typical cove rage o n a me dium-size ACM mult iple-contract projec t.

302

Chapt er 19

Risk M an acc rnen t

INSURANCE All reference to Insurance: in the General Co nduic ns shall be deleted .Th e insura nce req uire ments shall be as follows : 1 CO NT R ACTOR'S LI ABILITY INS URA NC E 1.1 Ea ch Con tra ctor shall purc hase and ma intain such insurance as will protec t it from claim s which may ari se o ut of o r re sult fro m the Co ntracto r's o pe rations under the cont ract. wheth er su ch ope ra tions be by itself or by any subc on tractor or by an yone dire ctly or indirect ly emplo yed by an y of [hem. o r by anyone for whose acts any of them be liable . All insurance co mpanies writing cov er age fo r this pr oject. shall be ap pro ved Or lice nsed to operat ed within the Sta te in whi ch this project is located. Wri tten certificatio n of this requ ire men t shall be p resented 10 the O wne r, A rchi tect and Construction Manager. 1.2 Th e insur ance req uired by Sub-pa rag raph 1.1 s ha ll be as follows : I Work er 's Compensa tion and E mp loyers ' Liability In sur ance: Work er's Co mpe nsa tio n and Occ upa tional Disease Insura nce at sta tu to ry limit s as pr ovided by the Sta te in which th is co ntra ct is performed and Employer's Liability Insu rance at a lim it o f not less than On e Hundred Thousand Dollar s (S100,OOO.00) for al l damages arising from each acci dent or occupa tional disea se. 2 Comprehensive G enera l Liab ility Ins ura nce covering: A. O pe rntions -c-Prcmiscs Lia bility: includ ing. hu t no tlimit ed 10 . bo d ily inj ury, includi ng deat h il l uny time resu lting the refrom . to a ny person Dr prop e rty d amage resulting from execut ion o f the wo rk p rovide d for in this cont rac t o r d ue to o r ar ising in an y manne r fro m any act or a ny o missio n o r negl igence of the Co nt racto r and any subcon trac to r. th eir respecti ve employers or age nts. B. Elevato r Liability: includ ing. but no t limited to, bod ily inju ry. includ ing death ill an y time resulti ng ther efrom, to nny per son or pr operty darnage resulti ng from ope ratio n o r use o f any eleva lor or ho ist, if eit her o r both nrc operated o r used in connect ion with execution of this contract. C. Co ntrnctoe's Protective Lia bility: includ ing. but netlimited to bodi ly inju ry, includ ing de ath at any tim e res ulting therefrom . to a ny per son or proper ty da mage a rising from ac ts o r omi ssio ns of any subcon trac tor , thei r e mploy ees or agents, D. Pro ducts- Complet ed O perat ion s liabil ity: incl uding. bu t not limite d to, bodi ly inj ury. inclu ding dea th a t an y time resu lting theref rom to any pe rso n o r prope rt y dam age beca use o f go od s. products, material s. or eq uip men t used o r installe d un de r this con tract o r becau se of co rnpleted ope ratio ns, which rna}' beco me evide nt after acceptance o f th e building. includ ing damage to th e build ing o r its con ten ts. E . Contractu al Liability: Eac h a nd eve ry policy fo r liabili ty insurance. carried by ea ch Co ntracto r and subc on trac to r as req uired herein sha ll specifically incl ude contractua l liability (h old harml ess clau se ) cove rag e.

Sect ion 19.9

Contractor Requirements

303

F. Spe cial Req uire men ts: The insura nce req uired und er 1.2.2 shall speci fica lly include the follow ing special haza rd s: 1. Propert y damage ca used by condition s o therwise subje ct to exctusions " X, C, U ", explosion , coll ap se, o r un derground damage, as d efined by the National Bureau of Ca sualty Und erw riters. 2. Proper ty d amage liabi lity co ve rage shall be broad for m cove rage. 3. "Occurre nce" bodi ly injury cove rage in lieu of "Caused by acciden t." 4. "Occurrence" property damage cover age in lieu of " Caused by acciden t." 5. EX CEPTION: Co ntracts that d o not requir e excavat ion or undergro und work are not required to have the abo ve "Special Hazards" insura nce cover age under (1) above.

G. Lim its of Liability:The insur ance un der 1.2.2 sha ll be wriuen in the following limits of liabil ity as a minimum:" Bodily Injury; $500.000 eac h occurren ce S500,OOO aggregate products Property Damage: $500,000 each occurren ce Sl00 ,OOO agg rega te op erat ion s $100,000 $100,000

aggregate protective a ggregate prod ucts SIOO.OOO aggr egate con tra ctua l 3 Co mp re hensive Aut om obile Liabilit y Insu rance cove ring: A. All own ed, hired, o r non -owned v eh icles including the la ndin g or un loading ther eo f. B. Specia l Requirements-Th e insura nce req uired und e r 1.2.2 shall specifically include the follo wing special haza rds: 1. "Occu rrence" bodil y injury in lie u of "Caused by accident." 2. "Occurrence" propert y d amage in lieu of " Caused by acc ident."

C. Limi ts o f Liabil ity:The insur ance unde r 1.2.3 sha ll be written in the followi ng lim its of liability as a minimum:" Automobile Bodily Injury $500.000 each per son $500.000 each occ urre nce Autom obile Properly Damage 51,000,000 each occurrence 4 Umbrella Clause: If an umbrella clau se is written to im plement th e above prime co verages, the umbrella cla use shall specifica lly sta te that the policy - Note: Limits staled he re are an example only The owner must establish limits on a project

~3$is.

304

Ch ap ter 19

1.3

Risk Management

Sect ion 19.10

is written o n an "occurrence" basis . Umbrella Liability: 51,000,000 each occu rrence and $1.000.000 agg regate. No Contractor shall commence work under this contract un til it has been approved by the:Architect and Construction Manager. nor shall any Co nt rac tor

1.4

1.5 1.6

2 2.1 3 3.1

TIle Own er shall pro vide Owner's Prot ecti ve Liability Insurance as will p ro tec t the own er ag ains t cla ims which may arise from o perati ons und er this co nt ract. P RO PER TY INS URAN CE BUI LD E R 'S R ISK COM PLETED VA LUE INS U RAN CE : The O wner s hal l ef fec t and mai n ta in builde r's risk insurance for com p leted valu e cove rage. an d sha ll include th e interest of the co ntractors and their subcontractors.This insura nce is to be u pon all the str uc tures o n which the work of all the con trac ts is 10 be do ne to one hun dr ed pe rce nt (lOO% ) of the insurabl e valu e th er eo f. includ ing item s o f labor an d materials co nn ect ed the re with whet her in o r adjacent to the st ruc tu res insu re d . materials in place or to be used :IS pa rt of the permanent const ruction incl uding surplus mate rials, sha nties, protec tive fen ces. bridges, temporary structures, miscellaneous ma te rials and su pp lies incident to the wo rk. and such scaffoldi ng. s taging. to wers. and equipment as a re no t owned or re nted by the cont rac to r, the cost of which is incl uded in the COS I of the work .

305

E XC LUS JO NS: lllis insurance does not cove r any tools owne d by mech anics. any tools, equipment, scaffold ing. staging, towe rs, and forms o wned o r rent ed by the con tractor, the capital val ue o f which is no l included in th e cOSI of the work. or any cook sha nties. bunkhouses or other structures er ect ed for housing the wo rkme n.The los s. if any. is to be made adjustable with and payable to the Owne r as trustee for tnc insu red and cont ractors and subco nt rac to rs as thei r inte res t may appea r. exce pt in s uch cases as may req uire payme nt of all o r a proportion of said insu ra nce to be made to a mo rtgagee as its int ere sts may appear.

allow any subcontractor to commence work un til the same insurance has been obtained by the subcontractor. Unless exceptions arc noted or specified. each and every Contracto r and subcontractor shall mai ntain all insurance requi red under 1.2.1. 1.2.2 and 1.2.3 of this section for nor less than one (1) year after co mp letio n of the contract. Each Co nt rac to r sh all file with the Owner, A rchitect an d Co nstructio n Manag er a Ce rtifi cat e o f In su ran ce (ava ilable fro m the Co nstructio n Mana ger). An y ce rtificat e su bmi tted and found to be inco mp lete will be returned as unsatisfa ct or y. Certificate of In sur an ce shall co ntai n a cla use that co ve rage affo rd ed by the policies list ed will no t be canceled or mat er ially alt ered. exc ept aft er 45 days advance written not ice to the Own er, A rchitect and Co ns tructio n Manager, ma iled to the add ress es indicated herein . If requ est ed by tbc Owner. Co ntrac tor sh;lll furnis h the O v..'ncr with tr ue co pies of each po licy requi red of him or his subccu tructors. Each Contractor shall secu re the following e ndorsemen ts to each of the above po licies: " It is unde rstood a nd ag ree d tha t the insu ra nce co mpany will give not Jess tha n forty-five (45) days advance wri tte n no tice of any cancella tion or material change under any of these policies ( 0 the O wne r:' " In the even t tha t such no tice is not given to the Ow ner a t leas t forty. five (45) days pri or to can cell at io n or mate ria l cha nge, the policy will co ntinue in full force and effect for the benefi t of the Ow ner as if suc h change or cancella tion had not occ urred." OWNERS L1AI3ILlT Y INSURA NC E

Th e Ri5k M anagement Plan

19.10

THE RISK MANAG EMENT PLA N

TIle risk management p lan sh ou ld pr escr ibe proced ures that ad dress the sta tic and dynamic risks inherent to the project.Th e goa l of the plan is to mini mize the own er's exposu re to risk from rhe s ta rt o f d esign to occupancy and th rough the warrant y peri od . The plan sho uld e mph asize risk a wa reness. It sho uld include procedures that will identify s ta tic an d dynam ic risks. eva luate their po ten tial loss value. and pr escribe 'va)'s to ef fec tiv ely dispose of them in ways (hat se rve the o wne r's bes t interests. The conventio na l mean s o f risk d isposal arc 10 :

,-

el iminate the risk. by tak ing an alte rnate course of action • shed the risk. by k it ing someone else bea r the burden .", ass ig; t-h e risk to othe rs. by ag ree ment o r co ntrac t re tain the risk and minim ize it Ihrou gh microma nage ment. The list of risks will be s ubs ta n tia l becau se it sho uld be as comprehensive as possible. It sho uld be sta rte d at the brains to rm ing session and con tinue d th ro ugho ut the pr oject.The CM sho uld be the cu stodia n of the list. E ve ry learn member s ho uld be risk , q uali ty, an d safe ty-co nscio us an d con tribute to th e list as risks iUC iden tified.The bes t approach is to al ways keep a "w11
306

Chapte r 19

Risk Management

all single risks. However . both these risks are stntic risks commonly de alt with o n every project. eM or o therwise. 'There are many othe r risks, as sugges ted earlie r in this chap te r and as e lude d to in other chapters. Some of them will requ ire extensive procedures and othe rs will not . The goal should be to review all identifiabl e risks by priori ty and establish procedures to lessen the potential of each one . Risk management is a part of cont racting and construction that must be microman aged.The team concept of Cxt makes that task easier to pe rform .

CH A PTER

2 0

Sch edul e Man ag em e nt Sched uling has always been used as a management too l in th e constructi on industry. As in an y o the r indu stry, ef ficiently do vetailing o pe ra tions and timely receip t of mat erials an d eq uipmen t is mandatory if a project is expected to proceed smooth ly. Howe ver. unlike mo st o ther indus tries, co nstruc tion ha s variables such as wind , rain, snow, and temperature that adver sely affect sched uling. Most man ufacturing sites eliminate the se variables by physical enclosure. but a constru ction site is not conduciv e to similar con trolling measures. While the art an d prac tice of schedu ling has reached very high levels of sop histicat ion, the variables co nvert co nst ruc tion scheduli ng into a less-than-perfect management tool . In sp ite of its recogn ized inadequ acies. construction sched uling is conside red a mandatory rool for manag ing the project-de livery process. Th ere is no do ubt of its value when properly used . Th e CM co ntracting structure provid es an ideal en vironment for the use of sched uling within its capabi lities. Th e sched uling tool is widel y used th rou ghout CM prac tice and procedures.

20.1

THE SCHE DULE MANA GEM ENT A REA OF KNOWLEDGE

The schedule man agement area of knowled ge en compasses all aspec ts of scheduling thro ugho ut the projec t. Schedul ing is the management tool that bes t rep re sen ts the co ntrolled opera tions philosophy of the eM co ntrac ting syste m. It combines the ele ment of time with the project' s reso urces from the sta rt of design to owne r occupa ncy. Sched uling elimina tes o r mitigat es pot ential time -resource crises by predi cting sta rt an d finish dates for inte rmedia te project milestones. Th e use of scheduling is a mea ns to an end. not an e nd in itse lf. It is a for m oC co mmu nica tion tha t sho uld be pre sent ed in the simplest Corm with just e no ugh det ail to convey its message. The CM must be able to app ly sched uling as a major managem ent tool. proficient in its use an d app lica tions, and sensitive to its ability to plan and predict. The CM must have the capa bility to des ign the Sche duling.Ma nagement Pla n for the project. select appro priate sche d uling fo rma ts an d techniques for specific project applications, and extract information from team me mber s and contractors fo r schedu ling purposes. Th e schedule management area of kno wledge includes a tho ro ugh understanding of scheduling techniques, from bar chart s to precedence diag ra mming. includi ng their use in plan ning, predicting. analyzing and tr acking project activities and events. The CM must be compute r liter ate in the area of scheduling. understand the fundamenta ls of mod eling . be proficient in matching sche d uling app lications to req uire . ments, and possess excellent comm uni cat ions ski lls. 307

308

Chapter 20

20.2

SCHEDULING BACKGROUND

Th e introd uctio n o f Crit ical Path Met hod (C PM) scheduli ng in the 1950s as an alt ernate to trad ition al ba r cha rts was greeted en thu siastically by the co nst ruc tion industr y. A lthoug h CpM co uld not elim inate the var iables that ham pered accura te co ns truc tio n schedules pr edi ct ion s, it pr ovid ed a sophistica ted d iagra mmi ng technique that cle a rly defined the ac tivities th nt moved the p roject from start to finish and identifi ed tho se events tha t controlled th e du ra tio n of th e project CPM wa s first used on co nst ructio n project s thirty-five ye ars before comput er s we re un iversally availa ble. Except wh ere large co m p ute rs were avail a ble, construction sched ules were produced manually. A la rge . co m ple x pr oject req uired a sche d ule th a t to ok conside rab le planni ng, diagra mmi ng, and tim e calculations . When the p roject pro ceed ed according to th e di agram. users had th e tremendo us advant age of accurately assessing progress and pre dic ting the start and end dates of rnan y activities as well as final co mple tion. However, if an activity seq uence or d urati o n cha nged du e to o ne of the variables inheren t to co ns tru ctio n's ex posure. the d iagram became useless and had to be complete ly redone. Th e time, effort , and money requ ired to manually upd ate schedules each time a seq uence or duration changed W ~IS di scou rag ing. and th is prompted many CP M advocates to rev ert 10 the m ore simplistic, mani pu la tive bar graph sch edule s. With all its p remise. CPM sch ed uling remained pr acti cally dormant in th e con st ruction indu stry un til econ omica l co mp uters became avail a ble in the 19805. Compute riza tion provided the mean s o f co nvenie ntly and qu ickly updating schedu les. As a result , CPM regained its po pulari ty Jtl
20.3

Section 20.6

Sche du le Man ag ement

The Five Basic Sched ules

309

3. To co ns ider alt ernat ives befor e an ac tivity begi ns 4. To compare actual performance with ant icipate d performance 5. To provide a record o f time-rel at ed performance A sixth use of sche d uling, as a sal es tool, is important to a CM . Many requests for CM p roposals ask for a schedule as pan o f th e CM's submitta l. W.hen this oc~urs. the " be lls an d whist les" wh ich a rc not ne cessarily valuabl e wh en using sched uling as II ma nagement tool can be advantageous in impressing owne rs.

20.S

A DDITION A L A SPECTS OF SCH EDULIN G

Sch edu ling deals wit h a ll tim e- rel at ed aspects of a project . no t ju st con st ructio n acrlvitics. Th e time -va lue of mo ney (merging o f cost information and time schedul ing) produces time-or ie nte d financia l in for mat io n tha t can prove vital to project financing and othe r cost -rela ted pr oject activi ties. Add itional aspects are d iscussed in Chapte r 15, Value Management.

20.6

T HE FIVE BASIC SCHEDULES

Th e re ar e five basic schedu les that should be developed and used by a CM on every project.They pro vide a sou nd in terrelated co re for th e succe ssf u l exec ution of sched u le management. Figure 20.1 d iagrams th e interaction of th e five schedules.

THE PRACTICAL USE OF SCH EDULING

eMsched uling effort s sho uld alwa ys be view ed as a means 10 an en d, not an end in itself. The "bells and whistle s" o f co ntemporar y scheduling so ftware make it ver y difficult to keep th is te net in view, Sched uling so ftware use rs, cau ght up in the extensive capabilities of the prog rams. tend 10 usc the available ca pabilities whether they contribut e to effective project management o r not . Th e result places restri ct io ns o n wh at mu st be a flexib le ma nage ment fo rmat th at can be readily adapted to cha nging p rojec t con d itio ns. It should be rem em bered that schedu ling is a ba sic m anagement tool that sho uld not be used beyond its pra ctical capacity, Scheduling is n mean s of commun icati on and sho uld be used at its most understa ndub le le vel , not its highe st level o f so phisticatio n. Sched uling should be used to accompli sh, nOI to impress. '1 1h~ eM should keep this in mind when carryi ng out sched uling responsibilities to th e proje ct team an d co nt ra cto rs.

DETA ILED CONSTRUCTION SCIIED ULE ·

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MI LESTONE SCH EDU LE

SHORT

20.4

THE REA SONS FOR SCHEDULING

TERM CA P

Th er e arc five fundament al rea son s fo r scheduling :

1. To en sur e plannin g lakes place before a n act ivity is unde rtake n 2. To give di rect ion to those respon sible to execut e an act ivity

FIGURE 20 .1 The interac tion

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th e n.. e basic sched ules,

I

310

Cha pt er 20

Schedu le

M it"'hlg cmen~

Sectio n 20.7

Th ey arc; I. Program Schedule: Drives the project fro m start to finish. 2. Dc tuiicd Construction Sched ule: De te rmines thc time needed for cons truction . 3. Milest on c Schedule: Dr ives the project du ring co nstruction . 4. Sh ari Term Contractor's AClh ity Plan: Plans contractor ac tivities to meet mileston es,

20.7

,

·t )

20.7.1

20.7.2

Pro g ra m Schedule Activiti es

Cons~derable tho ught should go in to the activi ties included in the Progra m Schedule. The list sho uld be co mprehensive and detailed, All team members should cont ribute to the devel?~me~ 1 ~f the list and the liming required for each ac tivity. . Ac tivity list ing manda tes pla nning (one of the main benefits of schedu ling). The list bec~mes an II1 ve~ tory of no~cons truc tion ac tivities that mu st be accomplished by the proje ct tea m dunng the projec t. The sched ule defi nes time-or ient ed req uire me nts for all team me mbe rs and la ys o ut t he project in a clea r. understandable per spective.

Progra m Schedule Format Co mpute rized, precedence-diagrammed sche d uling sho uld be used for the program sched ule. These techniqu es perm it conve nient a nd rapi d upda ting which is especially bene ficial when the sched ule is you ng. The re will be man y ac tivity ad ditio ns and seq ue nce and d ura tion cha nges as the sche du le dev elop s. Man y activities will be concurre nt: however the sche d ule itself will be linear due to its decisi on-based charac te r. Prog ram Sched ule printouts shou ld be list ings, no t di agram s. Program Sche d ule act ivities are no t influen ced by un contro llab le vari abl es: the y a re mostly proj ec t team ac tion s and interactions thai are subject to the contro l of the ind ivid uals invo lved. For th ese reason s, plus the fact that the Program Sched ule is formulated as a ream.the Pro gr am Schedu le has the best pot en tial for staying on tr ack of all schedules used o n a CM project. In spite of its high pot e ntial to stay o n tra ck , it sho uld not be assumed tha t a Progra m Schedu le will au tom at ically do so. Like e veryone else, team mem bers encoun te r prob lems whe n tr ying to mee t multiple commitments. Ad ditionally, when team me mbe rs plan. they te nd to be op timistic a bo ut the ir own abilities, They Ireq ucntly set timelines fo r them selves [ha t a re onl y att ai nabl e if outside influences are excep ted. Thi s tends to cre ate
THE PROG RAM SCHEDULE

Recogn iz~ng tha.t ~I.a nning activities and design activities need time-control as much as construction.ilCtiVllles established the need for a spec ific sched ule that cou ld cha rt the preconstruction pha se as well as th e const ruction phase of a project. Th e Progra m Sched ule fills thls nee d. It is used to de fine a nd track the actions of tea m mc~bers. a nd. t ~ e con st ruction phase, thro ughout (he co urse of the project. Th e construct ion phase IS Included as an activi ty with a single duration for its accom plishment. A subsequent schedule (Detailed Co nstructio n Schedule) will breakdown the prog ram schedu le's co nstruction activity in detail. Th e CM s)'~tem rcco¥l~izes tha t time los t du ring any ph ase of project delive ry is ~nreco~era ble wlt ho ~t addi tio nal ~ost 10 so meo ne. TIme lost du ring planni ng o r de sign I~ no ~ I ffe re~ t tl~3 n tlm,e lost ~ u Tl ng const ruction , but the con sequ en ces of a missed lIme./l)nc o~ bga tlo n d ur!ng des~g.nca n cause a n ino rdin ate project delay. ~ lunnin g and design acu vurcs such ;IS mee tings to extr act dec isions or dates est ablishe d .f~r the decisions the mselve s arc ge nerally shu n term . Being unprepa red to make a decision can cause an ext e,nded time delay {i.e.. OJ reg ulat ing age ncy tha t mee ts ~onthly to .gra nt a pp~o\'a ls tha: \"'111 allow design to proceed cou ld prod uce a 22 wor kmg day project delay, If the da ta req uired fo r ap prova l a rrives one day late ).

311

Many Program Sched ule ac tivities are owne r decision dates dealing with materiall equ ipmenI se lection o r appro vals of design pha ses. O the rs a re actio n da tes such as co nfirming financing, mailing documen ts, or assigning project pe rsonne l. Still othe rs a rc days set asidc for mee tings and tea m wor k-sessio ns. includin g value and q uality ma nageme nt mee tings and budge t re views, Regardless of a n activity's d uratio n, if it is a vital part of the seque ntial progress of the project, it belongs in the Program Schedul e. Program sched ule ac tivities are those necessary to kee p the proje ct ru nn ing smoo thly o n bot h ends of th e principa l con stru cti on activ ity. Th ese typically include: Co nstruc tion Loa n A pp rova l, Bid Package Reviews, Age ncy Ap proval s, Mat eri al/ E q uip ment Se lections, B uilding Permits. B id Pa cka ge Preparation, Con trac t Document Revi ews. Bid D ocument Mailings,Team Me etin gs, e tc.

j,

5. Compl etion Sche d ule: Coordina tes construction co mple tion and occupancy. There are ot~er sched ules and sche d ule ap plica tions tha t ca n be he lpful on a long or short term basis, However , these five basic schedules prov ide the CM with all the inform a tion req uired for successful sched ule ma nagement. A s Figure 20.1 shows , the five schedules are depende nt o n o ne anothe r for infe rmarion. Th e initial schedule is the program schedule, developed as soon as the team is formed. Th e fina l schedule is the comp let ion schedule, devel oped a bo ut two-t hirds through con stru ction.

The Program Sche d ule

20.7.3

Program Schedule Prin t-Outs Th e computer ized program sche d ule sho uld permit [he CM to obtain severa l print-o ut so rtings tha t a id in iden tifying team activities. Besides th e common list so rt by wo rk item o r ac tivity number . wh ich prov ides activity co rrelat ion with the precedent di agr am. early-sta rt list so rts for the team o r ind ividua l tea m me mbe rs sh ould be ava ilab le.These list sorts clearly iden tify the day- to-day ac tivities of team membe rs on letter-size paper without the need of a cumbersome diagram. A n early-sta rt sort which lists the ac tivities chronologically can be the guide fo r tea m members' daily actions. Eve ry team mem ber ca n de term ine herlhi s sched uled input to the proje ct fo r any da y by look ing at the ea rly-start so rt. He/she can also see what o the r learn membe rs sho uld be doing by reviewing thei r respective ear ly-st art print-outs.

312

Chapter 20

Section 20 ,8

Schedu le Ma na ge me nt

Because o f their use as :1 pla nner and mo tivator . an d the dynamic cha rac te r of th e precon struct ion phase o f the project, ea rly -sta rt print-outs should be sent to ea ch learn mem ber week ly. If an act ion dale is m issed . t hc C ~ l should be given immed iate notice. An a lterna te course of ac tion CJn be ins tit ut e d to b ring the progra m ac tivities back on schedule. a nd a n imm ediate pr int-out showi ng the time-line consequ en ce s should be sent 10 team mem be rs. Figure 20.2 b an example o f a progr am schedule. Th e sched ule W,IS devel oped by d ra w ing a precedence diagram and printing it as a list-typ e schedule. The so rt in this case was "early-start by team resp onsibilityv The activities arc listed in date-sequence prod ucing a critic al pa th . In use, the schedule is a day -to -da y cal end ar for team members (a list of what s hould be d on e today (M arch 28) and each day thereafter 10 keep the project on schedule ).Th e ( *) and (M) d esi gn at e key d ates. O ther sorts by wo rk item . activity se que nce. nud team me mbe r responsibility can be p rinted if desired . One th at shorte ns the so rt in Figu re 20.2 and serv es the sa me purpose is the "early-s tart by te am member respo nslbiliryvTb is so rt wo uld only inclu d e the activities for on e team member. Each tea m mem ber wo uld get her /h is own personalized day-to-day activ it)' schedule. By viewing this schedule print-ou t, th e ar ch itect/enginee r (A E), owner (ON). and co nstru ction manage r ( C ~ 1) can det ermine whe re and when their individual ef forts shou ld be app lied and \vhen te am (Tl\[) inp ut is required . Responsibility assig nments should agree with th e res ponsibility ch art developed in Chap te r 16. Proje ct Man agement. It should be noted that th e da te of the sc hed ule (M ar ch 28) co incides with th e sta rt date of the activi ty 00015 on this page o f the six-page: sche dule. Th e prcco ns truction phase is on schedu le as o f Mar ch 2~. Th e 000 sta rt -floa t after ea ch activi ty indicates that the requ ired-start d ate an d late- start dat e a re the sa me .Th ere is no room provi d ed fo r a late r star t than the required one . Thi s is especiall y critical on one-day d uratio n activities.

One activity tha t should be on cVl:ry program schedu le is "D t.:vclop the De tailed Const ruction Schcdulc,"Thc Detailed Sched ule is a co ns truc tion sched uh: for the tota l project or a phase thereof. Its pr ime pu rpos e is to dc te rmine: a p ractical durat ion for the com plet ion of all construction act ivities; seco nda ry b Ul imp0rla llt use s. are explained below. Of all of lhe scheJu ks used t:I Ihe eM process. tht.: Detailed Co ns truction Schedule appears m ostl radition a l.Th e conc ept is to b uild th e project on pa pe r,s tc p by slep, with meas.ured consideration given to the sequence J nd tim ing of activities.

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314

Chapter 20

TIle scheduler dete rmin es the const ruction act ivities an d pu ts them into se q uence by enterin g activity descri ptio ns in selected blank bubbles nod connecti ng th e bu bbles with line s by p recedence . Th e scheduler can begin 'vith a skeletal ne twork. using broad -tit led activities. covering the tim e allo tted for co nst ruct ion in the program schedule. H e/she can then fill in deta il by converting th e broad -ti lled acti vities to subne tworks. If lime is availabl e an d th e const ru cti on of th e pr oject is fairly co nve ntion al (or if th e scheduler p refers ), he/she can pUI the detail int o the network as sc he d uling proceeds. The choice of proced ures is opt iona l to th e sc hedule r. Ho wever . pr ojects with Lime: constraints and th ose that have un iqu e co nstruction req uirem e nts or re qu ire an earl } schedu ling effort can bes t be accompl ishe d using the skeletal/subnetwork me thod, (See Figure 20.5 on pag e 321.)

20 .8.2

Sect ion 20.9

Sched ule Mana ge me nt

20 .8 .3

315

Deve lo p in g a n d Using the Detai led Sch edu le When using C i\L the purpo se o f th e D etailed Construc t.ion ~ched lilc shou.ld be thre~­ fo ld : to dete rmine a pr act ical and accept able co nstruc tion tim e,.to esta~l.ls.h approXJmate dates fo r the co m ple tion o f ce rtai n groups of con s.trucHon acnvttres, and to p rov ide contractors with directio n at the outse t o f co ns t.ruc llon. . All the precauti on s and pra ctices o f goo d pr ofessional scheduling sho uld be fol lo wed. Sched uling sho uld be done by an experienced com~ctent scheduler .who has intimate kn ow ledge o f technical constru ction and th e project. (Th ese require ments sho u ld be inhe rent in a eM organization .} 111e D et ailed Sch edule can be manually pr oduced. com pu te r~ge ne ra ted. or ?oth. Eithe r approa ch is acceptable for its intended use. Th.e s~hedul~ ~eed not ~e a fims~cd document ; it mu st s imply be rea dable a nd acc urate within the limits o f the In f~ rmatl on available just prior to bidding the p roject. 1t sho u ld be produced as con veni en tly as . possibl e but not at th e sacrifice o f cr edibili ty. 111c sched ule shou ld no t be d ist rib uted to team mem ber s. It shou ld be hied by the Ct\l
Ne t w o rk Diagramm in g Whe n ori ginally ad op ted by the constructio n ind us try. ne two rk scheduling was main ly used to sch edule co nstruc tio n projects from begi nning to e nd. It pro d uce d a "rc ad ma p" of sequ ential activities with at least o ne sequence (a cr it ical pa th) th at , if followed by ge ne ra l con tr actor s and their subcontracto rs. wo uld achieve co nstr uc tion completio n on tim e. Th is sc he du le. de vel op ed befo re the st ar t o f con s truction, assum ed co n tracto r progress , a nticipated inclem ent wea the r, and es ti ma ted the co nse q uences of the problems inhe rent to co nstr uc tio n ope ra tio ns. TI1C schedule W.1S o flen co n trac tually imposed up on the co ntrac to rs with out the ir inp ut an d used in a di ctat ori al manne r [ 0 "drive" the contractors fro m cons truc tion sta rt to finish . Pr io r to compu teriza tio n, the initial construction schedule was o ften the last sched ule, because manually updatin g a non cc ntpu tcri zcd sc hedule te nde d to stall co nstruc tio n progress while upd ating was being accomplished . U pdating a sched ule (es pecially in th e ea rly stages of a projec t) some times took us long as init ially creating the sche dule. Compu terizati on red uced upda te time from days an d weeks to hours and m inut es. H owever. th e assumed seq ue nce of cons truc tio n activities, and th e pred icted effect s o f wea the r and un fo rseen construc tion problems. sel dom p ro ved acc urate. and th e effort required to stay with th e original co nstr uc tio n se qu ence o fte n became a se rious prob lem. Th e ad vent of th e C M syste m and involv em ent of a co nstr uction man ager effected a de part ure from con ventio na l de tai led co ns truc tio n sched uling. The Clv'l is an advocate of both the owne r an d A l E: th e C'vt has th e same project go als as bo th and is a specialist in con struction and scheduling. Mo re im po rt an tly, (he C M accep ts sche d uling as one o f sev e ra l managemen t tools. It is a too l that gu ide s ra th e r than directs const ruc tio n pr ogress to a tim e ly comple tio n a nd can cope with the realities of a constructio n pr oject. Th e road map conce p t still pr evail s, but the pa th betwee n targe t activities can vary, a nd th e target check-po ints are farther ap ar t. Thi s departure from co nve ntion has p ro du ced a new sche d uling phi losophy. o ne tha t con stan tly ex tracts input from co ntracto rs a nd co nse que ntly is no t conside red d ictatori al. Experie nce has shown that this approach to scheduling has a much be net potential to achie ve its pur pose.

M ileston e Schedule

20 .9

MILESTONE SCHEDULE Milesto nes ar c dates thai will be used to measure actu al progr~ss \Vi~h scheduled pr ogress during the co urse of th e proj ect . ~ c first .milcs tOI1:. d~te .IS. proJ~ct . st~~~. th~e last is p rojec t co m ple tion. It is assum ed th ai If C:;:lch intc rmc diutc milestone da te I~ mel acco rd ing 10 sch edule, the req uired end da te WIll be mel.

•Awa rd Contracts Shop Draw ing.Ap provals Fabricate Opc n Web J~l isl S O rder Hardware: Or de r Hollow Meta l Dc llvcr Mnsonry Specialties .Construclio n Mobil izalion Dehver Ha rdware Delive r Hollow Met al Frames ucttver Masonry Sped.'\lIics - Eanhw ork Co ncret e Foot ings.West Side • Bearin g Masonry "Site Util ities

-Cc ncrctc Floor SI,Jbs Sct Owner Equipment Erect Steel Joim Erec t ~k t:l 1 Do:ck Roofi ng and Shee t Mo: lal In ~t
FIGURE20. 3 A sample of De tailed Conmu,;til,)n Schedule actwitics,

316

Chapte r 20

Schedule Management

Section 20.9

Bidd ing Info rm a t io n Biddin g con tractors should have const ruction schedule information to assess the dem and s o f the ir time involvement in the projec t. General co ntracting biddi ng documen ts usu ally designa te an approximate start dale and a maximum construction pe riod in days, or a specific star t da te and a specific completion dnte . A Detailed Construction Schedule is seldom published as part of the bidding documents or provided by a ge neral contractor to the sub co nt rac tors as biddi ng informa tion, Subcontractors tradi tionally determine their time invo lveme nt from the gene ral contractor's start and finish informati on in the biddi ng doc u ments. Over time . subcontractor s have acquired enough kn owled ge o f the construction process [0 closely es tima te their time invclvement.cspecially o n co nven tiona l projects. Seldom does a subcon tract issued by the genera l cont ractor des ignate a specific start da le o r en d da te for a spec ific subcontractor (o the r than those in the GC's COntract with the ow ner). Subcont ractors would p refer specific time- related contract p ro. visio ns to protect the m fro m cost ove rr uns caused by the operations of the genera l con tracto r or anoth er subcont rac to r. However, gene ra l cont racto rs prefer co ntract langu age tha i simply req uires s ubcon tracto rs to kee p puce with cons tr uction progress, When computeri zed scheduli ng became th e r ule rather than the exception, CM prac tice became sched ule orie n ted to [he poin t whe re ma ny co nstruction man agers rel ied main ly on a constru ction schedu le to man age a projec t. Th e s pee d and flexi bilit y o f co mput erized SChed uling p rovided a false sense of co ntro l when in fact co mp u te riza tio n only streamlined the sch ed uling proc ess, not the co ns truc tion process, TIle reulilies of co ntrac tor pro gre ss. inclem ent wea ther. and the problems inher ent to construction o pera tions still had to be recko ned with .

20 .9.2

edited~ersion

20 .9 .3

mllestones-l~ose

Potentia l Schedu le liability

If th e De tailed Constructio n Sc hed ule ha s liu le cha nce of being follow ed preCiSC ly, l~e M ilesto ne Schedu le co uld have the sa me pro blem . It is o ne thing to develop a s~hed u e to gu ide per fo rmance an d qu ite ano th er to ~:< pec t spcci ~c da tes to be met d u.n n~ ~er~~ Inrm ance. Co ntractor perfor man ce is especially u n p.re(ilct ab~e du e .to the m~ n~edu le ab ies involved in the co nst ru ction p roce ss. Expe rie nce using Mdest?n.e c . d i I inform atio n clea rly indicat es th at it sho uld be p rese nted as a rou gh guide to bid 109 co ntractors. d . I . divi d I 0 trac t perfor Milest o ne events shou ld not be close ly klc ntific wit 1 III I ~I ua e n , .. •· . I ar close in" or a " b uild ing enclos ure" milesto ne IS accept ab le; a comA e . • ' '. rovide so ft ma nce. wm c , lc tc ro ofing" or "insta ll windows" mileston e IS no t. Th e intent IS to . P interpreta ble info rma tio n while not providin g ha rd dates that can be legally construed , Id as the time b racke t for a specific contracto r's wo rk-sco pe pe rforma~ce. Biddi ng informat io n acc ompany ing th e Mileston e Schedule infor mation sho,u l make it ab undan ti)' clear to co n trac to rs that th~ inforn13t~on is no m~re tha n a gUld.c. 111e ch ances o f meeting mil eston e d a tes urc subjec t to the inheren t v3n~bles presen/ III eve r)' cons tructio n projec t. A dd itio nal exculpa tory .c1auses ~hould be inserted to urth er estab lish the intended p urpose o f th e schedu le informati on .

Milesto nes a nd Multipl e Bidding Info rm ation Man y eM p roject s Use mult iple prim e co n trac ts and p hased cons truc tio n. O n these proj ects. it is p rob able th at no ne o f the mu ltiple pr ime bidders will stay all tile pr oject for the tot al con str uctio n period a nd only some will be o n the p roject a t the sa me time. Altho ugh the sta n and e nd dat e of the p rojec t could be used by multiple p rime Contractors to det ermine thei r time involvem en t (as it is when they wor k for ge nera l Contractors as su bcont racto rs), the presence of a con struct ion manage r (a n ex pe rt scheduler) suggests that mo re and more speci fic in fo rm ation be pro vided. Howe ver . for the same reasons general co nt ractors do no t provide specific schedule informati on to bidding subcon tractors, th e p roject tea m should not p ro vide lo a mu ch sched ule infor ma tio n to trade contrac to rs prior to bidding. Even tho ugh mo re schedule informa tion is a ..'a ilable d ue to the comprehensive preconstruction sched uling respo nsibilities of the e M, the credibility of that information is still subject to the real ities of the const ruction environment.

317

Consequen tly, it is im possible to une rr ingly pred ict precise con trac t star t a.nd fi~~ ish dat es for the thirty o r mor e int erfacing cont rac tor work -scopes that co mp nse t . Missed co ntr actu al sta rt a nd finish dates for whateve r re ason o ther than const ruction. l~ I ' . . st th e contractor's own fault arc pot en tial sources fo r claims ~y the co nt :actors agams r Ih IS · reason . ·' 1 1is ob vio uslv et he owner. r-or . in the owner's best in ter est to Issue con stru . lio n schedule informa tio n pri o r to bidding that has little or no cha nce of ge ne rating a de lay claim agai nst the owner. . . Miles tone Schedu le information can be used for .th iS pu rpose. A ~1: le sto~e Schedule. in list or netwo rk fo rm . can be issued to all bidde rs. Howev:r•.It IS mu... ~ wiser to issue selected , pertinen t, milestone eve nts on ,a c,omractor w o~k -scope by wor k-sec basis. If a Mileston e Sched ule is issued for biddi ng pu rposes, It should be an that o n I)' inclu des p rudent I)' defi ned that can not be construed as defin ing a specific contractor's work-scope star t o~ fi nish d ~te. . The concept of pr o viding a minimum amo unt of sched ule inform ation n~ay ~c d ifficult for supe r-sched ule r e Ms to un der sta nd. However, regard less of the eM~ pt.:r· ceivcd abi lity to pr odu ce schedules, as the owner's agent the C~ has the p~lmary ibilit 10 act in ' he owne r's bes t inte rests. It wou the o wne r s bes t respo nsl I I Y . ld nOI . .be Infini inf . int erest to need lessly expo se th e ow ne r 10 de lay claim s by issui ng nne m o rma tio n that is so vulnerable to ch ange.

The pu rpose of the miles tone schedule is to provid e bidding cont rac tors with adeq uate schedule info rmatio n from which they can roughly estimate the timc( s) when thei r ser vices will be needed on the project, and to provide a means by wh ich the proj ect tea m can measure project progress (and consider alternatives if requi red). 20.9.1

Milestone Schedule

20 .9 .4

Contra cto r Construction Sch edul e Input Two additional re quirem ent s should be included in eac h c~n t ractor~s pr op osal.. Bot h tend to reinfo rce the int en d ed use o f Milesto ne Sched ule informa tion ~ s a guide to co nt ractors ra the r than a d ed icated p red iction of wo rk-scope sta rt and finish da tes.

31 8

Chapter 2(\

Sched ule Man agement

Section 20.10

1. Each ,co n t ~actor ~holi i d be requir ed to accept o r amend the schedu le information co ntaine d III the issue d Mi lestone Schedul e a t the time of bidd ing 11, · res 0 • '11 id . . C c:.p nsc ~! provr e~. pr actical che~K o n thc.assuo?pti ons made by the scheduler and pro. vl~e som.t: ass urance that bidders will re view sched ule information whe n assent bling thei r proposals.

CM Scheduling Philosop h y !he C~l philosoP~l ad voca ted he re establishes scheduling as a coope ra tive endeavo r involving the mu ltiple .co ntracto rs and the pr oject te am, especia lly a fter COnt racts ha ve been nw.nrde~ . In serting additional milestones to those used for bidd ing purposes enh ances the sC!lc d lllc o nce co nstr ucuou sta rts. Using the miles to ne concept to its ult i1l1~IC, co nstrucuon opcruticns arc scheduled o n a shor t-term basis. from mi leston e to ~lIlcstone to acccmmodnn- unfo rseen con tracto r problem s and ac tual project con dit1~ns. Th e goal o f S hQrl- ~ e rm sched uling is 10 ma intain pr ogress by mee ting as man v mileston e d~ t~s. as pos sible . Figu re 20A is a sa mple list of Milestone Cons truction Schedul e activities.

20.1 0

20. 10. 1

SHORT TERM CAP

:nthee secodevndelopmen usc o f both the miles ton e sched ule and the d etailed cons truction sched ule t of the initia l Short Te rm Const ruc tion (o r Cont ractor's) A ct ivity IS

Plan , or Sho rt Ter m CA r~ TIle initia l segmen t of the CA P is based on the first month o r

Aw.u J Contr acts

Shop Drawing Submillals "Fabrtca te Open Web JO I~l s "O rder H Co nstruction Muhiliz ali on

' Dcli\'cr I-l iltdwarc ' Deliver Hollow Metul Frames "Deliver ~1 3 so n r}' Specialties E3rthwork. "Co ncre te Foo tings.. West Side Bt 3ring M aw nry S ile Utili tics

Concret e Flou r Slabs "SCI O wner Eq uip mc ru " Er e CI Slc:d Joists " E re ct Mela! DI:d; "Roofing ilnd Shect ,\l e l:l1

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' AC l i"i l i e~ Ih'll arc:NOT apprcprlcte for usc: IU biuding informnncn .

FIGURE 2004 A

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s3nlplcor ,\ Iiblonl.': Schedule a Clivilic5.

3 19

two o f these sched ules, af ter they are amended by the team to re flect information provide d by the suc cessful bidd er s. It is the n adj usted by in for ma tio n reve aled at po st -bid and pr econ stru ction meetings. Predicat ed on the reality th at con str uct ion sc he d ules face many variable s. man y of which arc un pr edi ct ab le, the Shor t Te rm CA P is th e ultimat e on-site co nst r uctio n scheduling too l. Spanning a du ratio n of appro xima tely two mo nt hs. the CAP should be p ro du ce d and mai n tai ned in the field on a daily/weekl y basis and used as a means o f co m pensa ting for the negat ive e ffects of as many of the vari abl es as possible.The Short Term CAP is a dynamic schedule with in wh ich act ivitie s can vary in both duration and pr eced e nce but only between two seq uential mile stones. Informa tion excha nge d be twee n the co ntrac tors' foremen and the Field CM a t any time, but es pec ially at weekl y progress mee tings. pr o vides th e data nece ssary for up dat ing. As the current wee k ends, the nex t week (ap prox imately t w o months in th e futu re) is added to th e en d o f the CAP. Usi ng th is sho rt- te rm progre ssive process. a cur ren t viabl e co nstruc tio n activity plan co.. . e rin g the next two month per iod is CQn stantly available 10 the contra ctors o n -site. Bnscd o n weather fo reca st s a nd the cu rrent knowled ge o f the variables, it is reasona blc 10 ass ume tha t the wee k imm ediatel y uhcud call he bet ter plann ed than the ne xt wee k. an d that the .ne xt week ca n be bett er planned than the one aft er that. Exce p ting su rprise, predictio n accuracy diminishes th e farth er plans are made in the future. Conseq ue ntly, as the next week is planned , a higher degree o f refinem en t can be expected fo r plann ing s ubseque nt weeks.

2. ~f biddc r~ do n~t agree or cann ot generally comply with [he Milesto ne Sched ule m f~rmau on as issu ed . the)' are required to s tat e so and provide the ir reasons in ~h elr pr op osals. TIlCYare a lso req uired to provide alternate sche d ule informa tion If they.can no t cOIl1? ly. O n pr oje cts with rigln sch edu les, sa tisfac tory sc hed ule commitm ents by bidders can be used ,IS a cons ide rat ion for con tac t a ward . 20 .9.5

Short Te rm CAP

Targ et Activ it ies Miles ton es dates aft: the co ns ta nt tar ge ts for all o n-si te co nstru ctio n plann ing. If eac h succes sive milesto ne dat e is mel . the final co mp letion mil eston e d ale will be met. If a milesto ne date is missed , time mus t be recover ed th rou gh ex ped ient planning bet ween future milesto ne dat es. If tim e cannot be reco ver ed . for what ever rea son, the comptetion milestone dale mu st be ch anged . Th e CA P provides co nt rac to rs \v·il h sched ule flex ibility, It is co m mo n for cont rac to rs 10 have unfor eseen pr obl em s (a piece o f equipm ent tha t breaks down or workers that fail to report for work ). Trade con trac tors es pecia lly have un iqu e o pe ratio na l p ro ble ms suc h as p ressu re [ 0 finish another job o r a shortage of necessary mat eria l. Th e coopera tive nature of sho rt -te rm pla nni ng can o fte n allevi ate the full effects o f these pro blem s on the co ns truc tio n sc he du le. When a cont ract o r's problem is passed o n to the Fiel d eMand the othe r contracto rs on-si te. a plan might be co llec tively found to work around the p rob lem with out loosing any lime to the sched ule, As peer parti cipants in the sche d uling and construetion pr oce ss. co n trac to rs are mor e inclined to help o ne a no the r by ch an ging planned ac tivities for that day to o ffset a dela y. Each con tractor is awa re tha t the nex t pr oblem co uld be theirs and they [0 0 migh t have to see k re lief through the help o f their pee rs. Th e Fiel d CM s hou ld be the willing inte rmed iary when ev er short-te rm cha nges a re suggested by contractors so lon g as the shor t-te rm change will pr ovid e a long-te rm sol u tion to a sche d ule prob lem . It is 10 the team's ad va ntage to mit igat e o r elim inate construc tio n delays th ro ugh coo pe ra tion rat her than int imidat ion .

320

Chapter 20

Selecting the best formal for the CAP depends on the scheduling capabilities of the field C M and the contractors' on-site superintendents or foreman. To be completely successful, the CAP should be based and maintained in the field, not at some remote office locatio n. However, if C M field pe rsonnel are not proficient in scheduling. hel p can be provided by a competent scheduler a t anothe r location. Comp uteri zed Precedence D iagramming (CP D) should be the first choice. Even tho ugh sugges ted cha nges will be short te rm, C PO has the ability to accep t a nd quickly analyze "w ha t if" situa tions and p ro vide both shor t-te rm and long-t er m effects. Most CPD p rograms can pr in t cut a ba r chan if a diagram format is be tte r unders tood by con tractors, It can be safely assumed that the scheduling expertise of on-si te cc ntractor s will vary from high to low. Formats should be used that reach them all witho ut exception. If field personnel are not sufficiently proficient in CPO. a compute r conn ection betwee n the field and a proficient person in the eM organization can provide a sa tisfactory sol ution, Ho wever , the ad vantage of the CAP is that planning is done in the field, by field level su pervisors. TIley know their indi vidual capabilities as well as the co nst ra in ts of the ac tua l on-site co nd itions and arc in a position of au tho rity to propose and pu rsue a short -te rm schedu le redir ection . Co ntr act ors ' o n-site supervisors arc ob liga ted to their employers to keep cre ws product ively occ upied toward co n tract co mpletion and ma ximu m p rofit. 111ey kn ow the cur rent sta tus of labor. ma te ria l. equipmen t. a nd site conditions and understand how to wo rk arou nd p roblems tha t ar ise. Th e field Cxt, on Ihe other hand, has the most intima te understanding of the project and is in an e xcellent position to effect mu tually produc tive redirection ef forts when called for. On-site cont ractors rend to cooperate \..'ith the field C M's effo rts when the )' realize the so lu tion to short-term schedule problems will optimize the product ivity of their personne l. Figure 20.5 is an example of how the need- to-kno w information philoso phy exp ressed in Chapter 13, Informat io n Ma nagement . is incorpo ra ted into sched ule management . Th e Milest one Sch ed ule prov ides s ufficien t info rma tion to the execu tive le vel. Th e Detailed Co nstructio n Schedu le info rma tio n is suf ficient to keep l1l;m agcmen t levc! par ticipants up to da te, and the Sho rt Ter m CA P act ivities arc su fficien tly de tailed to provide o n-site di rec tio n 10 co ntractors.

0050 e :u c

.» Foundations Concrete

Fo undations

-

S led ~H"

0520

Pile Caps

Piles

0540

8

,o

Poundaficns Concrete G rade Beams

6AS (- 4)

0560

I--

10

Short T" rm CA l' Subuetw ur k Atl hilil.'s

f - - - 2DS ( • 2)

-

--;

L ---'_ _-l 05-18

0546

FIG URE 20.5 Au example of schedule networks :ll1d sub·nl:'l\\'vrl:s.

lions. Ho wever, soone r or la te r. these ac tivities will become critica l to the o wne r, ~ nd ther efor e they shou ld be a nticipated as pa rt ~f sche~u le manage men t. The Completion Schedule (or Occu pancy Schedule) accomplishes this,

20. 11.1 Comp letion Schedu le De vel opm ent 111e first step in pro ducing it Comple tio n S~hedu lc is to d,~vc l~~ a c.ompl~lcr., lisl o~ , . A l E C:'-. I a nd other acti vitie s upo n which occ upa ncy IS pn.: d lcalt.: t.I:Th ls lls~ usu 0 \\ nt:r" ." r .. ' . t/fu rOlture delive•.ry~ ally includ es such thi ngs as ins pectio ns. pc r~1lt s. rccnscs. cqu l ~ll1 cn . .. , ' com pute r and telephone ins tallation s. supp lies a n~ mat erial stockpiles, trial ope ra tio ns and any ot he r un iqu e o wne r start-up ncccssrnc s. . ' ' Fioun: 20.6 is a sho rt list o f the man }' typical acti vities that sho uld be includ ed In

:aw

a Completio n Sche dule. . . . ~ . ~ Th e ac tiv ities vary with the un ique comnussiorung o r occupancy n:qulrt.: ~~~ ts for a particular facility. Resp o nsibility to arrange o r cx~c.u~e som e. of these acuviues may hav e bee n assigned to tc ..t m member s in the respo nsibilit y matrix develo~ed at the begin ning of the project, However, at that time. team dfor ,l s we re. ~r~pe rl)' directed t~ ge tti ng the p roject sta rted and constructed; some completion acu viue s were pr obably

COM PLETION SCHEDULE

Th e fifth and final schedule that should be used is the Completion Schedule. It provides a timely and orde rly transition from constructio n h) occupancy or comm issioning. Similar in detail to the De tailed Co ns tructio n Schedule. and in content to the Program Schedule, the da tes of its de velop me nt and initia tion should be activi ties listed on both the Program Sched ule and Mileston e Sc hed ule. The Co mpletion Schedule is the sequence o f activities that mus t be acco mplished befor e a construc ted facility ca n be be ne ficially used or occupied by the o wner. O ccup an cy activities are no t considered impo rta nt during cons truction sta rt-up o pera -

321

:'>Iilc!'lu n c Se ll",dlll" ,\e l i ~ i lie ~

20.10.2 The Sho rt Term CAP Format

20 .11

Comp letion Schedu le

Section 20,11

Schedule Manaqcrncnt

I

I

--l-

d it o verlooked. On e ac tivitv [hat sho uld not ha ve bee n o verl ooked was ow ner occu pancy an . 1 s an ticip a ted du ra;ion , A not her ite m that s ho uld appea r in the Pr ogram Sched,ule du n~g the proj ec t is d evelop ing a Comple tion Schedu le (p ositioned abou t two -th irds o f t e \\'(1)' th ro ugh constructio n).

322

Chap ter 20

Sect ion 20 .12

Schedule M anagement Fire M.l f'ih a l Wal k-Through O ..... ner Inspect io n CM Comple tio n List Punch USI '''H.:par;\liun Contrac to r Punch List Ccrnpleuoos Substantial Completion Ce rtificates FinalOe.1ning Nl:w Fum hur c and Equipmcm l nstallatio u Issu e Seven-Day Lcucrs I lcalih Depanm ern Certificate Required licenses Local Angene)" A pp ro va ls Tel ep ho ne System l nstallanon

Sjgnagc Rd e:nse Signage Istallaticn M aint enan ce Manuals Appro\'c ~lc.::h.lnic:11 SY~ I C' m 1 Approve Ekcl ricoll Systerns

I

>.· -r D es ign

Schedule Commu nication

Con~lructio n

113

2J3

Approve Plumblllg Systems

Be gin Comp le,ti~ Scheduling

Punch List Pro gress Contractor List Systems nalaueing :\10 \'1: Furn ilure and Equipmen t Occupancy Certificate N e~Ii,l:C' n t

, 1/6

l - - Co ntract

Test-R un Processes Spare Pans Im e nlo ry

323

Re ma in in g- -

A war ds

1_

Tr i.ll M:ltch date

~

Ti me

Com plete Comple tio n SChed ule

(a ) Sehcdule Tilning

FIg u re 20 ,6 Typ ic al acrivhics Ior the Comptcuoo Schedule.

~tiIes(one +oc~upancy Schedule

TIle Com pletio n Sched ule shou ld be devel o pe d backwards. fro m the required date o f ben eficial occupa ncy or use o f the facility to the date of th e initial acti vity in the occupancy sequen ce, Th is initial act ivit}' in the Comp letion Sched ule will be de pe nde nt o n o ne p red ete rmi ned con st ruc tion activity in the Mileston e Sche dule.

20.11.2

Sche d ule

M ilcslo ne Schedule ;lnd Short T e r m CA P

,

_

O -:'Cup;m9 Seh cJ ule

Late

Initi ati n g th e Completion Sched ule

I

A he ad of Schedule

I,

Sch ed ule

E:Hly

TIle da te tow ard th e e nd o f co nstructio n. wh en the Co mple tion Sched ule mu st be in itiated 10 all ow tim e for the comp letion o f all Co mp letio n Sche d ule act ivities. is d et er mined by ove rlayi ng the Co mp letion Sched ule o n the M ileston e Schedu le. If the dat e of the prede termined co nstru ct ion mileston e in the Cons truction Sch edule co incides \v ith th e dal e of th e initi al activi ty in the Co mp letio n Sc hed ule. the project is O il sched ule. If coincidence docs no t occur. con str uct ion is eith er ah ead or beh ind sche d ule . If beh ind sc he d ule, th e o wne r can accele rate co nst ruct ion so dal e co incidence occu rs or change eith er th e dat e or co nd itions o f occupancy, If uhc:ul o f sched ule. the owner can ei ther OCClJpy curlier th an plan ne d o r slow do wn the occup anc y proce ss, In the la tt er case, Slowing dovvn co ns truc tion s ho uld neve r be co nside red a via ble o ption . Figure 20.7 graphically exp lains impl cmerua ring and in ter faci ng a Com plet ion Sche d ule.

20 .11.3

L

Mesh D'"

FIGURE 20.7 Graphic cxpl.rnauon of the Co mplel lo n Schedule's usc.

jeered sched ule of constr uctio n act ivitie s. he aded f~r the future milestone called oc~u . pan cy.The Co m pletio n Sch edule is a backwar d-projected sched ule o f occupancy acuviries. starting fro m th e oc cupancy m ileston e. headed fo r a de signated me sh. d~ le approx ima tely two- thir ds o f th e wa y thro ugh construction . Ho w ~Iosc the y co~nc tdc will d eterm ine th e practical occ upancy dal e. ale rt the tea m to req uired acce leration of co ns truc tio n or occupa ncy activit ies. or bo th.

The Co mpletio n Sch ed u le Form at Th e Co m plet io n Schedule sh ou ld be in n co m puter ized precede nce dia gra m fo rm at to facilit at e conven ient development and pro vide timel y updating and ap pro pri ate printo ut so rti ng. Ea ch team mem be r should rece ive an o rigi nal pr int -o ut an d frequ en t upda tes. so rted by team and by early star t. A s s la ted. lime los t d uring the performance o f co mp letio n acti vities is no diffe rent than time lost d uring co nst ruction. If pro blem s exist. team meetings de al ing specifically with com plet io n ac tivities should be held with increased freq uency as the Comp letion Sche dul e initia tio n da te approach es. Th e close r the project ge ts to the occupa ncy da te. the m ore diffic ult it is to mak e co m pletio n ac tivity ad justments wit hou t jeo pa rdizing the occupancy da le. Interfacing the Completion Sch ed ule wi th th e Miles tone Schedule and Sh o rt Term CAP is a simple and reveal ing proC'~ss. Th e Sho rt Te rm CA P is a forward p ro-

0"

Mesh

20.12

SCHEDULE COM M UNICATIO N

Schedu ling is a pow erful manage men t tool for the eM. Properl y use d . it is a m ajor co ntr ib utor to the success of a constructi on project. E arlier in the chapter. o ve rusi ng sche du ling so ftwar e by tr ying to use all th e accessorie s software produce rs include [mai nly to incr ease sale s) was d iscusse~ . Sch eduling so ftware sho uld be viewe d by a co ns truc tio n manager as a hamm er IS view ed by a ca rp ente r-a basic too l to be used fo r b asic tasks.

324

Chapter 20

Schedule Mana ge me nt

It was also s ugges ted thnt schedule infor mation be passe-d on [ 0 others using the ~eed - tu- kn ow ph iloso phy co ve red 111 Chapter 13. Infor matio n Managem ent. 111c"iJea IS to on ly pr ovide in format ion to pr oject participants th at was within the limits o f that party's assigned re spon sibi lity, to make it easi er for parties to process and react to informa tion fro m their defi ned perspec tive and m anageme nt level. Prod ucin s sch edules as network s. su bn etw ork s and sub -subnetwor ks accommodates this need.':> Th ere is fina l sugges tion regarding sched uling tha t shou ld be co nside red . O n the a.ssump tion that the quality of co llective per forman ce relies on a com mo n inte rpretation of com municat ion between parties, the eM sho uld pa l,' special attention to the sched ule forma t or language used . . Sched ules ca n be communicated in several different languag es. each with its o wn level of sophistication: a pp ro p ria tely so rte d lists, bar char ts, with e-or wit hout tales. and CPM Networks, p reced enc e o r arrow d iagrammed. Of these. lists represent th e la nguag e familiar 10 peo ple in ge nera l. Lists art: co mmonly used for rad io a nd TV. ai rline. bu s and train schedules as well as manv o ther scr ~'iccs with preplanned timelincs . List sched ules s ho uld be used 10 communica te infor mation to those invo lved in the projec t who cannot effortl essly understand bar cha rts.o r net wo rks. A lthough it is difficu lt [ 0 de velop sched ules in th e list for mat, it is. very Simple to netwo rks to lists. ~ar .charts re pre sen t the sched ule language with the lon gest histo ry in the con s t ru~ lIon industry. Simple bar charts arc also widely used by the media 10 co nvey infermanoa to the gene ra l public. However, bar charts requi re enb.mcern ent to specifically co nvey sched ule informa tio n on a co nstructio n pr oject. If a simple bar chart can uccurarely convey schedu le informa tion, it sho uld be used; if it cannot . a bar chart with tales sho uld be used. Dar cha rts can be used 10 develop limited (per ha ps shor t te rm) schcd ulc s and can be con sistently in terpre ted by those who read th em . CPM ne twork diagrams repre sent the sched ule language that is unri valcd when used to deve lop and update schedules, bu t they arc no t recommended for ccmrnunicatio n between p roject participant s. exce pt as suppleme nts to list sched ules o r bur char ts. or for cO,mmunicat i~g wi[~ pa rtie s who will u~e the ne two rk d iagram for sched ule analysis. Ih e foregoing WIll cause constcrnanon to mo re than a few advocates of net wo rk sche d uling. es peci ally those who favo r disp laying the diag ram on the wall CI S a "road ma p" f~r completin g the pr oje cL Ho we ver. with the kn owledge that soone r o r later ther e will ~e an upd a te. an understanding tha t on ce co nst ruct ion begins schedu ling is used as a uru c pro blem so lving too l, the realizati on t hat wha t h ns occurred to dale is f~r rccor~ p urposes. and that only perso ns with a h igh level of scheduling sophisticanon can inte rpre t C P~ l diag ram langua ge, some t raditi o nal schcd ulc rs opinion, may change. 20.13

Section 20.14

20.14

USE OF SCHEDULES BY THE CM FIRM

To this poin t, sched ule ma nage ment ha s been disc ussed from th e perspective of CM se rvices p ro vided to owners (e xte rna l schedu ling in sup po rt o f the pr oject-deliv ery pro cess), Schedule managemen t sho uld a lso be practiced within the CM o rga niza tion as internal scheduling that can impr ove the co nstructio n ma nager 's performa nce o n curren t projects. Extern al scheduling assis ts in making team deci sions in the othe r are as of k no wledge that arc sche d ule depe nde n t: Bu dget . Decisio n, Mat eri al/ Equ ipm ent , Proj ect. Value and Resource Management areas. When the team is faced with rime-related dec isio ns, sched ule informat ion o r sche d ule app lica tio ns are exp ect ed to be provided by the co nstr uction man ager . Exampl es o f time-rel ated decisions in o the r management areas arc cas h-flow pred iction s. life-cycle cos t stu d ies, time criteria for ex pedit ing. least-cost analysis, and reso urce le velin g.The CM's sche d uling e xpe rtise sho uld ploy a n imp ortant pari in exc curi ng these act ivities. It is expect ed that famil iar ity with these typ es of schedule appli cati on s is an int egr al part of the CM 's capabiliti es. 20.14 .1

IN RETRO SPECT

Th e five schedules-a-Prog ram Schedule, Detailed Co nstruction Sched ule. Milest one Schedule,.Short Te rm CA P. and Comple tion Schedu le-a re int e rd epe nd ent . yet each ~e r\'es J single useful purpose. Expe rie nce has sho wn th at the comp re hensive sch cdulmg e ffort sugges ted here upgrad es eM schedule man agement s uccess,

32S

Sepa rat ing sched uling co mpo nen ts into their o wn entities tends to revitalize sched uling res po nsibilities by p ro viding new beg innings an d fresh app roac hes to pr oble m sol ving. To con te mp late a single sched ule approac h that woul d co mbine the: functio ns of t he five sched ules in to one is baffling after using the m ulti-sche d ule ap proach on e ven o ne pr oject.

J

1,

Use of Schedules by tne CM Firm

I

I I

1

Th e Int ern al Ma s t er Pro gram Sch edule The e M organization covered in C hapter 8 ide n tifies five d epart ment s: execut ive, ad ministr ative, ope ra tio ns, reso ur ce, a nd suppor t Of these. the resource department is composed o f pe rso ns with varyin g expe rt ise whose inp ut is req uired on every pr oject. at tim es d ictat ed by e ach projec t's progre ss. All oca ting resource pe rsonnel co uld he a problem if the schedules of two or more back logge d p rojects requ ire the inpu t o f the same reso urces simulta neo usly.To prevent thi s from occu rring witho ut so me warning. resource-level ing techn iqu es can be used withi n the C~ 1 organiza tion to an ticipa te o ve rloads on specific re so urce pe rso nnel and man age the resources in a productive fash ion . If each ba cklogged proj ect is und er th e contr ol and guida nce its own Program Sche d ule. co mb ining the Progr am Sche d ules o f all proj ects into an In tern al Master Pro gram Sc hed ule co uld ident ify when speci fic resource per sonnel input is required . p ro vide tim e to have adequate per sonnel avai labl e, or provide time to sligh tly adju st one o r mor e project Program Sche d ules to ease the pr obl em . The In tern al Master Pr ogram Sch ed ule wou ld p romote the same leve l o f manageme nt to the CM 's organiza tion as the C M provides to its clients under service co nt rac ts.

Section 2 1.3

CH AP TE R

Safety l aws an d Regulatio ns

327

E ve n thou gh the co ns tr uctio n site co-occupan cy n um bers a re essen tially the sa me , th e laby rinth o f co n trac ts and ag reeme nts is s imp lified on e M project s byelirninu ting one con tracting tier . TIle Second Tier co ntr ac to rs on a GC project become Prime or First Tier contractors on a eM p roject, and the form of contrac t the y ho ld with the owner is virtually the sa me as tha t whic h a GC wo uld ho ld with an owne r. Th e fact that each tr ad e contrac to r h as an id en tical and d irec t co ntrac t with th e owner simplifies assigning sa fe ty resp o nsibilities to the m. Coo rdinat ing resp onsibilities of the CM facilit a tes the int egra tio n o f ea ch co ntrac to r's effort in the safe ty management progr am as wel l.

2 1

Safety Ma nagem ent Safety in construction has always been of significant concern to the industry and the government. Construction sites haw the infamo us reputation of being one of the most acciden t-pro ne of all 'vork places in rhc Un ited Slates. Pers istent·efforts cont inue withi n the indu st ry. a nd by federal and s tate a u tho ri ties, to mak e con st ru ct io n sites safer. A ltho ugh p rog ress has been made . it rem ains ap par en t th at zero los t-time accident s an d deaths on a cons truc tion site are of te n the result of good fo rtune ::IS well as consci en tious practices. Fro m a pract ica l standpoi nt . co nstruc tion accidents can be red uced in num ber :l.od sever ity bu t neve r fully elimi nated. Co nst r uction is sim p ly a dangerous oc cupatio n, on e that employs people with no rmal hu man fra ilties. Once this bleak rea lity is ack nowledged by the: au thori ties. greate r progress can be made In red uce the frequency and seve rity o f accidents. Whe n an accident occurs. the respo nsib ility of u constr uction mana ge r is ce ntro\'~rsial du.c .10 the persistc~ce of obscure int e rp re tatio ns of cont ract language a nd a biased c p uuons of a CM's in here nt duties a nd ph ysical capabilities on a cons truct ion site. In the earl y yea rs of C M's de ve lopme nt , a co nstruction InJllagc r was conside red by most (especially the legal syste m) as a close k in of a gene ral con tracto r. Alt hou gh wro ng. this was unde rs tandable. because fo r yea rs eMwas consid ered und efina ble. no t onl y by the courts but by most pe rsons inside a nd outside the const ruc tio n indust ry. As a ne w and d iffe rent contracting system. e very d isp ute involvi ng a Cfoo t br ok e new gro und du ring, litigation. Without a co nse ns us autho rity 10 turn I ll, attorneys and courts provided their own definitions of eM
21.1

THE SAFETY MANAGEMENT AREA OF KNO WLEDGE

111c safet y ma nagement a rea of kno wled ge enco m passes sa fe prac tices at the con str uelion site in acco rda nce wit h the preva iling regula tio ns in the area o f the pr oje ct. Th e CM has the respon sib ility to promo te safe site co ndi tions by e xamp le and urge co ntr actor s to ha ve o rga n ized safe ty pr ocedures in fo rce. A lth ough each contracto r bea rs the respo nsib ility fo r the safe practices o f its ow n e mp loyees, the CM has the respon sibility 10 coo rdin ate sa fety requi remen ts comm on to a ll contrac to rs and to sec that sa fety provisions ar c includ ed in co ns truction co n trac ts. Th e Cl\ l mu st be famili ar with con stru ction p rac tices. sa fety prog ra ms, p ractice s. p rocedures. and adm in istration and sa fe en vironme nta l cond itions a t the co nstruc tio n site. as well as an un der s tanding o f the 1970 Occu pat iona l Sa fe ly and H ea lth A ct (OS H A) and the safe ty/heal th regu latio ns in the ar ea of th e project. Excell en t co mm unicat io ns s kills a nd high e thica l sta n dar ds a re requ ired .

21.2

CONSEQUENCES

Th e seve rest co nseq uen ce o f an accide nt ob viously falls on the injured pa rt y. a nd in th e case o f death . a ll the inj ured party's relatives nnd friends. Ho wever. the CM. AlE. o wne r, and con tractors " Ill su ffer co nseq ue nces as \...'ell. a lbeit o f m uch d iffer ent se . . cr. ity, These conseq uences will be mone tary. in the form of fines le vied by safe ty co rnpliancc au tho rities and d am ages a warded by a co urt to the victim o r the vict im 's survivo rs. Fine s ca n be sizeable. but da mage awa rds ca n be fo rmida ble.

21.3

SA FETY LAW S AN D REGULATIONS

The Occupa tiona l Sa fet y a nd H eal th Act (OSHA) was enacted by the U.S. Co ngress in 1970.111e Ac t co vere d mos t all indust ries. incl udi ng the co ns tructio n indus try. Its p ur pose was to es ta b lish wo r kin g en viro ns th at d ecr eased worker exposu re to un health y a nd un safe con d ition s. It a lso crea te d. within the fra me work of th e U.S. Depa rt men t o f Labo r, the Occupa tiona l Sa fe ty and H ealt h Admi nis tra tion whose respo ns ibili ty was to es tablish safety and heal th standards and prom ulga te the rules and regulat ions to imple men t them.

326

J

328

Chapter 2 1

Safe ly Mancqcmcnt

OS IIA legislation permits individual sta tes to establish and enforce their 0\\'11 safety standards and regulations so long as they arc us strict or stricter than the fed era l versions. Most stales have done this and have taken over the enforcement of the rcgu~ation~ wi~hin the framework of state governmen t. Enforcement includes inspections. investigations, record keeping, and the levying of fines on those who commit violations. When targeting the employer's premises as the location for complia nce. OSHA saw little distinction between construction sites and manufacturing sites. yet there was a great difference between the two. Manufacturing sites
l egal Consequences In our legal syste m. anyone ca n sue anyone with the slightest justification: by precedent. acci den ts ro utinely provide jus tificat ion. It is re acti vel y ass umed by :1 victim's atto rney thnt accid en ts a rc always caused in wh ole o r in pa rt by ac tions or inac tions of an other pon y or parties. To compe nsate for the pain and suffe ring ca used by the accl dent 10 the plaintiff o r plainti ff's fam ily. those de eme d respon sible must pay mon et a ry damages. Plaintiffs' a ttorneys implicate as man)' defend a nts us possible to en ha nce the cha nces for collecting damages. Wh en named as a defen dan t. whethe r a t fa ult o r no t. the party has no cho ice b ut to hire un attorney an d pay the size ab le Icgn! ex penses co nnec ted with a defense. Alth ough the co urts do not always assig n resp on sibili ty to CJ\1s, AlE s, and o wners whe n accidents occ ur, their reco rd to the cont ra ry is en ou gh to inllucnc c a victim 's auo rncy 10 inclu de them as cu lpab le part ies. It is difficult for a C~'1 to es tablish an d maint ai n an e ffective safe ty-manage ment program without being exposed to co nseque nces when an accide nt occurs. Th e courts see m to take the position tha t an effec tive safe ty program is one th ai produces zero accidents. net one tha t keeps them to an absolut e min imum unde r the circu mstan ces. The co urts go 10 grea t lengths to co mpensate an inju re d party. often d isco unting the prag ma tic circums tances that caused th e accid ent as we ll as the ex plicit respo nsibilities of the CM.AIE. and o wne r as de ta iled in the ir contracts. Man y times th e injured person is th e o ne clea rly at Iault: no o ne else cou ld ha ve preven ted the accident whe n it occu rred. However, th is a rgument seldom sta nds up to the manifest sympathies of the court fo r workers who a rc injured or killed. Reasons

Sec tion 2 1.5

Approaches t o Saf ety

can always be found to implica te othe rs who In some re mot e some th ing Ihal contribu ted to the worke r's unsa fe act.

21.4

Will'

329

d id or d id nor do

THE QUANDARY

00 an ACM project. e M personnel have no cont ract ual jurisdiction over contractor person nel, only over the contractors themselves. The Field CM cannot give orders to workers on the sitc-only the worker's supervisor has the authority 10 do so. When an unsafe condition is obse rved by a worker or a worker's supe rvisor, it is the responsibility of each to report the co nditio n to the eM and to refra in from be ing exposed until the condition has been corrected. Co nsequently. exercising safe prac tices i~ exclusively vested in [he wo rkers themselves a nd the supervisors who provide the ir direction. Only when worker safety is th reate ned by actions or inactions of another cont ractor or hy condit ions at the site C.1I1 the worker and the worker's supe rvisor no t be considered in control of the ir safety, Th e CM. AlE, and owne r shou ld on ly be culpable when a co ndition which is thei r responsibility co ntribu tes to an accide n t a t thc site. The respon sibilities o f th e Cl\.t AlE . and ow ner {or the site co nd itio ns should be: ca tego rically sta le d in th eir co nt racts and in the co ntracts e nte red int o by con trac to rs, 111e o wne r shou ld be respo nsible fo r co nse q ut:nccs re la ting to such thin gs as lat ent site con di tions and co ncur re nt site occu pancy; th e AlE fo r conseque nces rel atin g to dcsign and specifica tio ns: the CM for co nseq ue nces rel atin g to safe ty managem ent (in all cases,on ly to the po int the con di tio ns are co nside red con trollable). Curr e ntly a nd unfortunately. sou nd logic and co ntrac t p ro visions notwithstanding. rhe C rct's. AIE's, and o wne r's respon sibility fo r sa fety on th e construction site is ac tually de term ined by th e co urts in the litigation fo llo wing an accide nt. T he inco nsisten cies o f co urt decisions preclu de the establishmen t of standa rd gu idelines for CMs to ex plicitly follow. Briefly, the resp on sib ilit y of ow ners. A lE s. a nd e Ms for cons tr uction site safe ty is subjcc t to the vagari es o f the law.

21.S A PPROACHES TO SAFETY

111e best a pp roac h to an accident -free proj ect is as follo ws; estab lish safety as a s tate -of-mind of nil pe rso ns and parti es involved in the project. es pecially wo rker s contrac tually iden tify whe re th e respo nsibilities for safe p rac tices abi de. in clea r. concise provis ions have a ll pa rties d iligently car ry ou t the respo nsibilities assigned to them. Th is approach is simi lar to the o ne sugges ted to produce des igned quality in the cons tructed proj ect. Like the pu rs uit of zero defects. the purs uit of zero accid ents requires the consta nt aware ness and involv emen t o f all pa r ties and indi vid uals on the construction site, Everyone must be aware that an accide n t is an event wait ing to hap. pen. A ll invo lved must take a rel ati ve resp o nsibility for p revent ion and ca rry out those responsibilities with assurance that others a rc car rying ou t thei rs.

330

Chapter 21

Section 21.5

Safety Mana gement

Respo nsibility fo r th e measures tha t p ro duc e a sa fe con structio n e nvi ronm ent sho uld no t on ly be co nclusivel y es tabli shed by co rurucr-c-tbcy sho uld be ju st as clea rly unde rst ood by all pa rties invo lved in the project before con structio n begins. If p ro per ly handled. when an accident occurs the re should be no need for inte rp retation to d etermine culpabili ty. Sit e safet y shou ld be a to pic on the agen da o f prcconst ruction meetings hel d with co ntractors before they occupy the site. In a fo rmat similar ( 0 the cont ract or 's q uali ty plan covered in Chapter 17. Q uality Ma nage men t. a Safety Plan should be su bmi tted in writing by ea ch contracto r a nd discussed with Cxt. A/E. an d owner represe nta tives to a po int of mut ua l un ders ta nd ing. Th e team 's Sa fety Manageme nt Plan sho uld inco rp orate a detailed sa fety responsib ility mat rix chart that e xpands the bro ad safet y responsib ilities ass igned in the p rojec t tea m's respon sibility cha rt (see Chap ter 16, Project Manageme nt). Th is new cha rt should be discussed at the pr econ struct ion mee ting to elimi nat e misun ders tand ings relating lO cont ractual and pragmatic safe ty resp on sibilit ies of th e CM , AlE. owner, and contractors. After agreement. the matrix should be endor sed by each party and becom e a fo rmal memo o f under stan d ing or, if po ssible . a pa rt of ea ch contra ct by ame nd me nt. It is evid ent that the Safety Management Plan must be micromanaged by the learn from its initiation during co ntrac t d evel opm ent to its con clusion when co ns truction is comple ted . 21 .5.1

33'

that a party ca n be pen alized for do ing more Ihan o riginally ag reed to, regard less o f the ben efits LO the o the r part ies. TIle rea sonin g is that if a part y und ert akes an unassign ed respon sibility, o thers will ass ume that the respons ibility has bee n assigned to that party and rel y o n it. Standard CM co n trncr provi sion s do no t es tabli sh eM field person s as sa fety insp ecto rs who ar e required to patro l the site. looking for un safe co nd itions and sa fe ty viola tions. Cr.,.'l field person s have too many spec ific task s to pe rfor m for th is type of ac tivity. If safe ty inspection is assign ed to the CM thro ugh an ame nd me nt to the ownc r-Cxt co ntra ct, th e CM will have to p ro vid e add itional pe rso ns on site to perform that dut y. Thi s situa tion is ide n tica l to that o f inspecting quali ty explaine d in Cha pter 17,Oual ity Manageme n t. If C ''''I pe rso nnel on the site see an unsafe act o r o bse rve nn unsa fe conditi on, they have a moral commitment to in te rvene. even th ough there is no contractual auth ori ty to issue o rders to work er s to avoi d th e condit ion or to correct it (unl ess of co urse, it is clearl y an em e rgen cy-producing imminent danger) , Intervention by the CM simply demonstrates a positive, natural conc ern for the we ll-being of others. However , where imminent dan ge r is not an issu e, repe at ed act s o f similar inte rvention by the eM could impl y ass ump tion of responsi bility to lo ok out for un safe acts and conditions in the future. Alt hough this is a respo nsib ility fo r which the CM did not con tractua lly subscribe, it is now assumed in th e eyes of the courts. If an accident occurs, there is a vc ry go od cha nce tha t the CM 's failur e 10 prope rly perform the assumed respon sibility co uld put th e eM and owne r in a culpable position.

Postu ring th e CM's Safety Invo lvement 111e suggested pos ture o f th e eM with re gard 10 safe ty is staled in th e second purngraph o f the Safe ty Man agem ent Ar e a o f Kn owledge: "Th e eM ha s the respons ibility to coo rdi nat e sa fety requi rements com mo n to nil con trac tors a nd to sec that safe ty provi sion s nrc includ ed in co nstruction contracts," Owne r-CM cont ract provisions. C ~ l procedures. and C M ac tions o n site sho uld co nfo rm to this scope of invo lveme n t. It wo uld be grossly insufficient to me re ly slate in owne r-co ntrac tor agreeme nts that "con trac tors mu st comply wit h a ll prevail ing health and sa fe ty re gulati o ns ar the site o f the project" witho ut describ ing e M, A l E . and owne r pa rticipa tion . Although a state ment to that effect sho uld be included . the contra ctor sho uld a lso be made fully aware o f how site sa fety is to be managed und er co nditions of co-occup an cy (who is going to do wh at in lhe pursuit o f zero ac cident s). To appropriate ly se rve the ow ner's. A /E' s, and e ~ rs best in te rest s, the Cbt sho uld formul a te a de tailed Sarc ry Managem en t Plan, redu ce th e plan to speci fic p rovisio ns, a nd inco rp ora te the provision s in the su pple men ta ry an d special con d itions of the gen eral condit ions o f the con tract for const ruc tion ; subjec t of co u rse. to pr oject team approval . A ll thr ee team mem be rs must agree to ca rry o ut their respo nsibilities and to do no less and no mo re than sta ted except in the c vent o f imminent danger .

21 .5.2

Ap proa ches to Safety

Pra g m a t ic Inv o lve m e n t Proje ct team members, especially th e: e ~ l. shou ld realize t ha t do ing m o rt: th an req uired by the con tract p rovisions can p ro d uce results just as punitive as doing /t'SS than require d. Although this d oe sn' t see m rea son able, the at titud es of th e law are such

2 1.5.3

Sit e Pre se nce TIle fact th at the C M is requ ired to have ;1 full-lim e pr esen ce on site see ms 10 auto mati cully make the C M culpable when an accid ent occ urs. As far as plai nt iff's auor neys ar c con cerned. anyone o n the site with supe rvisory resp onsibili ty when an accide n t occu rs must be implica ted in som e way. Contract pro visio ns 10 th e contrary, a tto rne ys COIl1 stre tch the wordin g to com e up with in ter pre ta tions that op en the door to C~ I liabilit y, Th eir inte rp ret ations oft en put the Clvf in a po sition of respon sibility without authori ty. In th eir co nt ract ad min istratio n ro le on G C proj ec ts, arc h itects disco vered lo ng ago that the on ly way 10 lessen th eir expo sure to acci de nt liabilit y was to be o n sire as lillie as possible. St and ard contract d oc um ent s support thi s by not committing [he architec t to a set numbe r o r frequency of site visits. Th e cha nces of evadi ng culpability are im proved if an acciden t happen s when the architect is not on site. It should be no ted howeve r. tha t it is co mmo n for an architect to be named as a litigant even if no ne of the ir perso nne l were on site a t the tim e o f an accident. Un fortunately. it is a rare occas ion when an accid ent occ urs on site when CM personn el are not p resent. When construction is in progress. site pr esence is a standard co n trac t req uirem ent and a maj or attribute o f th e CM sys tem. Resp on sibility as a safe ty inspector is no t a s ta nda rd contract requirem en t. Construc tion man agers have no cho ice but to ca ref ully prepar e for th e safety realities of e t\l pr act ice. both co ntractually an d p ragmaticall y,

332

Chapter 21

21.6

MAJOR SAFETY MANAGEMENT COMPONENTS

Safety Management

Th e principal cornponenis of safe ly management arc the Project Safely Managemen t Plan and the Contractor's Safety Management Plans.

2 1.6. 1

Section 2 1.6

21.6.3

The Project Safe ty Man ag em en t Plan 21.6 .4

accid en ts on the project 2. with co ncurre nce, determ ine the most pragmatic app roach 10 safety unde r th e

condi tions which will prevail o n the project 3. procure insurances with appropriate limits to mitigate the cost of c1 airns if they occur ~. see that specific safe ty requirements and responsibilities arc Inser ted in owner. cont ractor ngrce mcms 5. req uire eve ry co nt racto r 10 submit a safe ty piau

expla ining how it intends 10 comply with OSHA and State safety requirements 6. commit to a team-defined safety approach, doing no more or no less than the com mitment req uires

7. d ocum ent the project' s Safety Management Plan. incorpornnng items 1 thr o ugh 6, and include it in the CM Project Manual.

Some Re spons ib ilit y Ra t ion ale Project ream member safety res po nsibilities should strict ly follow the esse ntial cleme nts of service assignments under the AC M contracting structure. 111e essen tial elements of se rvice ar c co vered in Chapter 1, The FundJlllc~tals of the Root For m of CM . Th e CM's respo nsibilities arc in construc tion coo rdin ation. project ma nagem en t, a nd co n tract admi nistration: the AlE 's. in de sign , project mnnngc mc m an d con tract ad min istration: and the o w ncr's, in co ntr acting. Noone on the project team h.IS rcspo nsibility fo r construc tion in [he ACt,"! fo rmat. . Confining safe ty respo nsibilities to these areas provides a broad gu ideline for spe cific team mem ber ro les for project safety, O ne majo r respo nsibility of all tea m members is to promo te a site that is a safe wor kp lace for a ll wor kers: ano the r is to instill the sla te-of-mind safe ty concept th a t collec tively influences safe pra ctices on site. Responsibility for worker safety is prima rily ass igned by law to e mplcycrs.This is supported by Workers Compensation insurance where o nly the employer is obligated to pay the costs of an injured wor ker 's medical trea tme nt and reh abilirnrion , Team membe rs arc di rectly respo nsible for the sa fety of the ir o wn em ployees but no t direc tly respo nsible for the safe ty of wo rke rs employed by others.

Developing th e Safety Man agement Plan

Evaluat ing Accid en t Exp o sure E val ua ting expos ure is it risk -m an agemen t pro ced ure. Eac h project has its o wn exposure to safe ty a nd healt h prob le ms. A s soon as practical. tea m membe rs sho uld discuss the probable construc tion processes to be used and the condi tio ns under which they will be execute d. Th e goa l is to identify worker exposure to the inhe rent da nge rs of the con structio n met hod s which will probably be used and thc uniqu e dan ger s of the pro] ecr's environment. A lthou gh lill ie design has bee n don e when th e FIrst review takes pinee. sufficient inform ati on is k now n to identify and e valua te the probable exposu res to risks. Future revie ws will en hance ea rlie r assess me nts. Will the cons truction be spread o ut ove r a large area? Is it low-. medium-. o r high. rise con stru ction? Wltnt is the nature of the fou ndation excava tion or trenching work? What type/size of eq uipme nt will be used? How will the site be accessed a nd used by contractors'! Ho w will const ruc tio n a reas be accessed by worke rs? Ho w fa r a way a rc emergency se rvices locate d'! Will hazardous materials be handled? Will explosives be used? Ho w long will each high-exposure constructio n process last? Which cons truction processes con tro l the project? Is the co nstruction time adequa te? Will shift wor k be req uired? What weat her condi tion s will prevail? Will wood concrete forms be used? To what ex tent will intlamrnnble ma terials be used? Is demol ition req uired ? Th e respo nses to these q uestions will provide insigh t to poten tial e xposures and assis t in ide ntifying the ph ysica l pr oble ms tha t could co ntribu te to sa fe prac tices on si te. TIley identify uniqu e safety need s, if any, and surface prob lem ar eas tha i require specia l atten tion . There will be periods of time du ring const ruction as we ll as certain ac tivities that a rc mor e prone to acciden ts than o the rs and will req uire special atte ntio n. A ll of th is informa lion should be take n into conside ration whe n dev eloping the Safety Management Plan.

I. usc risk-management techniques to ide ntify and evaluate poten tial exposure to

21 .6.2

333

Developmen t of a Safety Manage ment Plan should be started early in the design phase but need no t be co mple ted unt il the plan's contractor- related safety provisions must be inco rporated into the con tract d ocum ents. However . to keep pace with the deve lopmcnt of the ot her related ma nagemen t plans (suc h as risk man agement and cont ract managcmcnt l.nn carty start is be neficial .

.~

!be project team members should accept the fact that it is impossible to completely Iso late themselves from safe ly invo lvement o n a Ct-.,f projec t, just as it is impossible to do so o n a GC o r 0 -0 projec t. Fro m th is pe rspective, the re am with th e lead o f eM should:

Majo r Safety-Management Components

21.7

I

J

THE TEAM'S APPROACH TO SAFETY Due to the pote ntial fo r thei r ow n invol vement in an accident . the NE and owner sho uld assis t the CM in formu lat ing th e Sa fety Man agem ent Plan . Ea ch team member is a stake ho lder in site safe ty and sho uld be sure that their inte rests arc pro tec ted. a t least to the limits in their cont rac ts. A critical cle men t of site sa fety is specifying ce rtai n req uirements as cont ractor respo nsibilit ies in the contrac t documents. To accomplish this. the pro visio ns in the sta nda rd co ntrac t docu me nts mu st be ap propria tely amended. with th e coope ration of the o wne r and the AlE. As long as the a me nd me nts do not incre ase t he liabilit y exposure of the o wner and AlE. the cha nges sho uld be accep tab le to them.

334

Chapter 21

Safety Management

Section 21.8

TIle C M's role in safe ty req uires de finitio n beyo nd that found in s tanda rd co ntract documents. TIle cwnc r-Cxr agreemen t and the supplementary and special conditio ns to the general condi tions should contain provisions that assign th e eM responsibility 10 perform the following: 1. determine site-wide safety requireme n ts and assign them to contractors in workscope definit ions 2. mo nitor contractor compliance with O SH A req uired paperwork such as re po rting. pos ting. an d reco rd keepin g 3. o rganize. atte nd . and rec or d periodic co ntractor safe ty mee tings a t the site

, I

req uire each co ntrac to r to sub mit a sa fety plan to the eM and disc uss the plan with the eM befo re occ upying the site 5. recom mend ame nd men ts to th e owne r-co n trac to r agreem en ts that more spcci fically define co ntrac to r safe ty resp on sibilities.

De signa ting Resp onsibility Th e re ar e safe ty req uirements that affect mo re tha n one con trac tor 3111..1 mus t rem ai n in place fo r ex tended periods of time (items such as tempor ar y stairs, ladder s, barricad es, fire a nd life safe ty equipme nt and signs) and other requiremen ts that could be more economically pro vided by one con tractor for the benefi t o f all . Th ese items should be iden tified by the CM and eit her included as part of a sp ecific co ntra cto r's wo rk-scope or accepted as the C M 's respo nsib ility.The req uirement should be to pro vide th e item(s) acco rd ing to OS H A s ta ndards and main tai n the ite m(s) in goo d repair for a specified peri od o f time.The cos t of the req uire me nt should be part of the co ntractor's co ntrac t pric e and listed in the co n tractor's sched ule of va lues as a PIlYmen t line item . h em s dee med to be the C M 's resp o nsibility sho uld be included in (he owner-Clef agree me nt by amendmen t and funde d in the Co ns truction Sup po rt Bud get.

2 1.7.2

335

111e C M sho uld help ea ch supe rviso r or gan ize the projec t safety meet ing, p re pa re the age nda, and ob tain visua l a ids such as video tapes and hand o uts. If necessary, the C M shoul d assis t the chai rpe rso n duri ng the meetin g. The age nd a sho uld include lost-time accident updat es fro m eac h contract or and the sta tus o f safet y items for which the)' are respo nsible. Sugges tions to imp rove safety sho uld be encou rage d. Mee tings shou ld not exceed one hou r. and the minutes of each mee ting should be reco rded and d istribu ted by th e e M. Con trac tor sa fety meet ings sho uld be encouraged. The eM could req uire contra ct ors to sub mit meet ing sched ules an d spo t check to assu re they are bei ng hel d accord ing to sche dule. Co ntractor safety me et ing req uirement s sho uld be pre scribed in the s upple mentary an d spe cia l prov isio ns of own er-co ntracto r cont racts. To emp hasize the sa fe ty ph ilosop hy, contractor safe ty meetin gs a nd a ttend ance .'1[ pr oject safe ly meetings could be line item s in eac h co ntrac tor' s sched ule of value s. Co ntrac tors woul d be paid for co mple ting. mee tin g requirem ents 3S they ar c paid fo r co mple ting co nstruction wo rk .

~.

21 .7.1

Cont racto r Safet y Pla ns

Mon itoring Paperwork Comp liance OS H A req uirements e ntai l con side rable paper wor k wh ich com mc rors must s ubmit and mai n tain in a time ly mann er. There a rc a lso mand atory pos tlngs fo r ind ivid ual co ntractors. Alth o ugh th ese a rc no t acciden t prevent ion measures, they a rc req uire ments which mu st be complied with und er pe na lty of a fine. Th e eMsho uld coordi nate site-wide pos tlngs to ass u re co mpliance and el im inate red undancy and be avai lable to chec k contracto r paperwork to improve prope r and timely co mpliance b)' them .

21.7.3 Safety Meetin gs Per iod ic on-site safe ty meet ings propaga te th e state-of-m ind philosoph)' tha t is the key to sa fety performance. In addition to the safe ty meetings which contrac tor supe rv isors ho ld with thei r ow n pe rson ne l. the contractors ' supe rviso rs fu nctio ning o n the site at the time s hould be required to participate in a brief biweekly p roject safe ty mee ting, chaired o n a ro tati ng basis.

21.8

CONTRACTOR SAfETY PLANS

Co ntractor safety pla ns are simi la r to co nt rac tor q uality plan s cove red in Chapte r 17, Q ua lity M an agem ent. Th eir p urpose is to invo lve con trac to rs in sa fety be for e th ey mo ve on site, to give them a prescribed co urse to follow o nce th ey get there, and to ide n tify th ose cont rac tors who req uire assistance o r mot ivati on regar d ing O SH A safe ty co mpliance and the p hilosophy of pr oje ct sa fety. Safet y plans p ro vide an indi cati on o f how a co n trac to r inte nds to co mply with OS H A req uiremen ts. Mo re imp orta ntly. th ey provide insigh t in to eac h co nt racto r's att itude to wa rd sa fe ty. Wh en inadeq uacies arc fo und in a plan. co rrec tio ns can be mad e by the con trac to r befo re beco ming ac tively invo lved with o ther co ntrac tors on sitc- Th e time spe nt by co n tracto rs putting sa fety plan s toge the r and by CM pla n re vie ws co uld be the 1I10st pr oductive lime o r all. if an accide nt is pre vent ed as a res ult . Co ntrac to r pla ns sho uld not iterate OS H A requ irem e nts, they sho uld ind icat e how the contracto r intend s to mee t OS HA req uirem ents in con ce rt with o ther co ntracto rs o n the site. Ea ch co n trac to r's plan will di ffer acco rd ing to the type o f wo rk they will perform and the co ndi tio ns u nde r which it will be perfo rmed. Safe ty plan s sho uld ack now led ge sa fety req uire me n ts provided by cont ractor s for usc by a ll co n trac tors. A su mma ry of these cou ld be listed in CS I D ivision I. Ge nera l Req uirem ent s. u nde r a n addi tional num ber and head ing "01900. Safety," o r existing " 01O..l0. Co or d ina tion ." Th e safe ty plan co uld be specified under "0 1300. Submi ttals." The major po rt ion of the plan sho uld desc ribe how the contractor int ends to execu te the wo rk. iden tify the un ique hazards invo lved in the work the con tractor will perfor m, and explain how these hazar ds will be avoided o r mitigated in respon se to OS HA req uire ments and sa fe practices. Writing a con tractor's safe ty plan is time co ns uming. It wou ld be a prohibi tive requirement if an o rigina l plan was requ ired for each'Cb t pro ject in which a contracto r becomes involv ed. Ho wever . onl y the first plan will req uire an ino rdina te am ount

336

Chapter 21

Safet y Mana ge ment

Sect ion 21.8

of effort. On ce writt en. a sa fe ty plan will require o nly min or changes for futu re eM p rojects they become engaged in. To provide format consistency, safe ty pla ns cou ld follow the inde x for OS HA Cons tr uction S.afety ~md. ~ ca lth S land~rds. 29 CFR . Part 1926, Sub-pa rt C th ro ugh \Y. A n adde d sectio n pe rt ammg 10 reco rd ing a nd repo rt ing is inc luded at the bo ttom of the listing. Th e hea di ngs of the su bp arts o f 29 CFR Pa rt 1926 ar c:

F

Occu pa tiona l H ea lth and Environmental Controls Pe rson al Pro tecti ve and li fe Sa ving Equ ip me nt Fire Prote ct io n an d Preventio n

G H

rv lat erials Handlin g. Sto rage, Use , a nd

E

I J

11 E

C D

o J

Signs. Signa ls. a nd Barricade s

H E

Disp osal

Too ls- Ha nd and Power

C D

21.8,1

o

S U V

Unde rgro und Con struct io n. Caissons. Co fferdam s and Compress ed Ai r De molition Blastin g nnd the Use of Ex plosives Power Transmission a nd D istribution

W Roll over Protec tive Structu re s; Overhead Pro tectio n, a nd Re co rds, Notices and Re port s. The fact th;ll cont ractors have fun ct ioned unde r 0 51-1.-\ req uir em ents for decad es shou ld d iminish k:lrs tha i con trac to rs will be o ve rw helmed by the sa fety plan requ ire~lellL Add itiona lly, a co nt rac to r's op erat ion s will involv e o nly so me o f the s ub parts listed, subparts they sho u ld alread y be fam iliar with Irom past cons tr uction operations. A sa fety plan simp ly req uires co ntracto rs [0 document thei r cu rre nt sa fe ty p rac tices. For example. the ma son ry work -sco pe co ntractor wo uld add ress to o ne degree or an o ther subpa r ts: Q

Con cre te and Maso nry Con struction

o

Motor Veh icles. Mechanized Equipment Lad ders a nd Scaffoldur g Too ls-H and a nd Power

L I

Mutcrinls f landli ng. Sto rage.Use.and Disposal Persona l Protecti ve a nd Life Savin g Equ ipment Ge neral Sa fety and H ealth Pro visio ns Occup a tio nal H ea lt h an d En viro nm en tal Controls, a nd Record s, No tices and R ep orts;

of these, all contractors wo uld p robabl y address subp arts :

Wdd ing and Cutti ng K E lectrical L Lad de rs and Scaffold ing M Floor und Wall O pe nings. and Stairways N Cra nes, D erricks. Hoists. Elevator s. and Co nveyor s Mot or Vehicles, Mech an ized Equipme nt. an d M ar ine Opera lions P Excava tio ns. Tren ch ing, an d Sho ring Q Concrete and Masonry Constructi on R Ste el Er ect ion

T

337

G Signs, S ignals, a nd Barricad es

C Gene ra l Safe ty a nd He alth Provision s D

Cont racto r Sa fety Plans

I

1

Motor Vehicles, Mech ani zed Equipment Tools-H and an d Pow er. Mat er ials H andlin gS to rage, Usc , and Disposal . Per sonal Pro tect ive and Life Saving Equipm ent, G en er al Sa fely and H ea lth P ro visions. Occupat ion al Health and E nvi ronmen tal Co ntro ls, and Rec ords, No tices and Rep orts.

A n Examp le of A Pla n's Con t ent

A plan sho uld inclu de how th e requ ire ments of subpa rt E , Personal Protect ive and Li fe Sav ing Equipment, will be met. Su bpar! E sta tes equipment requirement s and when it mu st be used bUI docs no t stipula te how the equ ipm ent sh o uld be made avail ab le to workers. Th e contra ctor's plan s ho u ld s ta le wheth er person al safe ly gea r such as head . hea ring , eye, a nd respir ator y pr ot ect ive device s will be supplied by th e contract or or by the wo rker. If s uppl ied by th e co n trac tor . will the y be given 10 work ers or lo aned 10 workers'] Will th ey be stored on s ite during non-working hours? If s to red , wher e ? what arlo: the conditions of replace me nt ? If s upp lied by workers, how will the con traclor verify su itabi lity and condition ? Wh o is re sponsib le (o r maintain ing devices in wor kin g o rde r? Who is resp on sible for th e a vaila bili ty, cond ition . and usc o f wo rker 's per sona l safe ty ge ar? Th ese ma y see m like un import a nt consi dera tions from the persp ective o f the tot al project , b UI the unavailability of regulat ion . properl y ma in tained , per sonal protective dev ices could produce se rio us inj u ry in the event of an accident. A n ex ample of what might be cov er ed und er su bp art N, Cranes, Derricks. Hoists, Ele vators. and Con veyors. wou ld be an up da te o n th e mech an ica l status o f equipment mo ved on to the job. Fo r a cra ne. for ex am p le, the fo llow ing questions co uld ar ise : Is the cra ne rigged according to man u facturer 's specificat io ns? Has il bee n load rated ? A re th e ra tings still valid '! Is the rating ba sed o n manu factu rer s data or d ata ob ta ined by test ing? If teste d. who conduct ed the tes ts? Will the cra ne be test ed bef ore being pur into service o n th is pr oject? wh o will be re sponsible for meeting OSHA regu lations wh en the cra ne is in use ? For wh at purposes will the crane be used o n the p roject ? An y other informa tio n that est abli shes the uti lity of the crane will be pert inen t.

338

2 1.8 .2

Chapter 2 1

Sect ion 21.9

Safety Management

CONTRACTAMENDMENTS A fte r re vie wing the risk -managemen t s tudy used to de te rmine the tea m's app roach to safe ly. seve ra l ame nd men ts to the owne r-con trac to r agreem ents may be de em ed a ppro priat e. Care s hould be ta ken not to o verdo ame ndm en t writi ng. to a poi n t wh ere they clou d ruther than cla rify the int e nti on s of the Sa fe ty Management Plan. Am en dm ent s should be narr ow-scop e d efini tio ns o f al rea dy es ta blished broad-scope requirem cnts. uo t new req uire men ts in the mse lves. One ame nd me nt th at sho uld be inclu ded is an expli cit statement o f who is re spon sible for the safety oCco ntracto r em ploy ee s. wor ded to the effec t:

COl\t:\t ENT: Any chap ter o n co nstruction sa fety wou ld no t be comple te with ou t suggestin g that eM pr actition e rs d o all possible to b ring real ity into the mone tary co nseq ue nces of unsaf e pract ices,Th e co u rt syste m refuses to be realistic when allocating respo nsibility when an acciden t occ urs. E ithe r sym pa th y for the inj ured party or the fact tha t insur a nce fund s are ava ilab le to cover mone ta ry awards. eclipses the reality that the inju red part)' is o fte n the o ne that cau sed t h e acciden t in who le or in pa n . worker "1\" who sus tai ns a hea d injur y fro m a tool that was d ropped by \vorkc r "B" fro m a sca ffold above . sho uld be held accountable ifhe/she was not wea rin g a hard ha l and was loca ted in J p roperly marked ove rhe ad d a nge r zo ne. Wor ker " B" should be hel d acco unt able for ca re less ness whi le us ing th e tool. Wor ker -Av 's emp loye r should be held accountable if a hind ha t was no t ava ilable. Wo rker "B" 's e mp loyer shou ld be hel d accountable if the sca ffold ca used the too l to fall, if the zone below th e sca ffold was no t marked . o r worke r "B " was not inst ructe d in the use o f the tool. It s ho uld n' t be diffic ult fo r the co ur ts 10 sec tha t the pa rties responsible for th e acciden t are wor ke rs "A" and " B " and, po ssib ly, the ir respective em ployers . To assign even nominal resp on sib ility to the ow ne r. A lE o r eM who have ab so lute ly no autho rity ove r wor ker s "A" a nd "B" ca n o nly be founded o n the misp laced sympathy of the cou rt . the unf air con ce pt o f " dee p pockets," or the fact that insur an ce poli cies. not those respo nsib le. wo uld pay dama ges. D a mage aw ar ds made by co urts heavily favor pla intiffs suc h as wor ker "A : ' Co nstruction man agers and archi tec ts who p rov ide se rvices on ACM projec ts. sho uld be p roactive in an e ffo rt to co nvi nce cou rts tha t th e con trac tua l assignme nts in the ACM cont rac tin g stru ctu re re moves them fro m culpa bility in cases simila r to the o ne: stated ab o ve.

"Th e cont ractor shall not assign employees ( 0 work in areas and locations rb.u arc unsa fe. The COnt ractor's supervisor shall verify that the conditions under which their workers will be work ing fully com ply with O SHA regula tio ns. Su pe rvisors who dee m an a rea or location unsafe shall not pe rmi t the ir wo rke rs LO begin or con tinue 10 work until the problem is el iminated an d compliance is appar en t. Supervisors shall immediately inform the eM representalive on site, in "Tiling, of nuv

noncompliance observed. . Workers who dee m an area or locat ion unsafe sha ll not sta n or continue to work in thai area or local ion and shall immediately notify their supervisors of the unsafe conditions."

2 1.10

33 9

with the owne r a nd Al E, th e eM sho uld make s ure that the res ponsibiliti es the)' assu me have the same logica l se lf-reli ance. Co ntracto rs should be assigned respo nsibilities using the same logic; what the}' can con trol , they sho uld co n tro l.Their a uth ority gives them th e respon sibility fo r co ns truc tio n mean s, meth od s, an d tec hn iq ues an d the man ne r in which they utili ze the ir wor kers a nd eq uipm ent. Safet y regul at ion s arc orie n ted towar d cont ractor s. They sho uld be req uired to accept th eir respo ns ib ilities for safet y and co nscientio usly ca rry them out. It is not simp le to write the nece ssary provisions in the sup ple menta ry and spe cial con d itio ns tha t will p ro pe rly and effec tively assig n sa fet y respo nsibilit ies to co ntractor s. It is much e asier to wri te con trac t pro vision s tha t p ro pe rly and e ffectivel y assign sa fe ty resp on sibilities to the eM, A l E, an d owner. H owever. the time and e ffor t spe nt o n bo th will pr o vide a significan t be nefi t if nil acc ident occ urs. T he next s tep is to wri te the Sa fety Man agement Plan an d the co ntracto r safe ty pla ns. Th is will be d ifficult the first time it is ins titu ted. fo r bo th the Clvl and the co ntr actor s. Th e eM. A/E. and o wner sho u ld lea d by e xa mp le by s ub mitt ing the ir o wn pla ns co ve ring thei r o n site per son nel. Th e final requireme nt is th at e ver yone faithfully perfo rm their respo nsibilities. Thi s req uires con siderabl e effor t, especiall y from the C ~ I. and may tax the e xecut ion o f the Safe ty Managemen t Plan to its limits. Ho wev e r. the proper assignmen t o f res po nsibili ty ha s no valu e \vitho ut execution . Th e eM m ust lead the wa), by exa mple as well
Sa fe t y Pla n Re sponsibi lities It is the co ntracto r's d uty to anticipate sa fety re quiremen ts through plann ing. not simp p ly re act to the needs o f an immed ia te situat ion.To this end, the con tract or shou ld p rovide a plan th at demon strates plan ning to meet O SHA req uireme nts. o ne thai p recl udes su rpr ises whe n cons truc tion begins. A C M should accept the resp o nsibility to see that cont rac to rs submit pla ns that categorically a nticipa te OS H A safe ty req uireme n ts and t hat co n tain e nough infor mation fo r the C M to predict a success ful expe rie nce during cons tr uc tion .The CM sho uld review each pla n as pa rt of preconstruction activi ties. and gen e ra lly co mm ent whe ther the plan is sufficientl y detailed and has ad equ a te coverage. Re viewe d pla ns s ho uld be returned to contractors with ques tion s and comments regarding co mpl e tene ss but 0 0 1 co rrection s or sugges te d correctio ns.TIle p lan m ust rema in th e con trac to r's pla n un der a ll circumstances.

21.9

Con t ract Amendmen ts

SAFETY MANAGEMENT PHILOSOPHY Co nstruc tio n man ager s s ho uld do all possible to nuumuze the p ro bab ility o f bci nc hel d liabl e for accidents. Exc ulpato ry clau ses, de signed to iso lat e th e eM fro m an~ responsib ility wha tsoever, have bee n tried re peat ed ly and do no t wor k. Th e co u rts will no t acce pt clauses of this nature b ecau se it app ears to them tha t the CM firm 's co ntract ed invo lvem ent in the project suggests that at lea st some respo nsibility for safe pract ices a re on the CM 's shou ld ers regardless o f how rem ole the)' might be. Con sequent ly, the C M should pu rposefu lly become involved in site sa fet y in defined areas wher e th e aut ho rity to ex ercise co nt rol a nd uni lat crallv mak e decisions is re se rved exclu sively for the CM. As part of the C~ l's syne rgis tic learn rela tion shi p

---

Section 22.1 22 .1.1

CH AP TE R

2 2

Of the man )' contracting innovations of the eM system. multi ple bidding and contracting appears to be the prac tice of most benefit to owners. Switch ing from the info rmal assembli ng of trad e contractor proposals under the GC bidding format [0 a fo rmal com petitive bidding fo rmat under the eM system has produced significa nt cost savings and produced sizeable a ncillary benefi ts.

The primary cost savings nrc in the efficiency of the multiple-bidding process and the basic cc r npen uo n It creates, Most of the a ncilla ry benefits accrue fro m convcrun g trad e co ntractors to prime cont rac tors-a move that sanctions improved project con trol and management. Multiple biddi ng and contrac ting is not a simple forma t to inst all and ma nage . Awareness o f its flexibility a nd limita tio ns is esse nt ial. Implementing the forma t s uccessfully requ ires const ruction industry expe rience and insigh t as to how it funct ion s. especially at the projec t loca tion . It is also a tes t of the Cvl's microrunnngcmcnt sk ills. On ce experie nced fi nd used, the multiple biddin g and con tracting for ma t is no mor e difficult to ins tal l tha n a single prime con tract. Ho wever , expe rience never rep laces familiar ity with local co nstru ction con trac ting pr acti ces. nnd anything less than mic rorunnngcm cnt of th e forma! will no t be enoug h to make it wo rk.

340

22 _1.2

Work-Sco pe li sts

Econ om ic Wo rk ·Sco pes An ex ampl e o f an eco no mic de cisio n woul d he 10 establish work-scopes fo r ,\"Ifpplyil/g hollow meta l fra mes and do or s and for ,\'//fJplyillg the requi red ha rdware. Th e owne r

WORK-SCOPE S When using the mu ltiple bid d ing lind contractin g format , the: founda tion for succes s is determin ing and expressi ng the work -scopes o r d ivisio ns o f wor k. Wit ho ut ex per ienced input here, the forma t has little cha nce for success, regardl ess of how \ve: 1I it is managed d uring construction . All the req uisites listed unde r the co n trac t 'ma nage men t area o f kn ow led ge ill Cha pte r I I arc necessary to suc cess fully execu te the multiple biddi ng and co n truc tin g form at. Th ose in the indust ry who believe the fo rmal is too com plicated or d ifficult to pr op erl y install an d manage are pe rhaps nOI q ualified unde r the are a of know ledge or ob livious to its record of successful usc by co mpe te n t construction ma nager s. Th e concerns most o ften ex pr essed abou t the fo rma t a re : (1) it is nOI pos sible to define work -sco pes nccu ra rety enough to elim inate o verlaps and gaps betwee n the work-scopes, and (2) il is no t pr actical to ma nag e multiple co nt rac tors withou t ho ld ing thei r cont racts. Work-scopes can be de fined acc ura tely, and multiple: cont ra ctors can he effectively managed . Lite rally thousa nds of successfu lly completed CM multiple contra ct projects bear witne ss to this statement.

341

Before work-scopes can be wri tte n, the number and content of rhc wor k-scopes m.ust be determined. Obv iously, number a nd content arc rel ated; the facto rs tha t de termi ne number and co ntent arc exte ns ions of the decision to use mult iple co ntrac ts. Consideration should be given to the project location. type. and size' .the .availability, ca pac ities. and pr oficiency of avai lable .co n tracto rs: and t ~e coostr.uctlon .1ll? UStry pra ctices tha t prevai l in the a rea o f the pr oject . An alysis of this da ta Will precipita te a decisio n on the prac tical brcakdccv-n of work -scopes. . " Work -scopes o r bid div isions should be dete rmi ned o n a project b~s ls. Expe rien ce has shown thai u niform o r standard ized work-s~op:s arc . n~t practical because of the a typical character o f e ach project. Standardization with in the
Mu lt iple Bidd ing and Cont ract ing

22.1

Work-Scopes

I

1

C; \II purchase these items directly from a s up plie r and benefit from competit ive bidding and the elimination o f a contracto r profit layer. '1l1C mason is assig ned ca re, custody, control , and installation respo nsibi lity for the frames when th ey arc delivered to the site. The care, custody. control. and insta llation o f hollow metal doors and har~warc when d elivered 10 the site is assigned to the carpentry work -sco pe co ntracto r. It IS the AlE's and CM 's respon sibility to coo rd inate sho p d rawing review an d del iver y scheduling with the s upplie r a nd the IW O wo rk-scope con trac tors. . On pu blic projects. wher e own er material pur chases nmy no t be su bjec t to sales tax , an econ omi c benefit cou ld accrue to th e ow ne r through a d irect pu rchase work sco pe fo r the mat eri al. Thi s would be appropriat e on ite ms sU~h as st.ruct ura l Sled and larg e mechanical eq uipme nt o r item s that have lon g-lead. de livery l.lnleS a nd m.ust be pu rchased before con trac ts for co ns truc tion arc le t. to aVOId a delay In const ruc tion . Expe rien ce has shown th nt so me cons truc tion managers ha ve ove rs te pped the limits o f contract ing p ro pr iet y an d th e law by ha ving the o wne r d irect ly p urchase as much mate ria l and equipme nt as po ssible-seven to the poi nt where all mat erial and eq uipm e nt was purchased o n o wne r-issued purchase orders that simp ly copied the specific requisition req uire men ts of contractor s.

342

Chapter 22

Section

Mult ipl e Bidd ing and Contract ing

An ast ute eM sho uld not let d irec t o wne r pu rchasing cxcccd the pra cticallimit. If owne r-insti gat ed. the eM should advi se the owner th at ove r using this option will produce a negati ve economic effect rather than a positi ve on e. With o ut the cushion o f a mark-up o n a reasonable am ou nt o f ma terial an ti eq uip me nt . co ntractors will increase their mark-up o n la bor to re place the missing cus hion. La bor-on ly work -scop es are only co mmo n in a few tr ade contrac ting areas (s truc tural steel ere ction. car pet layin g, casework assembly, and lon g-le ad item install ati on , to list a few) . To e xtend the list beyond the no rmal construction contrac ting practices in the are a of the project co uld ha ve an advers e ef fe ct on co ntrac ting econ omics, Additi onally, the sales ta x agency could rule that the owner is tak ing ad van tage of the direct o ptio n to evad e the payment of sales tax . One ea rly eM adventure on a public sch ool proj ec t, where virtually all the material and equipment installed by contractors was directly purchased on req uisitio n inform ation supplied by co n trac tor s, was brought to task by a sales [ax age ncy. Th e au thorit ies ruled thi s a pass-through operation undertaken by the o wner so lely 10 evade lax laws, U po n a udit . the o wne r was required to pay all the accrued sales tax sa vings to the sta te, Th e legal co sts and resul ting con stru ct ion d isr uptio n added to the owner's problems. It should be no ted that each state has its own laws gove rni ng sales lax on publ ic capital expansion pr ojects. [0 ge ne ral. sa les tax is required on material p ur chased by the contractor , the a mo unt of which is passed on to the o wne r as part of the con tr act amo unt. Onl y materia l and equipment supplied without the involvement o f on-site labo r is usually frce of sa les lax. Noth ing should be assumed . 22 .1.3

22.2

Bid Division o r work-scope Descriptions

343

w ork -Scope Refere nce",

No s,

Excav ation/ Site Work Site Util i t ic ~ S 3 n it :l l')'fSt orm Site Util ities. water Roa ds and Parking Site Concrete Electrical Buildi ng Co ncrete Building Masonry Slruct ural Steel ~ lc l al Joists Metal Deck Steel Erectio n ~l iscdl ;ln e ou.slOm a mc n t a l Me tals R oo fing anJ Rela ted Sheet Met 31

1 2

J

5 6 7

8 9

10 11 11

13 I" 15

rJ u m bln ~

Fire Pro tectio n Elevato r ~ Icta l Pan els Ca rpen try and Millwork PI ~ t c r/\\'.1 11 Systems/Acoustical Aluminum and G I:lsS

16 17 18 19

20 21

2.3 .5 .7,8. 17.36 1, 3. 5. 15 2. 15 1. 3, 5 1.2 . 3.4 . 6. 7.4 5

5. 15.20. 25.46 1. 19.·;2. 4':. 46 is. t6. 23. 25. 33. 4-l 15. 10.1 1. 12.13.46 9. 12 1:2.14

7.9.10. I L 13 7. 8.1 5. 20.23. 24. 25 6.8. II . IS. 19. 23.24 2.3 .27 3.6. 47

6. 7.R.9. 13 8.1). 13.20.24 l·t 20. 32. 33.3 4.38 . 39•.;.1 ,46 (as no ted )

6. 16. 23

"

FIGURE 22 .1 A typical I':ut ial w ork -Scope o r Divislon {If Work list (with interfacing work -scope erou rc!crcncc~) .

•

Business Style Work·Scopes

mechanical-gene ra l con tractors and subcon tra ct to anot her con tra ctor those mecha nical trades not pe rformed by inte rna l e mp loyees Figu re 22.1 is an example of a pa rti al Work-Scope or Bid D ivis io:l list ~or a typical med ium -size bu ild ing (46 se parate wo rk-s copes wer e used on th is project}. TIle wo rk-scope ref ere nces clarify con trac to r in te rfaces for bid de rs.Th e ref er en ces arc also very val uable whe n writ ing the desc rip tion s to make sure all ite ms are included so mewhere in the listed divisions.

TI1C p rnctical Iimir of wo rk-scope definition sho uld be controlled by the pract ices an d the business sty les of area contractors. Th is ca n be explained by ex amining the concrete and mec han ica l trades. In some ar ea s, there are co nt ractors that do e ither Ilutwork or st ructura l co ncrete b ut no t both. In o the r areas, concre te co nt rac to rs do bo th. If the trades ar e sepa ra ted in the area of a par ticula r pr oje ct, st ructu ral concrete and flatw ork co nc rete sho uld be sep ar at e. By separat ing the two wor k-scopes. the criteria of red ucing potential subcontrac ting situa tion s to a minimu m is se rved a nd competit ion will be generated. I( a structural con crete co ntractor a lso docs Ilatwc rk , o r vice ver sa. that co ntractor ca n bid either or both work-scopes individually. or both \v-c rk -sco pcs with a com bined dedu ct if it is not in terested in accepting award for only one. Th e co mb ined bid. less the dedu ct . will he compared with th e two lowe st se pa rat e bids o r any o the r com bin ed bid to determin e if o ne or two co ntracto rs will be awarded th e s truct ural an d na twork con tr act. An oth er exam ple in vo lves mechanical trade s. These trades inclu de heati ng. ve ntilating. air- co ndit io ning. plumbing. piping. fire pro rccuou . mechanical ins ula tion, und ergro und utilities. inst rumentat ion, and bala nc ing. If co ntr actors are a vailable for eac h trade se pa ra tely. eight o r nine bid divi sion s wou ld he pra ctical. This will no t exclude a full-ser vice mechan ical contract or from bidd ing each work-scope and pr o· viding a com bined deduct. In pr act ice. many mech an ical contract ors ope ra te as

22.2

BID DIVIS ION OR WORK·SCOPE DESCRIPTION S

Multiple bidding and con tracting su ccess is also vested in the accuracy and com~lc tc. nes s o f the wor k -scope de scriptions. These na rratives p rovide defini tio n and uni for m data on which bidding cont ract or s ca n accurate ly calculate their dolla r p roposal s a nd sub mit them co m pe titively with co nfid ence. Compared 10 the way that gene ral contractors receive offers from potential subco ntracto rs., C~1 mult iple b iddi ng has a d ist inct an d u niq ue compcti tivc ed ge. It is for ma l. fair. co mpe titi ve. d efinitive. a nd respo nsive. The four-sample bid divi sion s in Figur e 22.2 demon strate the use o f a simple cffecrive form a t and ind icate the required conten t for complete definit ion . The "Excluded, Inclu ded . Also Included" forma t sho wn her e was first introduced in 1972 and is in use today. It is a simp le way to poin t o ut wher e and how tradit ional trade line s are cr ossed. where work-scopes begin and end . and who the interfacing contractors will be.

.J

344

Cha pter 22

Section 22.3

Multiple Bidding and Contracting 22.2 .1

(lid Ui , isi" n 07, 8uildi nj! Cuucre tc E xclu de d:

~b ch ln t: excevaucn (U.D. I. Exca vano n and Sue Work); mcisune pro tection (B.D. ':4. waterproofing lind Damp-prccfingjt seund isola tion 1:I}'er ( n.D. "2.l-1oaling Floor )

InduJ.:d:

All ~ and concret e-related .....ork ph) sica lly assoc iated .. llh t he bu iklln8 proper. includ m g but nOI restrict ed to foot ings; retaining w alls: walls; slabs on gra d e; st ruc : ura l. composite a n d supported slabs. equipment base s, ent rance pads, pI3Iform s, clc. including har ulexcavat ion and back-fill, forming. form lining. re-steel. curing pr o tection. fini..hing.e re.• a~ shu .... n and specifieJ.

AI~1

Arl cou rt concrete; founda tion. insulation, t'xpansion joint filler an d scaler; maintenance pumping as re q uired (Sec.lP-2QO-3.3); re q u ire d S4lnJ cushion unde r slabs. LarOU!. Hc usek ee ptng and Fina l Clea n-up.

Included :

Prefu nu cd vapor har rier ( B.D. .... ,Walc rproorm g a nd D um p- p ro o fing ]: turuW1iru: or hollo w ruc ta l door (r;lmCS(B D. 35. 1fo llo w Metal Doors and Framc s) ; 1umi5hinlt of access panels ( B.D. 23. Ile .l ting ;ll1dAir CtlllJi lill llin g: n.D. "24 . Vellli l:tling and S hed Me l.ll ; B.D. 2;'i.·lc m pcr :u ur e CHlltmls an d others),

Include d :

All D.J.i1iQ1l.O: anJ rnascnry-relared ....ork re q u ire d incl ud ing but not res tricted to uuerior and exterior walls,partitions. parapets, dividers. etc.• includ ing bric k. block. mo rtar. reinforcing. eccessortcs. lnsc la rion, nashing. cut-none. g rou ung, etc. as specifically covered in Se c. 1·11 00 , 14215. Ool?20 O-I "~O.

0-1610. Abo IncluJ..:1i

Ins tallatitln of hollo w m etal door rreme s. ecce ss pan els and other items embedded d ati o n insula lion . L3) OUI . Housekeeping an d Final Clean-up.

ill

Eurn1almt

22.2.2

Included:

IIr rntsceuaoeous

The ~ of :1 11 structural steel. metal joists and metal d e ck as required . ;IS sl-t\lwn JIlIJ as sp...cifie d in Sec . tlS1UI. O;'ill O. 0 52 Hl JIld 0 5JOlI.CIllllp lch: in ;ltl res pc crs in d ud ing boiling. wd din J:. c u llm ~ Irimm inG ~IS required

Also Included:

To uch-up I'Jinting; Layo ut. Housde': l'ing lind Final Clean-up. FIGURE 22.2c

n it! Il h isi<J n 09. Slru rlll r:ll Sln·1 Exclud ed :

O pen we h jo i~ l s (B .D. IO.Melal Jois IS);dcck ing{ B.O. II .Mc t all) e ck ) : ~ (B .0.12.Sted Er.ccti\Jn): ancho r boll in..tallauon ( B.D. 5. Sile C cnerercj. secondary suppo rtive membc....( B.D. 13. Misce lla neo us and Ornamental Mc t;J!s ):salcs TallO .

Included :

The ~ or all rC\luircJ ~lTuctual sled framing membe rs a , re quired ( no t 5j"
A ncillary Ben efits

It was ment ion ed at the beginn ing of th is chap ter that multiple contracting provided ancillary benefits that were not factored in or anti cipat ed when the CM system was developed bu t surfaced when the syste m was put into use. Writing work -scopes contributes one of these benefits: one that has signal value and con tributes to the success o f the eM system. ' 1l1C purpose of the CM's drawing a nd technical specificatio n re view is to wri te wo rk-scopes. However, the re vie w process accomplishes much more. It present s the opportu nity for the Cl\t to find incons istencie s in and between the drawings and specification s that o therwise wou ld not have bee n noticed until the documen ts we re used by biddi ng con trac tors. or eve n later dur ing co nstruc tion. Two o ther CM draw ing an d technical specification reviews also con tribute: on e by the scheduler when designing the detail ed construct ion schedule (described in Chapter 20. Schedule Managemen t), and another by the estimator when completing the wor k-scope budgets (covered in Chapter 10. Budg et Management). The NE's requisite pre -bid review notwithstanding. many inconsiste ncies will be exp osed during the CM's reviews.TIle result is a br iefer pr e-bid add end a and fewer contract changes during cons t ructio n.

01stru ct u ra l slcel.joists and deck (B. D. 9.Slruclural Slcel: B.D. 10. ~kl :l l 10i":5 and R D.

11. Metal D.:ck) ; sell ing of a nchor bolls (B.D 7, UuilJ ing Conc rete): installa tion meta ls (n .D. I3. Misce llan eous and Ornamental M':la l)

Writi ng Wo rk·Sc ope s

masonr)": foun-

FIGURE 22.2b

Excl ude d ;

345

Wr iting work -scopes is not a difficult task. However. it does require the following: (1) com prehe nsive revie w of the comple ted drawings and specifications. (2) per cep tive knowledge o f technical construction, (3) ability to visualize the construction process. and (..J) the capaci ty to put the require ments into writing . Th e work- scope write r(s) mentally builds the project a nd describes in word s exactly what ea ch contracto r will be required to do. Writing work -scopes shou ld be the respon sibility of the management or Level 2 Cl\1 Person. However, it is pra ctical to have more than one pe rson writing work-scopes for a project. The outcome is more con sistent if writing assignm ent s are doled out by groups of work -scopes that interface or within the fram ework DC principal elem ent s such as site developmen t, arch itectura l, mechanical, e lectri cal, etc.The final step should be to ha ve onc pe rso n, pref erab ly (he managem ent or Level 2 Clvl Person, edit and coordi nate the complet ed wor k-scopes 10 ensure co ntin uity and style. Wr iting work-scopes for the first lime can be intimidating, but once involved in the process, the writing f lows more readi ly and completing the task is not . IS difficult as some anticipate. What is difficult is allocating enough continuous time to get the job do ne. II is not a (ask that is conducive to interruption . A block of lime sufficient to complete the task should be includ ed in the progra m sched ule for this activity, and strict adherence to that schedule should be observ ed by the eM.

FIGURE 22.2a

Exclud ed :

Bidding and Bidder lists

abo ve } induJinc ,ln chm bults.lc\ding pla tes, b.;;uins- pl .llelo, ';:1l1um lli. supp"rt nlo:ml'Cl ), ': IC.as sho wn ;lnu a s specifIed in Sec . 0510l : complcle ly tdb ri.:a led . rna rkcd and Jdi\'creJ 10 the Erectio n Co ntractor (B.D. OS.Sle el Ere ctio n) at the job site. includ in g a ll co n necti o n ass em blie s, bolts. and

accessories, A lso Include d:

22.3

Shop palming. Erect ion dra wi ngs, Anchor boll selling drawi ngs.

When the work -scope list has bee n finalized and de scrip tions outlined, [he search Cor bidders should begin.TIle CM 's goal should be to ensure thal ea ch work-scop e will be

FIGURE 22.2d FIGURE 22.2 Typ i.:al Wor k-Sco pe D escr ip tion s for M ultip l..: Cm ll r.lc ts.

- - - - .. _ - -

BIDDING AND BIDDER LISTS

1

_

346

Chapter 22

Sect io n 22.3

Multiple Bid ding a nd Contract inq

-s .1

ation. One par tially effect ive substitu te fo r qua lifying con tractors is req uiring labo rl ma te rial and pe rforma nce bo nds. While it wou ld no r he acc urate to say that the a bility to furni sh bon ds rel ates d irectly to a con tra cto r's pote ntial performa nce, there is a remote re la tio nship between a goo d perfo rmin g cont ractor an d his bondabi lity. Whe n re lying o n bo ndabili ty as it q ualifier the cred ibility o f the surety sho .u ld be closely checked. Th ere a rc d epe ndable and und epe nd able bon ding sources. It is sug· gcs ted that a list of accepta ble su re ties be included in the con tract docume n ts a nd th at bidding contr acto rs use o ne o f these. Lists of prcq ualitied sureties co mpiled by units o f govern me nt a re goo d sources for q ual ifyin g purposes. If a co n trac to r has a wo rki.ng relat ionsh ip with a surety not on the list the con tra ctor s ho uld not be ban ned fro m bidding. Howeve r, e fforts must now be made to review the qualifications o f the sure ty as

22.3. 1 Se t Aside Wo rk-Scopes Multiple cont racting pr ovides a simple way to invo lve tar ge ted co ntrac ting groups in the pr oject. Rega rd less o f why they are targeted. it is possible 10 reser ve spec ific wor kscop es fo r exclusive bidd ing by co ntrac tors in tha t gro up. . Deciding which wo rk-scopes to se t aside de pe nds on the match-up of co ntrac tors m the tar get gro up and the requirem e nts o f the work-scope. If a certain g0:11 must be reached (s uch as a pe rce n tage o f p roject cos t) , work -sco pes whose combined a mo unt witl meet tha t per cen tage can be reserved fo r bidding by the targe ted group.

22.3 .2

Bidder Q ual ifica ti o n Regard less of whe ther the pr oject is public or pr ivate . eac h cont rac tor o n the list s ho uld be requ ired to subm it a sta te me nt of qunlif ica tions-c-cnc that will clea rly es ta blish ability to perform. In the private secto r, sub mitti ng a com ple ted qualification fo rm can be a p re requi site to ob taining biddi ng do cuments. This is a simple way to e nsure that a ll bidde rs arc qu alified . In the pu blic .secto r, it is no t al ways po ssible to limit bidde rs thro ugh a q ua lifying process. Howe ver, III so me p ub lic j urisdic tion s it is pc nuissihlc . if the q ua lifying lustru ~ nc l1t is o vert, equa lly fair La all, ami can be evaluated math em aticall y wit hou t any influence o f opi nio n. If it is possible lO pre-qu alify contractors. il s ho uld be done. Th e re really is no cho ice be twee n p re-q ual ificat ion an d post -qualificatio n. Prequal ification is mu ch p refe rred by co ntracto rs. Post-qualification force s co nt rac to rs to go throug h th e bidd ing pr ocess, spe ndi ng tim e and mo ney before the y find o ut if they are qualified o r not . If dee med unq ualified, so me co ntractors witl go 10 great lengths to change the ruling so they ca n be a warded the co ntract. Th e o wne r may be brough t 10 cou rt with the bu rden to provc th e con trac to r unqualifie d.The con trac tor may file au inju nctio n preventing an awa rd unt il the matt er is resolved. The disappointed contractor's ef forts are fueled by the fac t it is the low bidde r a nd also intensified because of the tim e and effo rt spe nt to estimate and sub mi t a pr oposal. Th is is not to say that on a public pro je ct, a tr ad e co ntracto r who is disqu alified be fore bidd ing wilt not go to gre at leng ths to be pe rmitt ed to bid. Howe ver . bec a use of the sma ller stake in the projec t. 3 trade co ntrac to r is less adaman t than a general con tracto r wo uld be and is less likely to pursue rein s ta te me nt as q ual ified. TIle tea m would have to face this problem as pa rt o f risk management (cove red in C hap te r 19).

347

A con trac to r q uali ficat ion for m sh ou ld be as brief an d to the point as poss ible. Thi s is especially tr ue if ther e is ple nty of wo rk in th e a rea for co ntracto rs to bid on. Th ere is no dou bt tha t tilling OUl a q ualificat io n for m is intimid aling 10 contractor s and a de terre nt to the bidd ing p rocess. The eM must con vin ce po te nt ial bidde rs th at its purpose is to stabilize the curnpctition and to makc sure that co mpe tent co n tractors will no t have to compe te with incompetent cont rac to rs. There will be times whe n the q ualification requ irement sho uld be dr op ped to e nsure competi tion. Th is is ano the r risk- managem en t decision , alt hough it is cert ainly preferable to ha ve unq ual ified co mpeti tio n than no co mpe tition at all. H owever , the team should no t decide to sacrifice qu alificat ion with out a tho rou gh review of the situ-

bid by a t least th ree compe tent co nt ractors who ha ve room in the ir wo rkload, available staffing. and arc interested, if not eager, to sub mi t a pro posal fo r the wor k-scope . O n pr ivate sector projects. bidd e rs can be invi ted . located by adve rtisem ent. or bo th. O n publ ic sec lo r projec ts. laws us ua lly pe rmi t any co ntrac to r who so wishes 10 subm it a bid. There is o fte n J. require ment to ad vertise the project acco rding to stated rules. However. the requirement sho uld not p reclude the Cf\l from scarchinc for add itional bidders. 0 Th e goal o f the biddi ng process is to ge nerate a compe titi ve situation tha t is very favorable to the o wne r a nd to ensu re th at a cro ss-sect ion of ava ilable trade co ntracto rs submi t p ro posals in ea ch wo rk-scope division . To achieve this, con tr act or bids from beyo nd the immed iate locale may hav e to be solici ted by the C M.

Bidding and Bidder li sts

we ll as the cont racto r. To ob tain bonds. a co ntrac to r must at least hav e his fina ncial "house in o rd er" and a good record o f completing co ntracts. Alth ou gh su ret ies ma inly dwell on financi al stre ngth and th e ab ility to repay th e surety for cos ts incur red as a result o f co nt racto r defa ult, there is co nce rn fo r the perfor man ce of co ntrac to rs seek ing bonds. In a co ntin ge nc)' situa tion . a con trac to r who can p rov ide labor/ma terial and performance bonds . fro m a repu table sure ty ca n gen er ally be con side red :1 goo d risk . In the e ven t a co ntracto r who is assessed 10 be sub-par ends up o n th e pr oject. o ne thing re ma ins to be d on e. ' 111C crv1 s ho uld d evo te an ino rd inate amount o f lim." tr ac king the con tracto r's pe rfo rman ce to avoid adv erse conseq ue nces. If tro uble IS anti cip ated , it ca n usuall y be prevented. A little co unsel fro m th e tea m ca n go a lo ng way to u pgrad e a medi ocr e contractor's performa nce. If the cont ractor clearly lacks techn ical k now-how, the Ct\'1 ca n con ver t a medio cre pe rforma nce to a good perfor man ce by pr o vid ing lead er shi p :1I1d tec hn ical gui d ance.

22.3.3

Pre -Bid Me etings Pr ior to rece iving proposa ls (about ha lf-way th rou gh the bidd ing period ), a pre-bid mee ting should be held with all co ntr actor s planni ng to bid the work. Alt ho ugh the mee ting need not be ma nd at or y, pro spe ct ive bidd er s sho uld be ur ged to att end, especiallv tho se who have no t previo usly been involved in a mul tiple-cont rac t CM project. . Th e structu re of the meeting s hou ld favor the con tr actors whose work-scopes in te rface. With the number of work- SCOpe s to be discussed and the numbe r o f co ntractors who will at ten d. one continu o us mee ting dea ling with all work-scopes wou ld be exce pt io nally long a nd a fru strating waste of time for cont ractors.

348

Chap ter 22

Multiple Bidding and Con tracting

Section 22.3

Th e suggested sol u tion is (0 ho ld two or three se pa ra te meetings which immedra tely follo w each other during the cou rse of a day. Th e first rucc uug could include the

etc .): the seco nd with work-scopes suc h as ma so nr y, stru ctural co nc re te. st ruct ur al steel, plum bing , H VA C ele ctrical, fire protecti on. et c.: and the thir d with the remaining

a risk- managemen t dec ision . II b idd I ers Th e num be r o f work -scopes o r b id div isions. added to the fac t th at a subm it p roposa ls directl y to the o wner, requ ire 3 lar ge number o f con tract d 0c'um~~~~ be rinted an d dist ributed. A ssuming th er e are 50 w~rk -~copcs, and th ree o r o~ r ,I d P h bo u t 175 se ts of docu ment s will be required Just to accommoda te bidd ing A ddi tionally, co m p le te se ts will be required for tea m me rnbe rs and aucncics wher e d ocu ment filing is requ ired . On a publi c proJe~t, the number c~u'ld inc;eQase, if bidding interest is hig h. ll~e 'nu m be r of d ocuments IS abo ut seven . d d times that needed to bid a trad itio nal OC p roje ct. On lar ge and complex project s, with many shc.c:: ts, of ~ ra w mgs.. ~n prece ente printing costs will acc rue . an d increased logistics o f dlstnb.utlo n, d~ posl ts.. an d returns m ust be worked ou t. Th ese cos ts and requi reme nts no twlths ta nd.lI1g, the ex pe nse .of docume nt reproduct ion a nd hand ling will be ret urned through the inherent econ om ies oC the mul tipl e-bidding process.

work-scopcs, The groupings a re re adily available fro m the ref eren ced work -scopes on the projec t work-sco pe list (Figu re 22.1). So me contractors may opt to be presen t for two or more meet ings, if [hey see a benefit. H o wev er , it would o nly demonst rate ext remely poor man agem ent if painting con tractors had to sit through pre-bid d iscussions on pile d riving or excavation work-scopes, The e M , AlE, an d Ow ner sho uld be represented by all thr ee leve ls of their p roj ec t person s to explain the ir sp ecial invol vemcn ts and answe r questions per tainin g to [he co nd uct of {he proje ct. The pre · bid meet ing is th e time fer the eM lirm to SICP for. ward and convince cont rac tors that the project will be managed prope rly. Marry o f the contracto rs will be wo rking with this CM for the first time, and o the rs will be getting their first exposur e to C M m ultiple biddi ng and con trac ting. In areas wher e Cl\1 is not commo n, m uch o f what is discussed at p re-bid meetings will deal with pr oject procedures. Att end an ce will depe nd o n whether o r not th e ca n. tra cto rs bidding the p roject hav e had previous experience with rho co nstructio n manager o r the CM syste m itsel f. In the mo re techn ica l work-scopes de;l ling with electrical and mechanical syste ms. tech nica l ques tions will be rai sed which will requi re 01 ([ (: 11. dance by the team's eng inee rs and the ir CJ\I co u nte rpa r ts, Pre- bid Illcl:ling't arc productive, especially when wdl planned . adver tised. ,IllJ managed.They a re usually well a tten ded, especial ly when th e p roject is un usua l or complexl f the proj ec t is ordi na ry, or if co ntrac to rs are famili a r with the C;"'1 firm. cont ract or att endance sho uld nOI be rel ied upon as a measu re of b idding inte res t ill the projec t. Regardless o f con tractor att endance, minutes o f the meet ing s ho uld be ke pt by the team 's d esignate anti Se nt to al l contractors on the bid list the day aft er the meeting.The min ute s of tile me eting can serve as a pre -bid adde nda if it is so d esign at ed . Whichever procedure is used shou ld be spec ified in the biddi ng docu me nts. Contractor att endan ce a t the pre- bid mee ting sh oul d be recorded by the Cr-.1. The reasons why a co nt ractor did not atten d the meet ing co uld be importa nt a nd should be no te d in the co nt racto r's bid-list file. If a co ntrac tor hJS lost in teres t in bid din g. the C r..1 sho uld know this as soon as possible, . Af ter the pre- bid meet ing. and the issu ing of any pre -bid add enda. the ne xt critcria for success is the deg ree of com pe tition in ea ch work -sco pe whe n bids nrc recei ved . TIle CM shou ld make e very effort 10 kee p comrnc tors int e rested a nti primed to submit a proposal.

c~~~r:~~o~:

22.3.5

pl~n ro~ms,

Pri nting an d Distr ibu ting Bid din g Documen t s TIle resp onsibili ty ch art covered in Cha p te r 16, Pr oject l\'lan;.lgemC l1,t, sho uld clarify how pri nting a nd distrib ution will be han dled . Lon g before the project r~aches the s tage where these activities ar e sc hed u led , the pr ocess will hav e been decided upon and re sponsibili ties assigned . . Th e ha ndling of bidding d ocument deposits is worth y o f com me nt. D.oc ument de posits sho uld be the rul e rathe r than the exce p tio n. ~lthou gh documenl ~ .wlIl ~e distributcd 10 tr ade con trac tor s wh o ar c no t used to ha ving dOCUI1ll.:nIS.of ~ h l.: l r 0 \\11, and p la n ro om document acce ss is available. it is important. that ea.ch bidding cont ractor has a comple te set of doc um en ts to. cla rify t ~e work o f mterfa cl.n ~ con tra~ (Qrs and to study the ge ne ra l an d specia l condi tion s requ irem ent s of the proJc~t manual. On a eM mul tiple -contract project , trade con tractors a:c pnmc co~tractors. n ~t subcon tractors. On public sector pr oj ec ts, their propo sal Will be submitte d once III o pen co mpetitio n with o the r contractors bidding. the sa me. work-sco~e(s). They mu st co nfo rm to th e In struct ions to Bi ddi ng 1O be con sid er ed a Vi abl e lo w bidder" . D ocuments sho uld be ob taine d o nly from rhe C l\.·J o r AlE . Ca sh deposit s sho uld no t be permitted. Document s should on ly be rel eased upon receipt of a chc:-k dra\\~n o n th e accou n t o f the b idd ing contract or in favor o f the owne r. All deposit che cks should be kept o n file by the d ocu ment distr ih ut or. ~Ill d retu rn ed t.o th e con tractor wh en the document s ar e returned i ll rei ssua ble cOIH.lHI Ol1. Th e d eposit am ou nt should not exce ed the actual reproduct ion cos t.

Se ts o f Bid Do cu me n t Unl ess the proje ct is fast-trucked o r phased , it is h ighly rec o mm ended th at a comp le te se t of documents be provided to eve ry bidding contracto r. Se pa rati ng the doc ument s to match wor k-scopes o r groups of work -scop es exposes the credi bility o f the biddi ng p rocess to un necessar y risk . It also involves con side rab le ex tra effort by the AlE and

349

e M, if the se paratio ns nrc to be complete ,:,·ith ou l errors and omission s tha t could cre• . (h a te pro blems whe n the doc ume nts a rc put II1t,O ~se . . Tr ading pri ntin g. distribution and admi nistru uo n costs .r~r do cument S~t5 t ' : p rov ide un iform in formatio n to co ntr ac to rs and more co mpetitive proposals) IS p urel}

work-scopes dealing with bringing the building o ut of the grou nd (such as demoliti on. excavation. site utilities, road s. parking. drainage footings. fou ndations. ground SIHbs,

22.3.4

Bidd ing and Bidder Lists

I

I

II

__________ _ _ _1L.--

22.3.6

Sub m it t ing Pro p o sa ls Contrary to th e traditional way in whi ch trade contractors offer propo~als to GC contract or s. dir ect bidding by tr ade con tr actor s demands th e sa ~e form.ahty ~s wh en GC co n tracto rs submi t bid s to owners. Th e nU01~er o~ bid s bein g .rec~ I~'.C ? IS .so great!; inc reased that special prepara tion s arc required If pr oposal sub missio n IS to be

_

Sectio n 22 .3 350

Chapte r 2 2

[Proposal D ue:

Pr oposal Form Submit Prcpcs alTc c (O wner)

For:

,

= = = = = = = = =

I' roposal Eectcs ed

Dc Nc t Opee

(Project) (CM)

Submitte d b)~ [Co ntrac tor}

Project name; BiJder 'sname:

Did Divisiorc(s) Auachcd

Con tract DtJCl ' mbn! ~ We have read and understand the Con tract Documents. incluJ ing the Instructions 10 Bidders.Advertisement Spec ial a~d.S.upplemenIOl ry Cond itions, I'roro~;ll Sec tion, General Cond itions, Technical Specific ation s and the Bid • . Dl\'lslOn(s) covering the work required in this proposal. '

Constryctjon Mao;>go:m>:.nl We u ndc fSt3 n~ the ~on st r uc t i lln M.a n a ~c.r ·s function OIS described and re ferred to throug hout the Cont ract ~OC' ume n ts. we realize rhat each Rid Division Con[rOICIOr is in Iacr a prime con tract or and nut a subcontracto r workLO ~ throu gh 3 General Con tracto r.

_

0

' '

credible an d orde rly pro cedure. If the en tire project is to be bid at one lett ing. 175 to 200 pr oposals may be received . It is rcccru rncndcd that work -sco pe proposal form s (see fi gure 22.3) be distributcd to co ntr actors by the CM. se parate from distr ibu tio n of the drawings and project rnanual.It is suggeste d that a special envelope (scc Figure 22.4. page 351) be provided to contr actors that will gua rantee the ide ntificat ion of the work -scop efs) proposal(s) enclosed and that e nvelopes only be made avai lab le to con trac tor s on the bidde rs list. Proposal forms consist of two part s: a page similar to Figure 22.3 which covers all proposals. and an attached Did D ivisio n page(s) tha t precisely itera tes the Bid Division Descript ion a nd includes spaces whe re cont ractors can enter their dollar proposal. signat ure . and any othe r inform ation the tea m deems necessary on a Bid D ivision basis" All infor mation on each bidd er's prop osal for m that can be pre-entered by the CM should be pre-ente red to avoid e rrors and misint erp re tations. Proposals should be custom assemb led by the e M for eac h con tract or on the hid list an d reflect only those Divisi on s the bidd er has prearran ged with the C~ I to bid .

Pivi>jon R, spoosih:ljly

w e r~ cogn i2e .Ihat the scope or the wo rk within Bid Divisions rep eesent s J construction unlt tha t is not necessant restricted to smgle: trade a.nd our proposal includes the work of all trades re qu ired 10 rully and successrU~ I~ ~om plc: tc all of the wor k required In the Bid Dwision(s) we han: b id. We ha ve included all wor k stated in rh B.W DJYlHOnCslPmM a!s 3!13Ch.;d hqCl o . e

pcrrorma~ce

22.3 .7

Th e Owne r reserve s the righ t 10 accept o r reject an)' and all proposa ls with or without cause. Nam e or Bidder A ddr ess (Signdturc:)

Rec eiving/Op ening Bids Th e increa sed number of bidders o n mu ttiple-comract projects also requires changes in the tradi tio nal way of receiving proposals. W heth er the project is phased or not. prepa ration s must be rnndc to accommoda te a la rge num ber of proposals. On fasttrack proje cts, the majo r bid pac kage will include 20 to 30 work -scope divisions a nd 30 to 45 proposals. On non-pha sed pr oje cts, the num ber of prop osals could be four times

Altrccmrnl 11,; p r~po~al . if acCc('pted by the O wner . ....'ilI be used as the basis fo r a con trac t di rec tly .....ith the Owner There fore the "On erngne agree s) to accept a co ntract for the work co vcrc d by the proPOS-OIl. in accordance with the Contract ' OC'umcnts.. •

I

(Type: or Prin t) Da te

I I

J

_

FIGURE 22 .4 Th e back of II typical r fll pl )"~oI 1 subnuual envelope .

We ack nowledge receipt of A dde nda __, __, __, __, __' __' __' _ _ '

FIGURE 22.3 A Iypical Proposal Form for A gency- C j.I Mult iple Con tract Didding.

'

Com bine d deduct en closed ; (circle: one) YES NO

&WJ:nd.ii

By

_

'- -' ', • '- -, '--' '- - , '-- , - -' ,- '--' '--, '--' '- -' '- -' - -

w ork-Sc ope Proposal(s) enclosed :

Pho ne: __' __-_ _

TIt le

351

tenvelape flap }

(NE)

Rjd

Bidd ing a n d Bidder li sts

M u lt iple Bidd ing and Co n t ra ct in g

1

as grea t. When rece iving mult iple bids, a single bid date and time is custo mary but not neeessary, even on project s that arc not fast- tracked . Bids could be received on different days an d times. for whatever reason . Th e only requirement is that all bids for work scopes designat ed to be opened at a specific Lime must be opened and read a t that time. 111is is usually mand atory on public sector projects and is good CM practice on private sector project s. T he re is an excepti on La this require ment .If the proposal en velope is marked that more tha n one work-scope proposa l is en closed . and if YES is circled on the combined

Sectio n 22.4

3 52

Chap ter 22

22.4

POST·BID MEETINGS The techni cal aspec ts of the p ro posals be ing con sidere d shou ld be checked at p~st -bid mcctincs fo r compl ete ness and acc uracy. Ea ch propo sal sho uld be compared w~th the work -s~opc descript ion and the C l\!'s con struct ion estima te. The C~~ 's es timates should no t be co nside red target s for bid der s to shoo t for . bu t they nrc a big hel p when revie wing dollar proposals for error s and o missio ns. . lhi~ is a u niq ue exercise th at can on ly hap pen o n.a CM mu i llplc-contr~ c.t ?roject. It con firms th e integrity o f the lo w qualified pro posal 10 each work -scO~t: d l ~ l slOn . ~f .a sign ifican t var ia nce occurs bet ween the Cl\ l estima te ~nd the contractor ~ csttma tc. u ts a signal that one of the two co n tai ns an e rror in q uantity. work-sco pe , o r judgment. Th e '. . possibility th ai an ari lhmct ica lmist ake ca used the dif ference e.:wits as wel ~ . O n pu blic sec tor projects. it is usually mandato ry t hat bidde rs pro\' ld~ bid scc~ ­ rity-most commonly a suret y bo nd ( Ch apte r 19, R isk Manage ment]. O n pnva tc P~oJ ­ cc ts, bo nds arc prov ided ,II the disc re tion o f the owner. Th e hond of fers rrotcC(I~n fro m loss by the owner in the eve nt a co ntracto r re fuses or for so me o ther reason Will no t or canno t enter into the co ntract. . TIle ways in which bidd ing errors occ ur emu arc cor recte d vary wl~el )'. Th ey co uld be a judgme nt e rro r, an omission, o r an uritluuc ricul mistakc- In th e ~ubh~ seclOr: r~solv­ inc bid ding errors is some times dic tate d b y rule or statute; in the pnv ate sector . u IS not In':>bo th sec tors. t he final resolutio n is usua lly in the ha nds of the o wner a nd lega l ~ou nsel. Fo r the be ne fit o f the p rojec t, it is ad visable in all instances tha t owner s reje':l low bids that con tai n significa nt e rro rs o f allY kind OI S lon g as t h ~ con tr~ctO r ca~ eX ~I~IO. th e error and agr ees to the reject ion . If th e co ntracto r s U PP~ I~d ;1 bid .securlty, It IS suggeste d that the o wne r 12r~~soll ec [ i o n unless i l~ su ~stan tl
Propo sal Re vie w As bids a rc o pe ned and re ad. de signated tea m pe rsons sh ould be checking bids pr evio usly opened to de te r mine if they are complete and that all req uired info rma tion has been included. Thi s shou ld be done sim ult aneously at a ncar location. If bidde rs want to be presen t while [his is che cking is being done, they sh ould be accommodated. The apparent Jaw bidders are really no t iden tified until their proposa ls have been deemed in c o ~forl11 a ncc . Trad itio nal checking is all th at is req uire d.

22.3.9

353

itb ,I1C C M 's work-scope estimates. If qualitlcat ion forms were posa I as co mpa re d WI " f I . s ub mi tted with proposals.fhcsc sho uld be rcvicweu: 11.1 th~ pflv~te sec to r. I '10 unta ry alte rnates have bee n submit ted. they should be preliminarily revie wed . . Th e CM 's revic w will de te rm ine if there is a need to recommend a post-bl~ con ference with certain bidd ers to clarify any problem~ an d ~ith .appare nt low ~Idders that were not subjected to qualification pr ocedu res. B ld. ve n ~ca ~lOn and evalua tion are impo rtant pa rts of co mpe titive mu lti ple bidding. At th is point I ~ th e CM p roce ss, the p roject team is sea rch ing for d uti ful co nt racto rs for the cons truction team.

bid ded uct question , tha t envelope sho uld no t be opened until the last of the work scopes listed on the e nvelo pe is scheduled to be ope ned . If there is more [han one work-scop e proposal enclosed. and NO is circled, the e nvelo pe should be ope ned whe n th e first wor k-scope pr oposal is sched ule d 10 be o pe ned. but o nly th at prop osal sho uld be read. Th e rem ainin g work-scope pr opo sals can be read when their tu rn co mes up. Figu re 22.4 shows the back of a typical pr op osal enve lope .To mainta in cont ro l o f the bidding process and keep track of the bidder list . all the infor mat io n o n both front and back should be filled in by the e M , no t by the cont ractor. It is best if the color of the envelope is vivid (pe rhaps red o r orange ) to pr o vide fast identif icat ion. TIle fro nt of the envelope should be used no rmally, sho wing th e owner's name and add ress and the bidde r's return add ress. Th e sca led env elope ma y be hand-del ive red or sent If the pr oposal is sen I. it should be encl osed in an other env elop e supplied by th e bidding co ntractor. Th e o pe ning of bids sh ould be spac ed and gro up ed to p reclude the need for bid de rs to be prese nt for the e nt ire length o f the pr oceedings.A ssuming each bid requires app ro ximately two minut es to ope n, read and reco rd , and tha t each work-scope d ivision will yield th ree to live proposals, ab o ut seven and a hal f work-scope div isions can be co mfort ably process ed in an ho ur. TIle sched ule for op eni ng bids shou ld take this int o conside ra tio n and adv ise co nt racto rs acco rdingly. A sing le-p has e proj ect, with fifty divisio ns o f work . co uld co ns ume an ent ire d ay LO ope n all bids. U nless a bid der is biddin g the entire projec t, wh ich is an availab le option. pr esen ce at nil wo rk-scope o penings is a waste o f time. If bidders k no w whe n their proposals will be read , it will save them a 101of time (e xperience has sh ow n th at they app reciate th is}, lim e docs not pe rmit read ing all info rmation: all tha t can be accomplished IS readi ng the pe rtine nt num be rs into the record. At pu blic op enings, this p rocedure ma y be questione d and time will have to be all owed to re ad all o f the informati on requested o n the pro posa l fo rru.This process will take long er and arrangem en ts ma de 10 accommodate the requ ire me nts o f each bidding situa tion . One way 10 shor te n the time required for op ening and reading p rop osals is to p rocess grou ps of wo rk divisio ns simul tnncu usly, All this requi res is d uplicate tea m staffing to cover IWO or th ree locations at the sa me lim e. It take s a while 10 grasp a ll of th e possibilities co nnect ed with mu ltiple biddin g. A lthough it is a lengthy process. if microma naged it can be exec ute d \v·ithou t co nfusio n. 22.3.8

Post-Bid M eet ings

M ultiple Bid d ing and Co ntrclct ing

p rospec t of ea r ning a just pr ofit.

22.4. 1 Awa rd Paperwo rk W hen post-bid inte rviews arc co ncluded anti awa rd reco mmend ati ons have . been mad e bv th e eM 10 the A l E and the. A l E to the ow ne r, dis tribution and co llec t.lon of doc ume nts can begin. Th e exac t steps to accom plis h this should be fou nd 10 the

Aw ard Re comme nd ati on s A rter bids ha ve bee n received a nd reviewed , the CM sho uld recommend bidders for awa rd to the AlE . Th e CM 's input sho uld incl ude an assessm ent of q ualifica tio ns. a de ter minat ion o f pro posa l co mp leteness, and a curso ry eval ua tio n o f th e do lla r pro-

Respon sibility Cha rt .

.-L ._

_

354

Chapter 22

Sectio n 22 .7

Multiple Bidding and Contracting

Usually the C \ I asse mb les comple ted se ts of contract d ocuments. gat hers required submittals from contrac tor s, insuran ce cer tificates o r copi es of poli cies, Schedules of value s. tabor/mat erial and performance bonds, and other s ubm itt als thnt arc required o r determ ined necessary
22.5

Multiple Contractin g Econom ics

35 5

allv be swiftly acco mplish ed. Con tra cto rs who d utifully perform can be d uly compensated.contrac tors who do no t can be appropriately d ealt with . Th e ac t ivities o f co n tracto rs ar c schedu led and coordin ate d by a competent full-time field per so n \\ ho has the same goa l as the o wner-t he comple t ion of the pro ject with in budget , o n sched ule, and in co nfor mance with the co ntracto r' s con tract fo r co ns truc tio n.

22.6

CONTRACT DOCUMENTS

Th e standard co n trac t do cuments tha t have se rved the G C system fo r many years obviously ca nnot se rve th e CM system without consi ~e rablc c~ange, To u nde rs ta nd wha t these changes sho uld be and why they must be included IS to und er s tand CM multiple contracting . _ . TIle best approach to understanding is to co mpa.re Cl..1 muiliple-co?tractmg documen! pr ovisio ns to the provision s in documen ts used 111 general comracung (the syste m bes t un der stood by con struction industry parti cip ant s. inclu din g o wners). Alth ough G C document s de pend a gre at dea l 0 11 p recedent pr acucc s, CM do cum ent s ca ~ not. In the early day s o f Crvl, gen e ra l cond ition d ocument s were not available fo r CM projects. Addi tio na l and substitu te informati on had to be provided in the su pplementa ry and spec ial co nd itions to the gene ral c? nditions o ftSJS~?nt~ac~ doc ume nts to erea te CM con trac t documen ts. One pra ctice used to proa bidding contractors to thoroughly read the new materia l was to give it the heading " Proposal Section," a titl e that was guaranteed to a ttrac t close attention . 111e Prop osal Secti on in A pp en d ix D provides example pr ovisions uscd to con ve rt standa rd ge neral condition document s for GC contracting int o eM gene ral condition docum ents p rio r to 1975. In that year, sta nda rd C~ l contract documents were issued by two of the major con st ruction indust ry grou ps in the Uni ted Sla tes. O ther ind ustry groups ha ve followed su it, p rov iding easy access to the CM syste m in today's cons truc tion mar ket place. Howe ver . when using any set of sta nd ard co ntrac t docum ent s, ca re sho uld be taken to make sure they convey the exact requi rem ent s of the owne r. Chapte r 11, Co ntract Manage ment. ex pands o n thi s advice.

ON·SITE COORDINATION

TIll: CM has the re sponsibility to coo rdin ate trad e contra ctors o n site. TIle major difference be lween th e GC und CM con tractor coordi nat ion is tha t the C i'o l is required by law to first look after the ow ne r's best interest and th en his own . As an lndependent contra ctor, the GC is allowed by la w to look after his o wn best interests before those of the o wne r, p ro viding the GC stays within th e terms of th e con tra ct for con struction. The eM mus t have the speci fic authority to coo rdinate th e co nt rac tors in th e field.This authority must be clearly sta ted in the contracts be twee n the own er and ea ch contractor and sho uld be s tresse d at p re-bid and post-b id meet ings. It is the Ci\r s responsibility to see tha i ade quate co mma nd ing language is included in the co ntracts. Exactly ho w this is to be d o ne sh o uld be part o f th e CM 's internal con trac t manage men t plan. Chapter II , Con trac t Man agement , provi des insight to coo rd inat ing co ntra ctor s d urin g con str uctio n.

22.5 ,1 Direct Relationships The same tr ade contractors that provide subcontractor se rvices to ge ne ra l con trac to rs on GC projects pr ovide prime contractor services to the owner o n a Cfvl project. Th e contractua l relat ion ship between own er a nd each cont ract or is di rect. 111is is bo th he lpfu l and co n ven ie nt to bot h pa rties duri ng the course of th e work. If a pr oblem ari ses with a cont ractor duri ng the proj ect , the full impact o f a d irect contract ca n be used to effect sol ution, In e ssence, the owne r has the same provision s in the co ntrac t wit h each trade contractor o n a C~1 p roject th at the ovvner wou ld have with the sing le gener al co nt racto r on a GC pr oject. w arr anties and guarantees provided by trad e co ntracto rs a rc directly admini ster cd . Perfor mance and labor/ma terial bo nds p rot ect th e owner if a tra de co ntr actor default s, Ea ch trade co nt racto r's liab ility and property damage ins ura nce protects th e owner as an additionally insured. M on th ty progre ss pa yments ar c ma de dir ectly to con trac to rs entitled to them . The rep lacem ent of a trade contractor fo r cau se ca ll usu -

22.7

MUlTIPLE CONTRACTING ECONOMICS

A n o riginal purpose of CM was to redu ce overall proj ect COSIS by improv ing the projcct-delivcrv process; by perm itti ng greater o wne r involveme nt, more con trac ting options, and a high er leve l of managem ent during nil ph ases of the pro ject. Red ucing co ntract costs through the multiple bidding and co ntracting process surfaced as an ancillary benefit after the system was in usc. Th e co st compari son in Figure 22 .6 o n page 358, between a single contract GC approach and the multiple contract CM a pproac h to the same proje ct, d emon strates how favo rab le eco no mics ar e e xtra ct ed fro m a mult iple bid C ~t projec t. Th e data in Figure 22.5 sup po r t the ba sis for th e cost red uct ion claim. . To p rovide credibility to the comparison , conse rvative value s have been used 111 bo th calculations. Contractor ove rhead and profit ( Items III and IV) to tal $610.500 o n

1

35 6

Chapter 22

Section 22.7

Multiple Bidd ing and Cont racting BiJs Received

Project I . Mult i.l' urpo..,; Building 2. Ham son Eleme ntar}' Sch oo l

3. Forest Arca Schools 4_ Kalkaska Elementary School S. O tsego City nuil dmg 6. Munising Elementary School j . Harbor Springs I-hgh School 8. Rowan County Hit:h School

CM

Location

GC

... Dirt

15.2% 13,"'" 14.3% 27.1"0 26.5% 29.9"0

Cad ill.IC. !'oil

265.7{).l

306.000

Port Huron,MI

4~{).O26

417.4W

Fife Lakc. Ml

1.622,463

Kalkaska.MI

726,223 117 ,44)

Olscgo. MI

Munising.MI Harbor Spring, MI Morehead. KY

1.854,(0) 927,350 224.20~

616.0183 698,.l75 3,603,.l64

801,036 1,118,435 4,35:!,OOO

$8,126.181

S10,061,323

Difference:

S 1,935,0·12 S10,061,3:!3

FIGURE 22.5

61.1%

2fl.S'rD

... 19.2%

C:-' l Contract Costs v~ Ge neral Ccmracr CO~{s (d;lI:1 recorded inthe puhlic l ccord).

357

The mfor matio n tab ulat ed in Figu re 22.5 was gathered during the late 1970s and early 198LJ$ in Michigan a nd Ken tucky. Th e projec ts listed ar e all public sector projects whe re p re-qualificati on h as no t pe rmitt ed and any con tra cto r who wa nted to could b id . Bid s we re o pe ned an d re ad in public. In cuch casco 3 gene ral cont ractor d ecided to subm it a co m b ined pro posal for sev eral or all d ivisio ns of wo rk.The b idd ing process specifically allowed this to take place. Ge ne ral co n tracto rs su bmitted se pa ra te b ids for each division in which th ey wer e int erest ed und tied them all toge ther as a pac kage by pro viding a co mbined d ed uct if awarded all in their packa ge. So nic additional co mme n ts pert aining tc Figu re 22.6 arc liste d below. I tem IA -C M

lB-e M (I)

I C- C ~ !

(OI l

I

au $11,000,000 p roject ; a new money retur n o f 5 h % . 1l1C con tingency {Item V) is no r o nly a co nse rvative 1% , it is used in bo th models and do es not affect the co mpariso n exce p t in the valu e of the labo r and mate rial and performance bonds. Th e re arc simi lar tr ad e-offs in Su per vision an d Fie ld Offi ce Expe nse (Item IIA ) a nd Contrac ting Ove rhead (I te m II I). Th ese amounts to ta lling S568.250 a re car ried .\ S CM costs of se rvices and project o ver hea d ( Ite m VIlA ). The d iffere nce of 59 1,750 ( Ite m VIH 3) is co nvenie n tly tra nslat ed into eM profi t and ove rhead simp ly to round o u t a co nser vati ve, ass ume d CM lump sum fee for the project o f $660,000. Th e proje ct valu e d iffer ent ial ( Ite m IX ) fa lls in the ra nge of the 5% cost c ffcctiveness assum ption used to ca lculate the C M contract cost s in Items IB, C S: D. A 5 % red uct ion in co n!ract cd costs is co nserva tive based o n th e p ubl ic record s in Figu re 22.5. No te tha i tile bo nd p re miu m (It em VIn) is based o n the co mbined valu e of m ultip le co n tracts ns adjus ted fo r the higher premiu m ra te cha rged fo r smaller con tract values. TIle value o f the mu ltiple-cont ract bo nd is $9"B9,430 ( Irern I eM co lu mn plu s Item VI C M colu mn) and th e va lue o f th e singlc-coru rac t bond $ 11.008.658 [ Item VIII G C column ). Althou gh the S111.930 p remium for mul tlplc-ccn tract bond ing is high er than the 565.658 for a single -con tract bond, it is common fo r sure ties 10 req u ire genera l conrractors to bo nd subcontract ors. Ca lled doub le bo ndin g, this practice prov ide s no more protectio n for the owne r eve n though the ow ne r pays the premi ums. If the GC bond cd all subco nt ractors, single- contract bo ndi ng costs would inc rease b)' S140.250. This wou ld make Cl\t m ultiple -contrac t bonding $93,978 1c::ss expensive than single -contract bon di ng a nd increase th e project valu e d iffer ent ial to 6 % . 111e data in Figure 22.5 clea rly show tha t m ult iple cont racting with de fined wor kscopes prod uces co nside rably mart: than 5% sav ings in ba re con tra ctin g costs when com pet itively bid against ge ne ra l co ntrac to rs. Ev en if the dat a a rc not accepted , the project value of the model st ill shows a savings o f $22 1,728 less the co ntinge ncy of $97500 ( Itcm V B) If it is expended.This is a tt ributed to the e liminat ion o f p ro fit O il profi t alone .

Multip le Contract ing Eco no m ics

\D -G! {u} II A -C M (p) IIB ·CM lII A ·CM (q) lIl Il -CM (r)

Iv-eM v-eM V IA -CM V IA -G C

VIU-CM V IB -G C

V II -C M ( u)

Com me nt D oes not ap ply (N.A .): th is wor k co m mon ly do ne by a G C is co mpe titivel y b id in AC M. Includ es lA -G C $1.500.000 (b) a nti I£l-G C $4 ,450,000 (c) . Th e to tal $5,950 ,000 is red uced 5% ba sed on th e result s o f m ultiple b iddi ng dem o nst ra ted in Figu re 22.5. Redu ced )l'lo by se pa ra ting the rncchar ucnl work into 5 to 7 se parat e ly bid wo rk-sco pe s. No change from JD -G C (e) beca use electrical wor k-scope separatio ns ere limited . CM field o ffice expe nses arc pa rt of the C ~ I fee VIIA -C M (p, q). CM con st ruction s upport cos ts are the eq uiva le nt o f GC sup po rt costs. CM co n tract ad min istra tio n cos ts are part of the eM fee V IIACM (p. q). CM general ov erhe ad cost s ar e pa rt of the CM fee [VlI B-CM(v)). Contracting pr o fit is N.A .The CM work s fo r the fee s ta led in VII CM . 111C con tigc ncy woul d be approximatel y th e same. T he co ntinge ncy is paid to the GC whe the r used o r not.Th e CM cc ntinge ncy belongs to the o wne r and o nly costs incur red arc p aid .

ac

N.A . {The re is no tota l projec t bond o n a n ACM mult ip le pri me pr oject.) Sin gle con tract bond fcc. Th e bo nde d a mou nt is $11.008,658, the tot al o f r-G C(a) + lI -G C( f) + lII -G C(g) + IV-GC( h) + V-G C(i) + V I-GC(j ). M ultiple contract bon d fee, Th e bonded amount is 59.439,430, the tot al o f r-CM (k) + VI B-CM. Assum ed N.A. It is comm on to includ e the bonding o f G C subcon tracto rs which wo uld prod uce a sizeable en try h er e. Howeve r. this cos t mo del ass umes ther e will be no subcontracto r bond ing. TIle $660,000 fcc for this pr oject includes
I

:(

"':58

Chapter 22

\

Cosl or Construction General Work /'erfo rmeu hy GC Gcn~ral \\lnrk Subcom rnctcd by GC . C Mechanical Wurl.. Subcontracted by GC o Electrical Worl.: Subcontracted by GC

"U

II

III

265,000

Comracring Overhea d

3':8,150 (g)

N.A .

Genera l O"t.:rhC:lc! COSh

COnlr.lctmg rlOli l

N.A .

(p)

261.250 (ll)

N.A .

76.0c0

N.A .

75,000 111.250

N.A. N.A.

97.500 (i)

(oj 1.0%

97,500

N.A .

(:I) 1.0%

N. I\ .

97.500

I It.930 ( I)

65,65S N.,\

N.A . III .'HO

(P,V,) 6 %

N.A .

660.000(,)

A Cost or Services and Project Overhea d 0 CM's Profit nod Gcner al 0 .1 1. (eM COSI.p .q.r ) 16%

N..-\.

568.250 (p.q )

:-:.A .

91.750 (v)

Constru.:tion :-'1 ;w.,,;I.·r's Fcc (I:\t.)

Tu tat.\

(IIJ.g,h.i) 0.6% (k) 1.7%

50 II,OOJoi,c'i.'\:i

Dif!crcn:i31 (- 5"10 Project VJlill:)

perfo rm them for. Unl ike con tracto rs. who
,I

23.1 MARK ETING AND SALES Allh ough o ften used interchangeably, ma rketing and sale s are two different activities. Mark eting is a prerequ isite of sales. Market ing ca n be defined as de termining what to sell, how much to sell. and who 10 sell [0 ; it is a science. Sales is the series of acts that carry out marketing conclusions; it is an ar t. Neithe r one is less import ant than the othe r, and although they closely interact. each requires its own requisite talents, A person who excels in one ofte n docs not excel in the other. In the case of CM. experience h:1S shown that the selling of services presents the greatest challe nge. A well-concei ved mark et ing plan can be developed in-house by comrnince as an annual or biannual activity, chaired by ::1 person who und erstands the fundamentals and purpose of marke ting. On the oth er hand. sa les requ ires individuals with abilities nOI usually found in a cons truct ion-o rien ted organ izatio n. SdJing 0 v1 services requires a talent as well :IS construction managemen t skills and knowledge . a 1;lIc111 that ultimately de termines the success of the CM firm'ssales stra tegy. Of cou rse. the selling of CM service is not solely the responsi bility of a talented salesperson. 111e marke ting plan mus t correctly target the type. size. and location of poten tial projects, and the se rvices being sold must have demonstrative success and obvious ~ ~L~ ?ll,i,Ly'oSuccess is an at tribut e tha t can only be acqu ired through the past pcrformance of die eM firm. Salability of services is depende nt on the flcxibilitv and clarity of the mana gemen t for mal used by the e M finn . TIle salespe rson must have a well developed and dependable se rvice 10 sen.

97.500 (oi)

65,65S UJ

A Siugle L s: ~I and Performance B Muh ipll: L 5: :-'1 and Performance

Marketing and Sales Proficiency in marketing and sales is esse ntial to the success of any construction man-

N A. (q) :-JA (,)

41.250 (q)

Cb) 5.0% (e) 2.5%

Bends

2 3

agcmcnt firm. In simple terms. you cannot provide services unt il you have a client to

J07,l )''Ill (t)

(J.c) 2.0'X.

Construction COllli;\J,:I.·l1;;Y

"

IX

(c,d,c) 0.5% (:1.l) 3.0%

CH APT ER

1.JOO,ooo (n)

220.000 (p) 165.000

Comracrcr's Risk B Owner's R i~\;

VIII

N." , 5.652,500(I) 2.375,000 (m)

A Supervision and Field Office Expense B Construction Support Items

C On GC Work Subcom racrcc

VII

15 00,000 (11)

4,-l50,cXXl (e) 2,500,000 (d) 1.300,000 (ej

165.000

011 Electrical ;lIlJ :"k c h;ll licOI I "B On GCWOII.: with Own Forces

V,

S 9,327500 (k)

485,000(f)

A Con tr:lct/\dminislra\ion

,v

S 9,750.llOO (,)

Ce nnrccricn-Rela tcd Costs

u IV

MultiplceM Cont racts

Single GC Coctmct

I'rojecl Value: -= 5oll,OOO.OOJ (P.V.)

hem

,

Multiple Bidding and Contracting

$10.·161,9) 0

(-) 5~6,7211

FIGURE 22.6 Singl.: GC Co ntract vs, Multipk C,\I Con tract COSt !\f odd.

..

UA- CM(p) a nd j UA- CM(q ) togeth er. VU B·CM (v) [$91,750] is , derived numbe r de ter mined by sub tracting S568,250 from the lump sum CM fcc of S660.000. 1l1crcforc . amounts p, q and v arc no t typica 1sub-sums of a bonafide C.~f Ice.

23.1.1

eM Personnel Invol vem en t

Although it may seem contra ry to wha t has already been said. all persons in the C ~t firm should consider themselves salespersons while pe rforming eM services. Tne 359

360

Chapter 23

Sect io n 23.2

Ma rke tin q and Sales

23.2.2 MAR KETING PLAN S

23.2. 1

I

Using Th e Inf o rma t ion TIle next-to-last step is to correlat e the de mogra ph ic and forecast informal io n with th e meas u red ability o f the firm. Th is will provide insight to new business op po rt u nities availa ble LO the CM firm, as it is curren tly st affed and orient ed, and will indica te or ganizationa l an d philosop hica l changes th at would have to be made to compete for clie nts on a broade r basis or wider geographic area . CM firms sh ould usc the re sults to det ermine II ra tio nalized dire cti o n for th e fu ture. Some will:

A ma rke ting plan sh ould be a cand id , objective staterucut of a firm's practical goats anti ho w they arc to he attain ed . It is an honest repre sentat ion of a firm's capabilities; it focuses onl y 0 11 the realities o f the ma rketpl ace. and it is base d o n facts, not speculation. Wh en prop e rly developed und prudent ly followed . marketing plans provide coherent direction for future bu siness de ....elopm ent and c rganizntional stab ility. When d on e superficially, they can mislead and adve rsely affe ct the econ omi c fu ture o f the CM firm. Develo ping. CM mar ket ing plans in-house by committee ap pear s to be the currently po pul ar app roach. an d th ere see ms to be two re ason s for this inclination: a misco nce ptio n of the ma r ke ting plan's imp ortance. an d ex pe nse. Th e former is usually a result o f inex peri en ce ; t he latt er. und erstandabl e b ut nO I necessarily p rudent. Con sultan ts a n: avai lable to hel p c~rs devel op a ma rke ting plan. and their se rvices co ns t it u te money well spe nt. Ho wever , e xceptio nal effo rts sho uld be ma de to screen consultant can d idat es. Ct\f is a unique practice withi n a u niq ue indus try, Only co nsu ltant s \vho ha ....e co mpile d good rec ord s de . . elo pin g ma rke ting pla ns for co ns tr uelio n managers shou ld even be con side red . If the plan is 10 be d evel oped in-house. on e person should organize and lead the effor t. It is advi sable for that pe rso n to lea rn as much as poss ible about marketing and marke ting plans. Many bo oks ar c available and se mina rs a rc condu cte d throughout the country. Ho we ver, care shou ld be take n to choose sources that deal with services, not pro ducts.

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D emogr aphic info rma tion sho uld be obtained to identify types. sizes, locat io~s, and o wnership o f projec ts thal use d o r a re using th e CM system. the form s an d van ation s of eM used , and the recept ion eM received o n those projects. The geog raphic area ca nvassed is a n estim at e a t th is time. II should be large r than one that is summarily de em ed comfo rta ble fo r th e firm. .. . . . . . In add ition to cc llecrlna de mogra ph ic informatio n on exrsnng eM use. It IS necessary to forecast the future volume of con struction by type and size and the po tential for the use o f CM in the are a. A qu iring thi s inform at ion is d ifficult with out experience or adv ice; a mark eting co nsu ltan t's se rvices will p ro ve valuable.

image of the firm is projec ted by those who re present the firm. If clients are impressed with the eM personnel with whom they come in contact, their re ferences will ma ke it easier to sell Ci\1services. Addit io nally. all CM pe rso nnel should be aware that marketing and sellin g a rc essential to their firm's success. In performing their duties, they shou ld be conscious of construction marketplace trends and alert to information on future projects. Wh en pe rso nnel realize tha t their fu ture is vested in the fut u re of the eM firm. they q uickl y become pa rt o f new busi ness activity, Their passive bu t impor ta nt co ntribut ions will prov ide focus to (he firm' s marketing a nd sales effo rts.

23 .2

Mar keting Plans

1. limit th e size o f their geogra phi c mark et area 2. have no inte rest in ce rtai n fo rms and variations o f e M 3. show a prefer en ce for pu blic o r p rivate sec to r projects -t con fine th em selves to ce rtain proj ect types and sizes S. expand the ir capacit y 10 captu re II bigger ma rket s hare 6. maintain their current wo rk lo ad level 7. curtai l C xt operations to conce nt ra te o n o the r o ppo rtu nities. 23.2.3

Market ing PIJn De vel o p m e n t In essence. devc lopmc n t requi res collec ting a nd inte rp ret ing informat ion . Knowin g the infor ma tion needed. how and wh er e 10 ge t it, a nd \vha l to do with it a fter it is in hand ob vio usly requ ires cunsldc rab lc market ing kno wled ge. 111C logical initial s tep is 10 det ermine the legitima te st rengths and weaknesses o f the C~ I firm as a business entity and as an or ganizatio n of dive rse ly tale nted individuals. If the plan is 10 be au the ntic. the strengths a nd wea kne sses o f the lirm an d its mem ber s mus t be o bjecti vely es tablished. This step will de te rmine the firm 's co llective capability and its cap acit y to p rovide cred ible C M se rvices to clients. It will ident ify de ficie ncies and whatmight be d one 10 elimi nate them . As well. it will ide n tify projec t type s and sizes th ai mat ch the firm' s ab ility a nd the for ms a nd variation s o f the eM syste m th at cou ld be pr o vid ed o n th ose proje cts.

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The Written Plan

The final and most important st ep s me to formulat e a ma rketing plan , redu ce it to

,1

course of ac tion. and put it into op era tion as soo n as po ssible.These steps should be the direc t responsibility of top manage me nt bec au se the plan may req uire staff changes and wilt require a relat ively lar ge bud get to cover sel ling acti vities. This is esp ecially true if the firm is inst ituting a fo rmal Cl\.l marketing/sales pr ogram for the first time. The Marketing Plan sho uld sta te the fir m's new bu siness go als a nd s tra tegy for ach ieving (hose goa ls for ap pr o ximatel y the next five years. It sho uld be rev iewed and cla rified each year to keep up with cha ngi ng demogra phics. forecasts . and the firm's maturing capabilities.TIle plan sho uld co ncisel y d efine th e ma rke t a reas. proje ct types. projec t sizes, owne rsh ip sectors, an d the se rvices to be o ffe red by th e eM firm .The p~an sho uld name the per so n in ch arge of all sales o r new business act ivities and pr escri be th e gener al proced ures that will be used for selling se rvices. includ ing the extent .an d forma l o f rep ort ing and record keeping. Job desc rip tions sho uld be writt en o r modifi ed to assign respon sibilit ies for sale s activities 10 spe cific personnel. TIle fact that selling is an art rat her than a science requires a certain a mo unt o f flexibili ty in ado p ted procedures. Howeve r. report ing and reco rd-keeping req uire ments

(

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Chapter 23

Section 23.3

Marketing and Sales

should not be flexible . Se lling of C\I ser vices to a clien t may require cons id erable time. sometimes years, making accurate records of past contacts invaluable for cont inuity.

23.3 SELLING CM SE RVICES Pri or [0 the ad ve nt o f C~I , ac tive selling of se rvices ill the co nstruc tion indust ry was essen tially confined to design firms. consultants. and de sign-build contractors. General a nd trade con tractors do pu rsue sales but to a limited exten t compared to the others mentioned . General contractors tha t enter the CM market pla ce sometimes h ave difficulty accepting the fuct that sales is not a part-time job for th ose who happen to have time o n the ir hands, Selling Cl\l se rv ices is not a casual task, nor can it be con sidered overhead. Sell ing is a direct cost of do ing bu siness as a con struction manage r: this reality often takes time to advance from a suggestion to a requiremen t and in the p rocess wastes time and money on less cos tly a lternat ives. As with successful safety a nd q ualit y p ro gram s, top manageme nt must be dedica ted, suppor tive, und ncnvety involved in a firm 's sales effort.The person in charge of sa les sho uld be elevated to the ex ecuti ve level o f the linn if at all pract ical .This is no t a superf icial move for status purposes but a stra tegic bu siness mo ve to en hance the ef fectiveness and productivity of the firm . Sa les should be involved in compa ny man agement decisions by virtue of its vital role.

Appro aches to Selling Se rvices Se lling CM services includes many areas of opportuni ty. The execution of the Marketing Plan shou ld consider th e use of mos t if not all of them. Participation in so me areas is mo re costly tha n in o the rs, b ut the cost of many is absor bed thro ugh the extra efforts o f the firm's execu tive, o pe ra tions, resource. and suppo rt pe rso n ne l an d no t a b urde n on the sales budget. Eac h area of opportuni ty co ntributes to the succ ess of the sal es vent ure ill its own way.A comprehensive list o f the ar ea s foll o ws. I\ l h c r ti s i n ~

Direct mail Trade publications News media Yellow pages Web sites Public rela tion s News re leases Sponsorships Appearance s Award competitions

Conferences/Seminars Participants Exhibitors Pre senters

As sociu tln ns Me m be rs Committees

Officets P ubli cati on s A rticles Tec hn ica l papers

Networking Socia l Pr o fessio nal Community In te rne t Person al con tact s

Cold calls Appointments

23 .3. 2

Selling CMServices

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Firm -W id e Participati o n Of the areas listed above. the designated salesperson mus t be excl usive ly involved in th ree of them: adverti sing. public relat ions. and perso na l contacts. Ad verti sin g and pub lic relat ions will occupy a re lativel y small por tion o f the sa lespe rso n 's tim e. Person al co n tac ts gene rally req uir e mor c time than the sa lesperso n has a vailab le in the n or mal working d ay. 1111: othe r four areas-confe re nccs /scmina rs. associations. net working. a nd publica tions-are tho se where respo ns ibility is assigned to o ther Cl\.t person ne l. a nd their effo rts are guided and coordinated by the salesperson. To accomplish significa nt sa les -rela ted results in these a reas. as many Cxt personnel as possible should be: act ive members of at least one appropriate assoc iation o r organization at a loca l. state, or na tional level. Mem ber ship sta tus will provide opportuni ties to attend meet ings. conferences. and sem inars. writ e articles and papers, networ k with ot he r membe rs. nnd gai n access to all co rne rs of the ma rke tplace. Wh ether the loca l C hambe r of Com merce o r the Na tio na l Socie ty of Pro fessional E ngineers, involvemen t in stru ctu red groups will p recip itat e"inf o rm at ion that will con tr ibute to the C jvl firm' s o ve ra ll sa les e ffo rt.

23.3.3 Adve rtising A lthough advertising is re lative ly expensive. a certain amoun t is necessa ry. The most productive of those mentioned is the Ye llo w Pages. Experience has shown that ma ny owners simply look to the Yello w Pages when seeking eM candidates, Smaller CM firms operating in a wide geographic ma rket area should list a toll-free numbe r in co mmu nity telephone d ire ctori es to facilitate direct access. Direc t mail ad vertis ing sho uld be limited to a co n trolled list o f potentin I clie n ts co mp iled by the sales pe rson. Ex peri enc e h..1S demonstrated that arbitrary and purchased lists nrc no t worth the expe nse o f mailing. T he tex t pr ovided in the mailing sho uld be usable inform at ion that will he o f inte res t 10 the recipie nt (perh ap s a eMnewslett er that covers the d etails o f a speci fic CM respo ns ibility or a CM project case study). Newspaper advert ising s ho uld be restr icted to listings in the tra d itional "congr atulations to the client" pan el when a project is comple ted and occu pied . Expe rience shows tha t few clien ts consult the news media for C:-..t service req uirem ents, Advertising in trade publications p ro vides two func tions, It shows a spirit of cooperation with the orga nization sponsoring the p ublication and maintains the C:-.t firm's name in the minds of the renders. A eM firm s hould demonstrate favo rab le rappo rt whereve r practical. Pub licat ions selec ted shou ld be those th at are part o f the co nst ructio n industry a nd read by po tenti al cl ient groups. web sites ca n be effec ti ve, pr o vidi ng the slte is regularly maint ained and upd at ed . TIle very la rge num ber of sites on th e Inte rne t is cause (Q q ues tio n its ef fec tive ness fo r sma ll Ctv1 firms th at ope rate in lim ited geograph ic areas. H owever. for med ium and lar ge firms operating in wide geographic areas. a we b site ca n enha nce sales.

23.3.4 Public Relat ions Salespersons should review the appropriate media to ascertain the types of news releases (0 publish and when an oppo r tunit y aris es. write and issue a relea se in a concise

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Sect ion 23.3

Marketing and Sates

23.3.6

tio n indu stry. Beco ming an o fficer o f an associ ation or o rga n iza tion is a large ste p up from being a chairpe rso n, E xpos u re to a br oader segment of the co nstruc tion industr y and 10 so me public sec tors is ass ured. mee rs of one associa tio n ha ve access 10 their counter parts in o the r associations and can spread the ir message a nd influence to the local, state. and nat ionalle vels in the p ublic sector. A firm's reputa tion withi n an d beyond the indu stry is exp anded and en hanced, openi ng more do or s for sale s oppo rtu nities. It is rela tively expensive for a firm to su ppor t
o

Conference s a nd Se m in ars As a pa rt.icipant .in a con,fcrence or sem,ina r,a CM firm's rep rese ntat ive will be exposed t~ .a ca pt ive aud ienc e wit h" common interest in th e to pics being discussed . T he Iunction docsn't have to be an esse ntia l le arn ing e xpe rie nce for the pe rson-t he rea son fo r a tle n ~i ng is 10 mingle with o ther confe ree s tha i cou ld bec om e client s. Ho we ver, on ly functions Ihat last mo re tha n a day sho uld be co nsid ered so the re is an o ppo rtu nity for cas ual co ntact dur ing b re aks and evening ho ur s. A n uucnda nce list that ca n be used for direct mail or cold ca ll contacts is usu ally distri bu ted at eve nts. The ult im.,ltc p r ~J u ct i \' c situation a ~ a seminar or co nfere nce is 10 be n presenter and do
365

twel ve a reas of knowled ge arc rep resented in whole o r in pa rt b y a nt: or more o rganizati on s that we lco me membership. It is suggested that all pe rson s a t the C M firm' s execu tive and management levels, as we ll as some from the admin istrative level, maintai n ac tive membe rships in at least onc trad e or professional orga nizat ion . Th e firm shou ld pay all expenses of me mbership, including expenses to attend meet ings. Mo st associations op e rate th ro ugh a committee struc ture. The eM firm should urge and rewa rd person nel who achieve chai rpe rson status in selected or ga nizations. Att aining chairperson stat us ind ica tes the q uality of the perso n's invo lvem ent in the assoc ia tio n's ac tiv ities and assures the firm that time devo ted to the group is well sp en t.The re tur n 10 the eMfirm is incre ased reco gni tion by peer gro ups (and e vidence to pot en tial clie n ts) that the fir m has a vested in ter est in the p rogress of the con struc-

and timely way: Local an d nat ional news med ia an d co nstru ction ind ustry professio nal and I r~ d e med ia should be considered. If nothing else, new s releases keep the firm s na me In front of 3 targe ted audience. Sponsorshi ps I ~ k ~ many forms, from financially backing a local peewee league hockey le,am to P:OVldlOg lunch on the exhibit floor of a conference or funding college ~cholarshlps for ,h igh school studen ts, In addition to providing a material benefit to reciprents, sp onsorships connect the eM firm's name with a positive contribution . As with news releases, the audience sho uld be target ed, Sponsorships are easy to find , so it is up to the s.alesperso n I ~ scle~t ~nly those that best mee t the goals of the ma rket ing pla n. . . Simp ly a lt~nd lOg significant even ts maintains th e visibility of the firm , indi cate s Its Interest, and Imp ro ves its image. Th ese oppo rt u nities can be sched uled to permit o ther per son s in th e or ganization 10 be invo lved and ease t he b urden o n the sa les perso n. Th er e will be times when an of ficer of the firm is better suited to make an app earance, but the sa lespe rso n shou ld con tro l th e lis t. A pp ear a nce oppo rtu nities abo und. T hey range fro m local zo ning board hea rings, wedd ings, and fu nera ls to d inner s hono ring outs ta nding per sons. As many co mpe titions as are appropriate and a vailable should be en tered Part icipa tion alone ca n provide a p ublic rela tio ns benefi t if deftlv hand led. Entrv in award compeut ion s connects the firm's nam e with e xcellen ce. ~ ~ 23.3 ,5

Selling eM Services

23.3 .7

Publicatio ns Well-writ ten. timely art icles abou t co ns truction and eM projects. es pecially in the form o f ca se studies, are usua lly welcomed by ed itors o f co nst ructio n-o rie nted publicatio ns. Sales persons s ho uld stay in co ntac t with the firm's projec ts and identify those that have pub lish ing po te ntial.Ar ticles need not be lo ng: ill fact, they ar e gen era lly mo re accep table if th ey ar e sho rt b ut not bri ef. Th ey sh oul d pr ovide a co mple te acco unt o f the topic a nd be accom panied with ph o tograp hs, if ap pro priate. The salesperson sho uld identify th o se in the eM finn wh o hav e a propen sity fo r writing and e nlis t their aid in p rod ucing arti cles or in writing them them selves. Salesp e rson s sh o uld also target approp riate publicat ions to asce rta in thei r p ubl ishi ng po licies and re q uire me nts. Published art icles co n trib ute 10 the firm's public relati o ns effor ts, R epr ints o f a rticles, ob ta ine d from th e pu blisher, a re excellent handouts to dist ribute to pot entia l clients during d irect-selli ng activities. A rt icles re late facts an d in forma tion ba sed on expe rience rather than research. Th e cred ibility of articles need not be es tablished be yo nd the extent of the info rmat ion prese nted. A r ticles arc subj ec t to o pin ion and criticism but no t 10 the po int where sta te d facts sho uld be challe nged. Techn ical pape rs ar c scho larly d isse rtat ions that pre se nt arguab le co nclusio ns a nd a re based o n resear ch a nd unqu estionable d at a . Statu s as a paper implies th at the info rmation pr ovided is litera l. Papers are subject to review and challen ge by the autho r's peers. Papers req uire scho la rly kno wledge and conside rabl y more effort and tim e to write tha n art icles. TIle majo rit y o f papers ar e theoretical; they are almost

366

Chapter 23

Sect ion 23.5

Market ing and Sales

other reason than to convey the pra ctical aspect s of the eM system on which academia can build.

Networkin g Because eM services a re us ually eng aged thr o ugh a qualification -based selection process tha t is oft en ini tia led withou t prio r adve rtisement, both the presence of the eM firm and its repu ta tio n must be highly visible 10 the right pe opl e at all limes. Networking is hy far the be s t ta ctic to use. Net wo rk ing is establish ing relationships with a wide: but select gro up of ind ivid uals who have a mutua l incli na tio n to assis t each o the r in the pu rsu it of a n indi vid ual's business enterprise (the clich e, "if you sc ratc h my bac k, I'll sc ra tch yours" applies) . Netw orking is a framewo rk of per sons who ha ve mu tua l respect for o ne an oth er by rep ut atio n. previous b usiness dealings, or sim ply ca su al frien ds hi p. The glue that keeps the framework in tact ana functioning is recu rrent person al contact. This can occur at co n ferences and se mina rs: meetin gs o f assoc iations and o rga nizations; com m unity, social and professional funct ion s; via the Intern et . corrcspon(knee and telepho ne; a nd most impressive of all, by one-on -one pe rsonal contacts. Everyone in the firm shou ld mai nta in a ne twork , and the salespe rson shou ld be kep i cu rrent with the s tatus of each .

23.3.9

Personal Contacts A ppro ximately 80% of a salespe rso n's tim e s ho uld be spe nt on the ro ad , contacting potent ial clients pe rsonally and visiting current and past clients,The selling seeds so wn in the other six areas of new busi ness oppo rtu nity arc difficult to cultiva te int o sales, un less face-to -face co nta ct is made . Two types of co ntac ts-s-cold calls and call s made by appointment-s-can be made. Cold call s ar e dr op-in call s wher e no appointment has bee n mad e. The assumption is tha t the party the sa lespe rso n wants to see is in th e office an d has both the ti me and incli nat io n to mee t. Call s rnndc by appo intme nt det e rmin e the trip 's itine rar y. In essence, cold cal ls are subo rdi na te. Pr eparation for sales trips sho uld include me eting with other CM firm pe rsonne l to de termi ne if th ey ha ve received net,vo rk infor ma tio n about potential clients in the salespe rson's assigned area .The lime, effort. and money pUI in to a sales trip warran ts close scru tiny o f the possi bili ties. Regard less o f which type of call is to be mad e, the salespe rso n mu st be prepared to make it as succ essful as possible. As mu ch in formation about the pe rson to be visited and the company he/she represents mu st be uncove red befor e the call takes plac e. Networking may provide so me info rmatio n; a few well- placed ph on e calls could provide morc.

367

Being highl y familiarized with the company and the per son represe nting the compa ny during an initi al con tact could m a~e the d iffer ence b.e twee n a "goo dbye" or a "by the way. the city is planning a ne w facility" or a "I would like to learn more about you r services" response. Pr epar ation for the ca ll is on e of the key s to se llin~ .suc~e~s. . Whether a call was considered a success or not, a follow-up mailing IS rm pe rau ve. It is also an opportunity to contact the person a nd th e company o ne ~o,re time. A let te r o r simple thank you note should be sent within a few days of the VISIt. Th e styl e of the foll ow-up should be congenial, no t aggressive. If imp li~d o r req~es ted at the meeting, additional information 011 the firm and eM should be Included: If not, the salesperson sho uld dete rmi ne wha t material should be included, if any.

exclusively pr odu cts of acade mia, where their wr iting provides promotion credits for author s.Their pr act ical valu e 10 eM practitioners is limited. Technical papers published by e M pe rso n nel contribute little to a firm' s mark et ing effort; art icles an: fa r more effective. H owever, the s tat us o f Clvl as an eme rging professi on sho uld be a rgument e nou gh for eM p ractiti on ers to write papers, if for no

23.3.8

Salespe rsons

23.4

NETWORKING/PROSPECT RECORDS Records o f sales co n tac ts with po te n tia l clie nts sh ould be kept in a com pute rized file. The liles sho uld be kept in a da tabase fo r qu ick access a nd easy upd at ing. If the reco rd s are kep t in a simple format. any pe rson in ibe eM firm that needs in forma tion can access the appropriate file by using the name of the company o r the name of the netwo rk co ntact pe rso n, Firm-wide uctwo rkln g prod uces new infor matio n o n po te ntial clie nts on an uncon trolled basi s. It would be time co nsum ing a nd prob lematic for the salesperson to gath er and ente r 311 in for mat io n recei ved .The refore, personnel actively i n ~'~l ved in t~e firm's ne twork ing ac tivities shou ld be able to upda te thc file on :I provisional baSIS. Provisional informa tion C3 n o nly become part of Ihe prospect's pe r mane nt tile af te r the sa lespe rson has clarified and e nte red it as suc h. . , Records can be used to keep in contact with pr ospects on a consiste nt baSIS. By ente ring co ntact ty pes and the dates co ntac ts arc mad e, the sales~erson can p~ ri od i ­ C31ly scan the file to de termi ne which pro spects to recon tact. Sei ling Ct-.t se rvices to some pro spects ofte n lakes several years-a rela tio nshi p o f tr ust and confidence in the salesperso n and the firm must he establish ed. Ind icating an ong oing interes t through low-key periodic contacts a t app ro pria te int er vals can help create this rapp ort .

23.5 SALESPERSONS Selecting a sa lespe rson for the eM firm is not an easy task. Selling services is no t.the same 3S selling products tha t can be se en . Services arc intangible. and among services tha t are so ld, such as design ser vices. CM se rvices arc more in tangible. w hen architec ts and e nginee rs se ll thei r services, they ca n em ula te the product by providi ng co mp a ra ble visu al ex amp les o f.the ir work .:nrou gh ~llo logra ~I~!i. and visits to completed projects, the A l E's aesthetic and fun ctiona l design capability can be clearly demon strated to pr ospe cts. Al ong with references from past clien ts. ar chitects and engi nee rs can clo sely foll ow selling st ra teg ies used by product sale spe rso ns. The eM se rvice sa lesperson can not use these stra tegies. Alt hough a p icture of a past p rojec t can be sh own. it d oes not demonstrate anyth ing ab out the CM's management ability, exc ept tha t the project was complet ed . If a p ictu re is used , it should se rve 3 S the background for a list of the CM's achievements on the pr oject (i.e., the project

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Chapter 23

Marketing an d Sales

was completed within budget. on lime. with specified quality and no business interruption to the owner). Th e only substantiation of a C \ I firm's ability is references from pa st clients. The salespe rson could provide the p rospect with a handful of endorsements and references but it is doubtful that such an approach \...'o uld lead to a n eventual sale. A C~t salesman must sell him/herself before selling CM services to the prospect. To bring this about requ ires time. patience. and talent. When sea rching for a qualified salesperson. the ques tion that usually arises is whe ther to leach a competent C~1 pe rso n the a rt of selling. or to train n co mpe tent salesperson in the prac tice o f cons truction managem ent In the firs t instance, co mpelen t CM persons arc va luab le to the firm whe n execu ting CM se rvices. To subtract o ne fro m the ope rations ro ster co uld be a proble m, esp ecially if the firm is s mall. Add itiona lly. pe rso ns with the nece ssar y leve l o f CM compe ten ce an: o ften those wit h co llege degree s who will q ues tio n whether se lling cr,..! se rvice s is a n appropria te way to PUI their ed uca tion (Q use, A lt ho ugh the impor tance o f selling eM se rvices is obvious. sta tus as a salesperson (in Spilt! o f the title " Vice Preside nt. Business Developm ent ") does not always meet personal aspir at ions. If the decisio n (0 teach a co mpe tent Ct\-! person the art of se lling is made. ca re mu st be exercised 10 selec t a pe rso n who e xhibits the at tributes o f a good salespe rson : pe rso nality. organization . commun ica tion. optimism, ICn:lCUY and dedicmion. in copio us amo un ts, A person with these a ttribu tes who is already a mem ber of the Clvl linn will very dearl y stand out. O ptimism and tenacity a rc o f signal importance: especially when making co ld calls. salespe rsons expe rience rejection much mo re often thun acceptance. Ho wever . each reje ction ca n be viewed as a step close r 10 a sale. Teach ing a technic all y-comp et ent pe rso n ho w to sell CM se rvices shou ld be lef t to expe rie nced teachers, There arc profess io nal associa tions thnt offe r semi nars to teach se lling techniques and books o n th e su bjec t for those who pre fer th is app roach 10 learning. Becoming J me mbe r of mark eting and sales associatio ns will p rovi de o ppo rtunities to at ten d co nfe ren ces a nd meet with o the r sa lespe rso ns to gai n co urt(k nee and additi o nal kn owledge. Th e person sh ould se lec t media Ih:11 rel at e to selli ng services. not prod ucts. TIle strict tenet 10 follow is that 110 one s hou ld sell C:-. t se rvices witho ut bei ng p roperly pre pa red. A lth o ugh mu ch will be learned from experie nce. a prem at ure sia n could prov e demo rali zin g to the firm as well as to the salespe rso n. Su fficien t mo ne y. tim e. an d ef fort should he budget ed to dev el op a confidently com petent salespe rson be fore exposing he r o r him to rhc CM mark etpl ace . If it is decided to hire and train a competent sa lesperson in the practice of co n struc tion manage ment. the CM philosophy of th e firm a nd the CM format used by (he firm ca n he ta ught in -ho use. H owever . care m ust be take n to selec t a ca ndi da te wh o thoroughly u nderstands the construction ind ustry a nd has previously success fully sold servi ces (p refe rably engineering. arch itect ur al. or construction se rvices if no t eMservices for a nother company). Ah hough this training seems straightforward . a ll th ree a reas must be co ve red an d co nveyed. Teac hing the science o f C~l sho uld be s traightforwa rd to all can did ate s:

Section 23.5

, .- ~

Salespersons

369

howe ver. the firm's CM philosophy and fo rmal is unique with each company. These two aspects of se rvices arc often the deciding facto rs when owners rnake the ir choice of a C~ 1 firm. They both mus t bc me ticulously transfe rred and tho ro ughly understood by salespersons-in -training. especially those who have previously sold services for another CM firm . When an in-house CM person is lea rn in g to be a salesperson. the firm' s CM philosophy and fe rm at is indelibly fixed in the salespe rson's mind. Only the selling as~ects m ust be acqui red. Although learning to sell is by no means an easy task. sometimes re placing preconc ei ved ideas with new ones is more difficult \Vhen tra ining pe rsons with previo us se lling expe rience for a rc hi rects, engi nee rs. and CM fir ms, extra ca re should be exercised to sec th at th e firm 's C M ph ilosoph y and forma t is tr ansferred and ind eli bly fixed .

Secti on 24. 3

CHAPTER

Acquiring

Services '"1

A co nstruction manager's qua lifica tions are significa n tly different from those of a rch itect s. engin eers, and gene ra l co n trac to rs. Owne rs consideri ng using eMsh o uld be well aware Ill:!. l (he m ost im po rtant po int is th at selec tion shou ld be qua lification based. no t

based on cost as one might selec t a con tractor. 24. 1

CM FIRM CO NSID ERATIONS

A protot ype co nst ruction m anagement o rganizat io n docs no t exist. A eM ca n be an y o rgan izat ion that has the un iqu e combin ed reso u rces necessary to pr oficient ly exec ute th e for m and varia tion o f e M best sui te d for o r selec ted by the owne r, All orga niz atio ns tha t call th emsel ves co nstr uc tion m an agers arc no t eq ua lly equipped to p ro vide se rvices. A dd itionally. u nlike e ng ine ering a nd a rchit ect arc. co nstruc tion m anagemen t services a re no t uni ver sally go ve rned by law. e M s tanda rds of pr ac tice a rc in th eir fo rmative stage s, an d the professional status o f the C~l and those that th e C t\.t employs rema ins for th e future to de termine. Th e fina ncial stre ng th o f the CM firm is o nly im port ant whe n usi nz II form of Con. s tr ucuon ma nage men t that requi res [be eMto pr o vide explicit se rv ices as a co nst rue. lo r or contracto r. Whe n using a G ~t PCM o r XCM fo rm (othe r than D es i gn-X C~I ) . construction man ager s shou ld be evaluat ed financi ally as o ne wo uld eva luate ge ne ral contractors. wh en using Ag en cy-eM or Design-Xf' M, co nstr uc tion ma na ge rs s ho uld be fl.nan ciall y evalua ted as o ne would ev alu a te de sign profession als when considering

.

A re cord of p ro ficie nt pe rform an ce as a design pr ofessiona l o r as a con trac to r is not an automatic ind ica tion o f pr oficiency as a co nstr uctio n man age r. All hough m':IIlY CM's a rc also ar chitects, engine e rs, and gene ra l contractor s (o r u nique orgnn iza tions spaw ned by o ne of the se) , succ ess ful co nst ruct io n managem ent exec ution requires much bro ade r d iscipl ines tha n th ose inherent to the sale pra ctice of architec ture. en gi~ee ring, o r contracting. A profi cie nt Cr-. f linn m us t have the basic reso urces and qualiucs of all three; a multi-discipline orga niza tio n tha i assimil at es the co m po und expe rtise of a design- build firm . CM's have fle xible geogra phic m obilit y. Their perform ance is ins ignifica n tly affe cted when fu nct ion ing in local io ns ot her tha n whe re the ir headquar te rs ar e Pomcns of this chapter are reprin ted with permiss ion from C. E. I-Ialtenhoff. "Q ualifiCiltio n and $declion o f Consuucucn Manage rs With Suggested Gu idelines fo r Selection Precess." }ol/"'III of Conuruaion Engim:aing /IIui MllIlllgnl/cn/ 113 (March 1987J:51-89. Ct1p)Tighl 19S7 h)' the American S\~jCl}'

370

ut CIvil E n ~ i n c c r $.

24.2

W HEN TO HIRE TH E CM

The o wne r shou ld hire th e co nstruc t io n mana ge me nt firm as early in the p roject as poss ible. It is reco mme nded that the AlE and e M h e hir ed approxi mat el y at the sa me time. Th is permi ts exposure to one an ot her (befo re agr eem ents are signed) and co mpa tibility checks. It pe rmits th e meshi ng o f thei r respective ag re e me nts with the o wner a nd provi des an op por tu n ity for a co lle ctiv e s tart. The nature of th e CM's prcconstructio u se rvices ma ke an ea rly team s ta rt ve ry de sirab le. Th c CM's expe rtise in conce p tual es tima ti ng ca n be a valuab le assis t to the o wne r an d the d esign p ro fessional d uring feasibi lity.

.

servic es.

371

located . In fact, Clv1 per for m ance is ofte n e nhanced by the CM's inves tigatio ns in a new ar ea . Fami lia rity with local co nd itions a nd con tractors may miti ga te th e CM 's objectivity rather th an en hance it. O bject ive decision making and an inqu isi tio na l a pp roach 10 projec t delive ry are esse ntia l to success fu l Cf\t ope ra tio ns. Ow ne rs shou ld not o ve rva lue th e " home- tow n adv antage " and se lec t a eM firm simply be cau se it is loc ally based. A CM firm '....ith ex te nsive Ctvl expe rien ce o n a va riet y o f projects is o fte n a be tter cho ice than a fir m wh ose experience is limi ted to a spec ific proje ct type. Th e CM 's prime contribu tio n to the success of the pr oject is ves ted in his ability to m anage.TIle technica l aspects of the p roject ar e esse ntially vested in th e expe rtise of the AlE and th e ow ne r. Th e Clvl syste m of chec ks a nd ba lan ces in decision maki ng pro vides so und d irection so long as a ll the ex pe rtise is ava ila ble fro m tea m mem bers. In practice, a Clvl wit h var ied projec t type expe rience is the best cho ice. 111at eM can close the experie nce cir cle through her/h is ab ility 10 re late so lutio ns from one p roject type to ano ther. A C ~,t sho uld be co ns ide red a manage r first an d a p roject co ns ultan t seco nd.

2 4

eM

Cont racts and Services

24.3

CONTRA

as AN D SERVICES

111c serv ices to be provid ed by the co nstruc tion m an ager are dete rmined by the CM fo rm a nd vari a tion se lecte d by the o wne r, a nd th ese se rvices sho uld be prescr ibed in th e ow ner/CM ag reeme nt. Stan dard docume nt se ries are av aila ble. It is advisa ble to re view the series 1O en sure tha t those selec ted conform as closely as possib le to the eM fo rm a nd var ia tio n se lec te d. All sta nd ard d ocumen ts m ust be amend ed to reflect the services that ar c uniq ue to each project. Once selected, it is re co mm ende d th at a single docume nt se ries be used . Most documen ts add ress this considerati on, po int ing o ut th at mixing cou ld cre ate proble ms betwee n co ntrac tu al ly inte rfac ing part ies. TIle use of proprie ta ry docume nts sho u ld be ap pro ac hed with simi lar ca re. It is not ad visa ble (Q usc ame nded non- Cfvl docume nts. A constructio n manager's se rvices can be ide nti fied wit h the phases of pr ojec t deli ve ry. Bro adl y sta ted , these phases are : (1) Pre-d esign, (2) Design , (3) Con str uctio n , a nd (4) Occ upa ncy. D ur ing Pr e-design and Design , th e eM provides se rvices u nique to tr ad itional industry pra ctic es , In the GC sys te m, inp u t to these phases is via th e AlE and al mos t

372

Chapter 24

Acq uiring eM Services

exclusively reflects a design pe rspect ive. TIle contributions of the constr uction ma nager compe tently broadens that pe rspec tive by incorporating compre hensive const ruction a nd contracti ng inp ut int o the des ign. D uring the Co nst ruc tion phase, the eM perform s and accen tua tes t he management serv ices provided by the general con tractor in the GC system. (They are reoriented to benefit the owne r rat her than the Gc.) Most eM service contracts exte nd into the Occupancy phase at least one: year fro m the date of occupancy or coincide with the duration of the warranties, guarantees, and surety bonds stipulated in owner/contractor agree ments. providing the o wner with call-ba ck coordination se rvices during occupancy.

Sect ion

24.5 24.S.1

373

St eps 1 & 2

Det c rrmn ing th e form and va ria tion of eM to be used is not pa rt of ~he sel;:ction process but is a necessary issue that req uires rcsol ~t io~ before ~roceed mg. 11 IS also nece ssa ry to de te rm ine whic h co nt rac t docu ment sencs IS ::Ippro~~a te for the fo rm and vari atio n of C~'1 conte mpla ted.The same issues apply to dere rrninmg the laws and regula tions thai go\'e rn rhc conduc t of the selection process, Steps 3 & 4

Def o re con tac ting con stru ction man ager s. it is necessary to defi ne the p roject to the ex te nt possi ble ar the s tage of its development ."This information pro\'id~ s critcri~ with wh ich to match up eMfirms with th e req uireme nts of the propose d project .Th e Intent is 10 pro vid e C~I firms wit h an o ppor tu nity to quick ly ~ccide w~ether or not to sh~W furth er inte rest in the project. Th e more comple te th e information. the mere defi~llte the ir reactio n can be.Minim um info rma tio n shou ld include the project's type . Ioca ticn . size. b udget , sched ule, uni qu e cha rac te ristics. and desig n :o~lIl1 i tmc nts..i f. any, It is ma nd atory tha t the se lec ted C M fonu an d vnnatton be explici tly sta ted .t he doc u me nts ide n tif ied. and a clear d escriptio n of the se rvices bei ng sou gh t from construction manage rs provid ed. There is no ad van tage in with ho ld ing inform ation abou t the project. TIle a mo unt o f informa tion p ro v ide d by th e ow ne r sho uld o n ly be co ntro lled by practica l publis hing con sideratio ns.

GUIDELINES FOR SELEGIN G A CONSTRUGION MANAGER

The fo rm at for selecting a co nst ruc tion man ager closely resem bles that of select ing a desig n pr o fessiona l o r any other con sul tan t an o wne r is co nside ring, Ho weve r, some forms and variat ions of eM. as well as some local laws and regu lat io ns, mand ate a selection p rocess that mor t: closely resem ble s that o f selecting a contractor. Before initiatin g a selection process. the o wne r sho uld seek guidance 10 ens ure p ropri e tylegality, and p ro tocol.

24.4 .1 The Pro ce ss Th e se lec tio n process should proceed as foll ows:

1. De termine the fo rm an d/or variati on o f the C:-"1 Syste m 10 be used 2. De termine if an y sp ec ific laws or regul a tio ns go vern the selec tion process for the pr oject 3. Dr a ft a co ncise p hysical des cription o f the proje ct. iudicut ing timc coust ruin ts and budget 4. D raft a brief des criptio n of th e se rvices re quired bused o n the C ~'1 Io nn and/or variati on to be used

Steps in the Selectio n Process

STEPS IN THE SELEGION PROCESS

24.S.2 24.4

2 4.~

24.5.3

Step S

1111:re arc se ve ra l wavs to luform con stru ction 1ll ;1I1.. gc rs abou t :l p roject. On e is to publish a no tice in a 'co ns lr uction pe riod ica l or ot her media so urce such as a da il.y newspape r. Ano th er is to o b tain .1 listi ng o f Cx t Iir ms from it co nsultan t ~ r e M prncu tio nc r a nd con tact as many as necessar y, hy telephon e or by le tter. to o btain the rcco~l ' men ded num eri cal responsc, On pu blic proje cts. !
S. Issue a request Cor interest in the project by CM Onus in the fonu of
7, ISSUe ::I ll Init ial Req uest for Pr o posal (IR FP ) from be twee n five a nd ten o f the m OSI p ro mising respo nd ant s 8. Scree n rcspcn da nts to the IRFP and develop the "l ong list" o f those worthy o f fur ther co ns idera tion

9. Issue a second Req uest for Pr o posa l ( R FP) to those on th e Lon g List requ est ing uni form a nd specific inform at ion 10. Scree n respo nda nts 10 the second RFP and develo p a "short list" of those wo rthy o f an inte rv iew 11. R eq uest final info rmation fro m those se lected from th e Short List and conduct ind ividual inte r views wit h that group o nly,

24.S.4

Step 6

T he goal o f the adve rt isement is to lo cal e bet ween live and ten respond~ rs.who clearly stat e t heir ge nu ine int er est in t he pr oject and ind icate C~1 form and vanat lO? co mp a tibility.The less cer tai n the o wne r is a bo ut each respo ndent's sta nd on these irnpc rt ant co ndi tions. the lar ge r th e po o l o f rc sp on dan ts becomes. Du ring. the scre ening process. it is impo rtan t to recognize certain conditions and cri te ria th at will help in the finnI se lec tion o f the construction ma nager. 1. Fees fo r CM se rvices should not be addressed in any way until the inter.... iew stage has been reached. CM sc rvices nrc p ro fession al in the business sense of the

r

374

Cha pter 24

Acqui ring

eM Se rvices I

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Ath l'rli, cml:nl [or Consl r ucl io n :'Il ana~ cmcn t Scn ic('s

The project consists of a (~ -lc\'c1 service a nd pa rking s tructure and an IS-story office towe r) , IOC3(l:d in (t he downtown a rea ). 2 Th e wor k con sists uf the (demolition of 7 e xis ting 5-,S10I')' maso nry s uuetures. e xcavaucn.underpinmn g/ prol cclio n of 3 adjacent st ructures.co nstrucuon o f the 210,000 sq . It, fac i !il ~ including tena nt improvements and 2 skywalk co nnec tions to neighboring buildings). 3 TIle Architect selection process is to be conducted con curre ntly with th e eMselec tion proce ss, TIn: projec t is funded and will proceed lmrnediateiy, with full occupancy scheduled fo r ( month. year). 4 The Co nstruc tio n Manage r will be required 10 pro vide a Gu aranteed Maximum Price 31app roximat ely 60% co mple tio n of design , and is no t pe rmitted to bid or pe rform a ny of the const ruc tio n work invol ved 5 Con struction manag ers with e xpe rie nce on (urba n high- rise) projects are invited to ex pr ess preliminar y int e rest hy se nding a maxim um length five- page qualifi cat ion kite r to:

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word. TIle eff or ts o f the selection pr o cess sho uld he to tally o rie nted towa rd the scn pc and quality of se rvices and not p re ma turel y influenced by fcc discussion s. 2. A ll commun ications with all respo nde n ts and potential resp ondan ts sho uld be kept uniform to create a fai r and equitable p rof essiona l a tm osph e re throughout the selectio n proce ss. It is imp ort ant tha t none o f the co ns truc tion manager s ar e given an unfair advantage or th at any ge t the impre ssion of unfair advantage ,

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Chap ter 24

24.5.5

Acquiring eM Se rvices

Section 24.5

Step 7

Rat ing

~e IR f-"P is the first scree ning de vice used in the se lectio n pr ocess. It shoul d be stra tegica lly prepared to effectivel y surface prime cand idate t.'Pr further scruti nv, It is sueges ted that the I RFP be in questionn air e form 10 pre~i"u(fe respo ndams from pro\lidi;g a. lot o f u.nwan tcd prose. Th e IRFP sho uld essent ially form a lize the original lnfo rm ano n pr ovided by the re spondents to the owner solicitation (fi gure 24.5 on page 384 is " an example of an IRFP). Whe.n forwarding the IRFP to t.he group of five to ten rcspondnnts, it is important 10 cnd o.st:. :\ lime sched ule for the selection process. Spe cific dates should be dedicated to the rcmarmngsteps 10 be taken and the d ue-d al es se lected should be me t if at all possible.

24.5.6

Total

4 Depth of In-ho use CM Organization 5 Technical Level o f Organizntlon 6 Ind us try Ass ocia tion In...olv ernent

,.

Ste p 8

7 Project n'PE March-up 8 Project SIZE March-up 9 Ex pc ricn ce nase..! nn VOL UME o r Wurk 10 Expe rien ce neseo on PROJ Ecr NUMBERS I I De monstrated Geographic Vers at ility 12 Project SIZE Versat itity 13 Projec t T YPE Ver!>a tility 14 Experience with Differ.: nl A rch itect s 15 Versa tilily as a Construction Manage r 16 Dispute Avoida nce Recor d 17 CapOl,"IL)' to Absorh Ne w Projecl5 18 Capacuy La Ac cept T i l lS Projec t 19 Stability o [ Pe rsonnel Turnover 20 Ouality of Listed Own e r Refe re nce s Tota l Scor e

to

Notes III user: • Each owner can determine the wd ghl of eil~'h Hilling Factor bllsed on the unique [undiLi()l\s of the projecl at hand. o Th e F.t<:lo!'llillc,J above ! ener:lIly coincide 10 the l.luo:shons ulr.c:,J rn Ihe 11IIli.:.1 Request For Proposa.! (IRFPJ. o ScorlO' shool
Step 9 Th is second R FP complem e nts the IR FP by req uesti ng info rm a tio n from th ose on the ".Ion? lisC' th~ t was n~t p re vio usly r~q ui red. It is importa n t that all re ma ini ng evalu ano n Infor':latlO n requir ed fo r selection be accumu lat ed from this q uestionn a ire. Specific respon ses pe rt ai ning to han dling the project (such ,IS a pro po sed manag~mcn l plan nnd .sl:1fling pl an ) sho uld be req uested. R es umes of per son nel to be assigned to the project, the pr oposed co ntract d ocument s 10 be used. and tile con strue. ucn manager-owner agreemen t shou ld be req uested for review un less th e docu ments 10 be used ha ve already been specified by the owne r, dee med to be necessar y [0 ma• ke •a dec ision o n".. single r IEsse ntial ly. all information . ( ' '''"''(00' ~ nll s 10ul J be Illdud cd. '" th e ~fP. so tl~ a l the final int erview consis ts ma inly of q ucs. ~ Ions an d a ns wers pert atru ng 10 inform ati on a lready pro vided. (Figu re 24.6 on page 3SS IS an example of an RFP.) ~

FIGURE 24 .3 A lyr ical e M firm ratin g syst em fo r responders,

The ne xt step is inte rviews a nd selection. One of the Ct-.'f firms on the sho rt list will be the construction ma nager. It is im por tan t that impressio ns relat ing to pote n tial tea m co mpa tib ility and co nfide nce in eac h firm 's ab ility to perform be caref ully noted . If addi tional infor mation is req uired from those o n the sho rtl ist, contact sho uld be mad e and th e info rma tio n obtained. A s rec omm ended in all ot her steps. car e must be exe rcised not to favor .any o f th e contender s. A fair and success ful selec tion process is highl y dep e nden t o n an ar ms-lengt h rel at io nship with all firms under co nsideration. M ain tai ning th is pos tu re in the late stages o f the pro cess is some times difficu lt bu t very ad van tag eo us 10 the o wner. Int erview da tes sho uld be established to easily acco mmo da te th e number of firms on th e short list. Th ere a re advan tages and d isadvantages to firms bei ng inter viewed rel at ive to their position in th e int erview sched ule. Do not solicit o r accep t req ue sts fro m the Cl\.f firms for p ref e rred interview times; use an u nbiased sched ule sele ction met hod and ho ld the firms to the se lec ted da tes and times. It is bes t no t to sched ule mo re th an two inter views on a nyone day. If it is nccessa ry to spe ed the p rocess up , sp read three o r fou r interviews ove r a full day. No mo re than four inte rvie ws should be sched uled in a day. (This p revent s co nfusing o ne firm's informa tion with an o rhc r's.)

Step 10 As so?n as it is de te rmi ned wh ich firms a re to be int e rviewed , all of the firms on the long list sho uld be contacted and advi sed o f the decision. Int erv iew dates for tho se on the short list sh ould be made as soon as possible, A procedu re similar 10 that sugges ted in Step 8 shou ld be used in this fina l scree ning process,

- - - - --

Weighl

1 longe vity of Business Org':H1 iUltion

All Cxt firms that respo nded to the lRFP s hould be notified of the o wne r's "lone list " deci sion by the date speci fied in the selection process schedule. .:0

24.5.8

Score

377

2 Longevuy of C~ I Se rvice Organization J Versat ilily o f Availa ble Services

A scr~eni.ng process should be esta blishe d to un iform ly compare the resp onses to each qu estion In thc . IR FP. In si tua tio ns whe re co mpet ition is a legal requisite. a rating syst C I~l ~a n be ~Ic vlsc d that will sa tisfy thi s requiremen t. It is sugges ted that owne rs creat e a s l~ llar rating syste m eve n if they are not s ubjec t to co mpetitive constraints.The infe rma tron can best be sorted and evaluated if it is systema tically handled. With ou t a for. mal syste m. the information will become unwi eldy and hinder the re sult s of a \\lc l~ .i nt l: ll~ed selection process. Figu re 2-t.3 on page 377 is an examp le o f a simple companson rnung syste m.

24.5.7

ril ;:lO r ~

Steps in the Selection Process

·1

378

Chapte r 24

Acqui ri ng CM Services

Select i~terview d ates.and .limes th at allow full attendance by the gr oup resp on sible for s~I~~lIo n . ~ bscnlccI5m, In whol e: o r in part d ur ing the int ervie ws, is unfair to ~h ose bei ng m t e [\'I ~ \\ ed and d et rimental to the selec tion process. An accurate comparrson of th e competing firms cannot be bas ed o n partial in formati on , It is to the owner's advantage ( 0 p articipa te fu lly. 24.5.9

St ep 11

Th e in terview process wi!1 be a success if the owne r is prope rly p re pared for the task . It has al re ady been establis hed tha t the eM proc ess is not simp list ic and not read ily und~ rs lOO,d by ma ny user s o f the system , It is assumed thu t th ose wh o an: 10 co nd uct the lI1h: r VICWS hnve edu cated the msel ves by rendi ng th e inform atln n sub mitted in th e IR FP 's and RJ7P's, A com p rehensive Req ues t Fo r Proposal process allows o wne rs to learn mor e ab ou t the CI\'1 sys te m as well as more ab out the compet ing eM firm s before fina l sel ec tio n occu rs.

24.5.10 Intervi ew Fo rmat '~ll: intervi ew f~)r ca c~ compe ting C~l firm sh ould lak e a pproximat ely an ho ur an d :I halfThe first ~h rn}' ,nll ~ u tcs sho uld be all ocat ed to an un res tric te d prese nta tion bv the C:-' l firm . DUring this tim e, the C M should be allowed to " sell ' his can d idncv as he-see s fit.lbe next fifteen min utes should be devoted to the CM 's respon se to [he inquiry for\\:ilrded to e~ch firm pri or 10 the interview. The (.\1 sho uld :1IS0 add ress specific i~su cs directly applicabl e to th e project. .

Th e next l\ ~l e en minutes should be used by the o wne r to q ues tio n th e Ci-.I on

~l slh e r pres::I1Wlloll or anything co nnec ted with the informat ion pr eviou sly p ro vided

~ n th e. Rf'P So 111c CM sho uld be excused for the nex t fifte en minut es to pe rmit the m rervl.ewc rs to com pa re notes a nd Ion nukuc ,my Iur thc r ques tions that sho uld be asked In the final schedule d fifteen min utes o f the interview. Tim e alloca tio ns need no t be rig id withi n th e al lo tted ti me, but each in te r view shou ld be held to 3_n hou r an,d II ha lf ~ nd used consis te nt ly [rom firm to firm. E ve ry e ffor t shou ld be mad e to provide a cr ed ible co mpa ra tive process d uri ng the in te rviews. 24.6

HAN DLING THE CM fE E

~a ch C~I sh~ u ld p~"'sent h is tee to r the pr oject ill J se al..-d e nvelope befo re bcg in nine Its p rcscuianon . II IS stro ng ly sug gested thnt the owner not 0 rc n the se L'n \'elor~s lIlI lil all ~n tc n·lc \\ s have be en com ple ted. Th is ensu res the op po rt uni ty to rare ca nd idat es o n th eir perfo.rman ce poternia l withou t considering fees,111e k e issue should on l\' be d is. cusse d d un ng th e fin;'!1 phase o f th e 5elec lio n process. . 24.7

QUESTIONING THE CM

It is nssun;ed that Ihe ,process.as oUllined wi ll p rovide lhe inte rviewers with pertinen l a.nd mc~nll1gful 4U~St1ons ou rmg Ihe int erviews. It is generally usef u/ to frilme a spe . cdie' se nes o f q uestion s hefor e start ing th e inte rview process. Th ese queslion s s hou ld bl: add ressed to eac h firm to ge ncrntc sp~cifjc cornparnli\'t: crit c riil fo r linal eval uation .

Section 24.7

24.7.1

Questioning the CM

379

Typ ica l owne r-Co nst ruction Ma n a g er Int erv iew Quest ions

The interv·iew is prima rily
~----j--

380

Chapter 24

Acqui ring

Th e inte rview can best be conclu ded by allowing ti·ve o r ten minu tes for a eM spokesperso n to exp ress anything that was not covered o r that might assis t in the go al to be sel ected.This p rov ides an op po rt unity for the eM to poin t o ut att rib utes no t previously ment ion ed. Th e lim ited time frame o f the interviews doe s not permit all the time the eM would like to ha ve, but it is adequ ate for its purpo se if the eM or gan izes it

effectively. As the interview is concluded, the own er sh ould ask th e Clvl for his Fee En velope. All fee env elopes should rem ain unopened until all int erviews have been completed. Th e C~ l firms should be given th e op po rtu nity to insert the fcc amou nts after the inter view in case infor mat io n affecting the fee is revealed d uri ng the inter view. The sealed envelo pe co nta in ing th e fee sho uld be given to the o wne r before the co nclusion of business o n the day o f the inte rview. A prep rinted fcc Iorm p rov ided by the o wne r should be used by ea ch CM firm. On ly the information requested should be en te red on the form .

24.8

24. 10

,.,1

:.l .j

, .J .

"''' :j

381

time .

24.11

AGREEMENT NEGOTIATIONS

In addition, the own er sho uld tho ro ugh ly review the term s of the Owner-Cxt agr eement with th e co nst ruc tio n man ager. She /he sho uld have present tho se who can help clarify any discu ssion s of the provisions o r a ny modificatio~s to them',The document sho uld co ver the necessar y int eractions of the owner. design pr ofessio nal, and co nstr uction manager in sufficient det ail to avert future confusion . It is suggested that a Memorandum of Unde rstanding or a, ~espon~ibility Cha~t be developed to provide clea r defin itions o f th e, team meffi?crs l~teractmg responsibilities. All te am mem ber s sh ou ld co n tribute to Its formulation. This documen t ca n be an attachme nt to each tea m mem ber s' ag reement with the owner, Figure 24.4 0 11 page 382 is a sa mple page of a Respo nsibilit y Ch art.

24.11.1

Fee Neg otiation s It is assumed that the first ran ked CM firm

\\' 3 S chos en with due considerati on o f both ability an d fcc . Con sequently, negotiation of fee
MAKING THE DECISION

Discussions rela tive to a de cision on the constructi on man ager sho uld not be initia ted until the final int erview ba s be en completed and a da y o r so for reflect ion ha s elapsed. During this time, no con tact should occur between th ose interviewed, bu t a fre e exchange of compa rati ve data between the inte rviewe rs is en couraged. Wh en dec ision lime is ut hand , the interviewe rs and others involved ill the pro]eCI sho uld meet to co mpare note s, sco re shee ts, and impression s and come to agreement on ra nking the C:-..t firms. On ce th is is accomplished , fees shou ld he: reveal ed and furth er d iscussions of the best cand idates (bas ed on fee informati on) should Occur. The firms shou ld th en be re-ran kcd if necessary. As soo n as possible , a nd within the sche d ule set for the sel ec tion process, the owner sho uld notify all eM firms int erviewed a nd inform them of the ra nk ing. Th e ow ne r shou ld let the m kn ow that be/sh e int ends to ente r into a n agreeme nt with the first cho ice. thank them for their inte res t and time, and answer nomina l qu erie s co ncern ing th e d ecision .

Agency eM Fee Form s

ea ch ca se, and ho w int er co mmunicati o n would occu r is ~lso im porl.ant. 111e ~ w n~r sho uld review the staffing plan , if o ne was pr evio usly sub mitted. be sa tisfied l~at Il Wi ll serve the purpose. feel free to re-questi on the C~: on. u nc.lear ~esponses pr?v lded during the intervie w, an d mak e sure the crvt' s parti cip ati on IS as Il was percei ved at that

.,

INTERVIEW DECORUM

It is irnpurtnnt that the owne r rem ai n in charge o f ea ch intervi ew a nd co nd uct ea ch o ne in an effective and efficient manner. The gro u nd rulcs sho uld be form ulated an d made kno wn well ahead o f the intervi ew dates. On pu blic projects, it is mandat ory tha t all co mpe tito rs be trea ted with an even hand . Thi s pract ice bene fits the int erviewe rs an d should also be pr acti ced on priva te projects.

24.9

Sect ion 24.13

eM Services

24 .12

CM FEE STRUCTURES

Th er e arc seve ral ways to arra nge fees for Clo. t services. All tire derived from similar a rran gemen ts common to th e industry, and essentia lly they include Lun~r Su~, Cost Plu s. and combina tions o f bo th . Some variati o ns o f C lvl have propagated mcenuve and me rit fee structu res.

24.12.1 Typical eM-Owner Fee Arrangements The fee arra ngemen ts be tween ow ne rs a nd co nst ruction managers arc mor e varied tha n the form s and variations unde r wh ich C~t is perform ed . Cer tai n forms and varia tion s of eM require the usc of uniqu e fcc arrangement s to accommoda te dual res ponsibilities. The followi ng repr esen t the more common fee arrangements and are p rovided as a guide o nly,

CM OFFICE VISITATION

Befo re discussing the te rm s o f an agree ment, it is rec ommen ded that th e owner visit the o ffices of the CM being con side red. If the owner would be dealing with a b ra nch o ffice operation , shelhe shou ld visit both the br anch and the main offices to see the en tire op era tion. Knowi ng how each office would be involv ed. who wo uld be resp onsible in

24.13

AGENCY CM FEE FORMS

LUIIII) Su m, with or with out an lidded cost clause: Thi s is used on s mal l- to m.e ~i~~­ size, straigh tforward. new project s where the required involvem en t a nd resp on Sibilitie s o f th e owne r. AlE, and co ntractors a re re ad ily predictable.

I(

382

Chapter 24

Acquiring

eM Services

Ow ncr·,VE·Ci\1 Kcspo nsibilily

adde nda

procedura l

addenda-technical ad ~·cttisemenl-bjds

b id open ing bid reviews bidders lists.

bidding allo.....ances bidding alternates bidding documents bon d ing req uirem e nts

budg et updates budge t,proje ct contrac t a....aros

conlraet dra w i ng~ contracting melhods conua cu, constructio n costs.cc ntr uction design development documen ts design param et er s insurance values teuers of intern meetings,preb id notice to proceed project manual proposal forms bidder qualification qualily st and a rds schedule updates schedule. design sched uling, construClion schem.llic drawings spccs.,front end spcca .ourtine spccs.technlcat value engineer ing work -scope description work -scopes

Section 24.13 O w ne r

revie w/appro ve revie w

issue/pay aucndlwitness review rc viewrapprove review/appr ove review/approv e approve/pay establish review/approve est a blish review/approve

review/approve review/appr ove provide/sign review/approve rc\·ie w/apprm·c establish establish issue att end/commenl issue approve review/app rove H.'\'icw/ar r ru ve establish review/approv.; fC\'iew/apr ro\'e review/appro\'e

ME re view/analyze

review ra nalyze gen e rate/w rite chcd:/ rccord

open/read revie wzcc mm enr revie w/com ment

gene rate gen erate generate distri bute

review/comment

analyze

analyze analyze recommend

generate: review/co mment review/commen t analyze

gene rate

gen era te

an.llyl dcod ify revicw'comme nt wm e pauicipale review assemble analyze analyze anal)7:eJcoJ ify analp e pr ovide

approve

revie wzccmment

review /approve review/approve

rc"iew/3pprove

pro vide

analyze/codify revicwrcommeur

review

review/app ro ve

analyze

analyze/write generate/write assemble/prim

anJlyl.e generate generate /write generale/wrilc gcneralc/wrile analyze design llnal)'Zc

rc" iew'iappro\'c

gene rate/writ e

reviewrcomrnem

re vlewrcornm ent review/comm ent

determine review/commen I analyze analyze review conduct write review/comment general e/write gen er ate

genera te provide commcnl/codify generate review/comment

generate analyze review/analyze genera te ge nerate

generate

fiGURE 24.4 A sample page: of an O wncr. A/E .CM Respo nsibility Chan.

. Projects suc~ ~s wareh ouses. light indu st rial plan ts. local shopping malls, office b uildi ngs. mmo r CIVIl wor ks. medical office s. cl inics, and el em e nt ary a nd high schools can e ffectively use this type o f fee arran gem ent. . A ~o n ti nge n~y clau se is gene rally included tv re imb urse the C :-.t fo r ex tended pr oject time resulting from act s o r occu rr ences no t und er his d irect con tro l. It s hou ld stipula te a daily o r weekly lump sum am ount. that does not include o ve rhe ad or p rofit, fo r fie ld personn el req uired after a specific co mp le tio n date named in the contract.

-,

eM Fee Form s

383

Lump Su m plu s Rcim bursa hlcs: Th is is used o n an y of the pr ojects that acco mmodate a lum p su m fcc and lar ger o r mo re co mplex projects where the involvement/ respo ns ibilities o f th e ow ne r. A lE , or con tractor s 'Ire ne t readil y predi ctabl e. Hospit als. pr oce ss plants, high rise bu ildings. univer sit y facilities.jails, prisons.Iuxur y ho tels, regional malls, hea vy industrial plan ts, and civil engi nee ring project s fit wel l u nde r thi s Icc arran gem ent. Th e lump sum portion of the fee arran gement usu ally covers the cost o f the constructio n manager's serv ices pri or to the start of o n site con struct ion. including the fee , genera l ove rhead , and p rofit for the total pr ojec t. The ow ner reimbu rses the CM for field costs incu rred du ring co nst ru ction . Variat ion s to thi s form at C'1n change th e pha ses covered by lump su m and reimbur sabl cs. TIle reim bursable port ion is based on prede te rmined. listed rat es for pe rson nel and equipment nml for spec ific se rvices listed in the agreemen t. The reimbur sabl e portion is usuall y limit ed [ 0 a no t-to-exceed a mo unt a nd co nsists o f costs o nly (the fcc. general o ver hea d. and p ro fit having been paid for in the lu mp sum porti on o f the tot al fee ). \Vhen using thi s C:¥I fee form, it is import ant to defin e what will be included in each port ionThis is especially true whe n req uesting and analyzing fees du ring the CM selectio n process. Requiring the eMto pr ovid e pe rso n-ho ur requ irem ent s will help so n o ut potenti al confusion when comparin g o ne candi date with ano th er (Figu re 24.6: 4,0

C\ I

generate/.....rite

Agency

on page 388). 24.13.1

Reimb ursab les The tota l flexibi lity o f this CM fee arrangement makes ir applicable to a ny p roject regardless of the Cl\1 form or varia tion used . The co nst r uction manager is reimbursed for the services pro vid ed on an ho u rly o r pc: r diem ra te ba sis plus all expe nses incu rred in the pro viding uf serv ices. Th is fcc: arra nge men t is characterized as cost expended plus a pe rcentage o f cost ex pe nde d o r cos t expended plus a st ipula ted lump sum. Own ers should be aware that this type o f Icc arran gement is no t tied to pr ed etermine d per fo rmance by the con s tru ction manager regarding staffing usage. D ue to its open-ended charac te r. th is fcc sho uld only be used when non e o ther wil l fi t.

24.13.2 Fee Enh an cem en t Pro visions Occasiona lly th e con str uction ma nage r's fee arrangeme nt is mat e rial istically en ha nced by the own er in ho pes o f impro ving the C xt 's performan ce. Two forms o f fee enhanceme nt arc so me times used : Incen tive and Pe rformance. Inc ent ive nr raugcm c nts: These arc usuall y co nnected to eith e r the cost o r [he lime sc hed ule for the projec t. and sometim es both . Add itional fees, specifica lly named in the Cr-t-Owner agre em ent as to am ount a nd paym ent cond ition s. ma y be earn ed by the eM for comp le ting th e p roject below a budge ted a mo un t o r in a sho rte r tim e tha n o riginally sche d uled . Wh en co ns ide ring ince n tive fee s, o wne rs should realize th at est ablishing bo th budg e ts and sc hed ules is the normal pr er ogative of th e con stru ct ion manager. In establi shing both th e b ud ge t and the sche d ule. caution sho uld be tak en that ec o nomi c returns under an incentive clau ses a re not inad ve rt en tly or stra teg ica lly included in Contin ued 0 " page 389 the bu dget o r the sched ule.

384

Chapte r 24

Acquiring

Section 24 ,13

eM Services

I x ITIA !.

I~ E Q LJ EST

FO I( "UOI 'O SA l.

Submiued To:

2.5

What has bee n your turnover num oc r (layoffs (I' replace ment s] durin g t he ra~t li Yc yea rs?

2.6

De signate the tec hnical leve l of all in-house pe rsonnel by ca tego ry. Degreed No n-

2.6.1

Enginee rs, Ci vil

2.6.1

E ngineers. Me chanical

Regutered Su bmit ted By:

a: Cc rpc eaucn Pa rtn e rship Individual Ql ht: (

Age ncy e M Fee Fo r m s

Non-Reg.

Degrecd

2.603 Engineers.. Electrical 2.6..4 Ar chitects

1.0

IIUSI NESS O RCA :" IZATIO:"i

1.I

How many )"I:'ars has your firm been In business under the name slal eJ 3OO\'c1

1.2

How many yea rs has yo ur In m pr ovid ed Con :u ruction Man agement services".'

2.6.5

1.3

What ether services docs your firm provid e unde r the nam e state d aOO.-e1

IA

If a Corporat ion . please ans .... e r the Iollcwing:

IAJ

Dale of inco rporatio n Slate in which incorpo rated

1..;.2

If Individ ual. plea se ans.... er the Iollo .....ing.: Da tc c f crgamaauon

1.6.1 1.7

Name of owner W "Ot her ," plc:lS<.: explai n.

U'

AJJ rcu of Main O mcc

Planners

2.6.7

Es timators

2.6.8 Aucmeys 2.6.9

Bu siness Admin.

2.6.10 Computer Science

_

If a Partnersh ip, please answer the Icuc.. .-ing: I.S 1.5.1 Dolle of organ ization "" 1.5.2 Names of par tners and per cen t o f participation:

1.6 1.6.1

-'--_ _

Value Ma nage rs

2.6.6

2.6.11 A ll o the r 2.7 List abe prorc~ion31 and tr ade associations that arc re prcse nte d by in-hou se per sonal membe rslnps,

_

_ _

2.8

Of all In-ho use e mplo ye es listed in 2.1, ho w many a re da!>Sificclas min ority employe es ? _ _

2.9

Wh e n pe rforming CM se rvices, what portions of your CM services do )·ou no rm ally co nnec t oul?

3.0

[X I'[IU£N CE list your specific expe rie nce as a CO/IS /fl /clio " M anogr r in the fo llo wing project ca tegories.

3.1

1.9

Nu mber of Projects

Location of br a nch offices. if any. 3.1.1

Co mm e rc ial

3.1.2

Ind ustrial

u rgest (S) Pr oje ct

3.L3 He alt h Ca re 3.1,4 Educa tion al ~o

OIOR GA!\' IZATIO x

2.1

The ll umber of permanum empl oyees

2.2

How ma ny
2.3

List "in- hou se " personnel in the follow ing catego ries.

3.1.5 Correctio na l 3.1.6 Il 0 t.:1s

_ _

3.1.7

2.3.1 Field Manage rs o r Superintendents 23.2

Pro ject Ad ministr a to rs o r Ma nage rs

3.1.10 3.1.11 3.1.12 3.Lt3

23 .3 Resource Personnel 2.3,4 Suppo n or A d nun istra tive Pers ons

2.35 P rincipa ls or officers 2J.6 Tot al (must e q u;d l .l ) 2.4

H ow many of the persons in 2.1 ha ve bee n hired in the pas t two )'ears?

FIGURE 24 .5 A typic al Initial Request For Proposal ( JR FP).

P roc ess

3.1.8 Services 3.1.9 Civil w or ks

3.1.14 _

3.1.15

TOTAL FIG URE 24 .5 Cont inuc:d

385

.~l.

386 3.2

Chapter 24

Acqu iring

eM Services

Wha t had be en yo ur annual volume of e M projects Juring the pa:.( five (5) years, based o n cc ns u uction COI>ts1

I S S 3.3

I

S

How many C~ I projects have yo u eithe r com pleted o r have un de rway in the follo wing arc a! of the United

Slates'? Nu mber of

Projec ts Completed

3.3.1 3.3.2 3.33 3.3.';

1). ~i\ ' !>J

\~~ -.

Number o f Proje cts

l!:

.:{~

No rtheast South east

:f:

North Cenrral South Cemral

"

,.;1

TOTALS Il ow man y differe nt Ar chitect ura l/Engineeri ng firms have you work ed .....ith on the

35

O n ho w many of the

3.5.1

l tctd conuac u for construction wurk

3.5.2

Per form ed co nstruction work

3.5.3

Pro vided a guaranteed max imum pncc for wo rk

3.5.4

Pe rformed const ructio n support work

eMI'mjcc l~ li ~ l c d in 3.1 have

.;.5.1 A dJ sta ff by direc t lure 4.5.2 Con trac l services OUI .;.5.3 Both o f the abo ...e Provide the follo wing informalion on no more th an five (5) o f you r /,u gf:sl c u"ent pr ojects. 4.6 Project Type (Ou ed.!)

Loc a tion (Oues, 3.3)

S Size

Com pletion Dat e

4.6.1

O n how many of the eM proj ects listed in 3.1 did contractors en te r into Jilig
·to

CUHRENT WO IU\ LOAD

4.1

E XrIC s.~

the cur rent work kMJ u( your

eMorgani zation

Number of

Dollar

Projects

Value

5.1A

5.2

Desig n Dc ylp./Fina l Design Contract Doc ume nts

O..... ncr's Name

Projects Involved List th e foll owing Information on thr ee (3) of the five (S) projec rs lis ted in 4.6. [A ttach a sep arate sheen D o not lISt

on a project basis, bro ken down as follows:

projecis lis/t'J in 5./ ,

5.2.4 Owner's Ph one Number 5.25 Project's A rctntcct/Enginccr 5.2.6 A/E's Address 5.2.7 NE's Phone Number Provide the follow ing information on pro ject Ar chi tect s or En gineers tha i you have worked .....ith on marc tha n 5..' one CM project, {or the sa me o.....ner or diHercnl o.....nc rs, (A na ch a sep ara te shed )

4.1. 1 Fcasib ility/l' l;lllning 4. U

hav e used yuu I servic es mor e than o nce. ( A lI; ICh a ..cp ar ute

5.2.1 Project 5.2.2 Owner's Name 5.2.:\ Own e r's Add res s

4. 1.2 Schematics/l' refir n. Design 4,1.4

HIl OWlICrs 111;11

5.1.2 Ow ner's Address 5.13 Owner's Phone N umber

3.7

4.1.5 Ou l (or Bids

5.3.1 Architect 's/Enginee r's Name 5.3.2 Ar chitec t's/Engine er's Address 5.3.3 Archilcct'sl En g;ncc r's Phone Num ber 5.3,4 Projects lnv o lved C E l n l nCt\T IO ~ OF l :o.; F O R;\IAT I O ~ "I·W VID ED 6.11

·U .S Warra nty-Guarantee 4.1.10

suClicicnll)' increase yo ur sl.l ff 10 han dle it prope rly? Yes No

5.1.1

Provided desi gn se rvices for the wor k

·1.1 .9

Based on )'o ur curr en t 5t3ft liste d in 2. 1. a nd assuming an ave rage project, .....h;ll j.. the la rgest single project )'our

s heet)

On how many o f the eM pro jects hstcd in 3.1 did you e nter into litigat ion/a rbit ration with the own er '? _ _

Occupancy/Start-up

387

CM organiza tion call effectively ha ndle? S _ If the project .....hich is the subject of this inq uiry .....35 large r than Ihe maximum size s tare d in 4.4, how wo uld you

4.6.5 REH:; n ENcES 5.11 Provide the fullowing inlonnarion 5.1

rou provided the fl)lIl\W;ng se rvices in who le ur in pa rt?

3.6

4,1.7

eM Fee Forms

4 6.J

eMproj ects listed in 3.1'!

35.5

Co nstructi on

4.5

Agency

4 6.2 4.6.3

H

4.1.6

44

'1

AI3Sl.:a and Haw aii

3.3.8

Section 24.13

.

-\'.~

Unde rway

3.3.5 Northwest 3.3.6 So uthwest 3.3.7

.•

Co mplete. bu t not closed cut

_

TOTALS

4.2

Based on your curre nt sla ff luted in 2.1. lind avera ge pr ojects from you r lisl in 3.1. what is the esnma te a nnual vctum e capacity o f you r C~ f firm ? $, _

4.3

J( the project which is the subject of this inquiry pu t )'our work load above the esn mated cap acity sta led in 4.2. ho w wo uld you su fficienlly increase your capa city to ha ndl e it properly?

Yes

6.1

All of the infor mation pro vided he rei n is to th e be st o f my kno .....ledge co mple te and accurate. and can be accepted by the solicitor as a valid res ponse 10 the q uestio ns asked . Firm _

6.1.1 Signed: 6.1.2 Signed by; 6.1.3 Tltlc:

No

6.1A

oS.J.I Add 113((by d irect hire 4.3.2 Contract services out

6.1.5 FIGURE 24.5 Co ntinue d

Da te:

_ _

_ _

FIGURE24.5 Ccnueucd

-

388

Cha pter 24

Secncn 24 .14

Acq uiring CM Services R EQ UEST FOR j'I WI' OSA (.

Su bmitted To:

Extended Services and Gua ranteed Maximum Price CM Fees

5.0

Cer1i rin li"l1 tlr lll rtlrl1la li' lll I' rol·jtl.·d

5.1

All infor mJ.lion pruvidcd herein cen be co nside red by the sohcuor. ru be pro vided in good Iauh and attain .. blc u n the proje el :IS p ropose d. by the e M firm named bel ow.

5.1 .1 Firm

Submitled 8y :

a: Corporation Part ne rship Ind i\'idua l Olher

Pr e vide lour

p rovo~cd

/'II ;,lI\;,lgl:ment l' b.n Ior the proj eci

b;l;~e d

5 .1.-1 Ti t le: 5.1.5 O:lIC:

,_ "_ , _"_ "_ " _ , _ "_

e)

OCCUP ilIl C)'

of the entire pr ojec t (10

_

"_ . _ "_ ,_"_

24 ,13. 3

1.1.3

Job Descriptio ns of a ll positio ns shown o n Both charts.

1.2

P ro vide a 2·Pa sc nar rative of how the or ganizat ion will Funct ion dur ing Design and d uring Co nst ructio n.

1.3

I'rov~d c

3 Sched ule [ba r ch:ln or othe r) sho wing how the Major d ement of the proj ect will meet the rime

Usin l: llOl\lurc lh..n 0 11 1:'" 1'",;:\,

z.t

Co st M.ln;JlIoc mCnl-Es tlntall ng, B ud gc ung, Cos! Re porting

2.2

val ue t-l.m 'lg..: m..:nl-\·al u<:

E~ ch, l; _"I I ..in

En~ int:eri n g,

liu" )UU prupu~c t u

110... rullu" inJ.:

rU ll ct i ull ~

24.14

Life Cycle Costs

23

Decision

M ;l n :l ~e l1l c n l -Chc d, .s and

2.4

Sched cle

~l a ll :l l:..: me nl -S y ~t cms. T)'p.: s..App licatl on s

2.5

Informa tio n ~l a n a~c m c :J t-eo 01mu n lca l ions. Documentation

rLlI;LneL:s. Expertbe

2.6

Rid, :'o.1 .m agclllcnt-lnsuranee. Bo nd ing. Decisions

2.7

Con trac t

~tana gc lI\(' n (-D i vid ing.

II l·c u l1l p li ~h

Bidding. Coor di na tion

3,0

',0

I'r u\ id... an [slim..l.: uf the

' .1

Preconstructicn acnvines

J.2

Constructio n aClivilie s

1 \· r~ l) n · l l o u rs

)U U" lIulJ e xpe ct to use on lh is prujcCl lo Qccompl i!oh:

PH ", PH "

x -1 .3

Th e total proJ..:cl _ _ _ _ _ _ __

_ _ _ _

PHrs

• !' re·cntell:.J ill lvl m~hon by Ownel.

FIGURE 24 .6 A t) pical Reqvest Fo r I'roposal ( RFP) .

Fe e Incentive Et h ics An e thi cal questi on ari ses regard ing th e dualle vel of performance infer red by perfor ma nce re wa rd s. Does a n owne r have to pay fo r improved pe rforma nce, or is a const ruction manager obligated to provide the best pe rforma nce when the origi na l ag reeme nt is made ? Ow ner s sh ou ld se riously ques tion the even tual wort h o f performa nce ince ntives from bo th an e thical and value-received perspective before includ ing them in a CM fee arrangement.

requirements, ;:,0

_

Per form an ce rewar ds: The se can be connected 1O man y asp ects of the construetion manager's performance and con sequently a re not as simple to mea sure as tim e a nd cost incentive s. Addi tion al fees a re contractually se t aside as a reward for effective perfo rm anc e (as seen from the own er 's perspective ). D ue to the nebu lo us criteria , the Cr..-t must de pend on the owne r's good fai th fo r reward . Havi ng made the comminuc ut, owners must retain sufficient bu dge t fu nds to cover the eventuali ty and no t be te mp ted to expend th em for o the r p urpo ses.

un:

1.1 Submi t yo ur Pro pose d o/ ~:l ni z a t i on in t he fo llowin g for ma t. 1.1.1 On-Sire o rgan iLdtilln CI;;Ir! WIth position Ti tles id en tified. 1.L2 Off ·S ite orsaniz;lt ion Chan ..... ilh posit ion Title s ide nti fied.

_

FIGURE 24 .6 Continu ed

b ) a cc nstru cuou time o f _"_ mo n ths (y e ars)

d) occu pan cy of are a (huildingJ _ '_oo _ "_

_

5.1.3 Name:

a) a ~ e si g n time of _ "_ months (weds)

c) oc cupancy o f ;1/(' ;\ (bui ldin g) _ "_00 _ "_

_

5.1.2 Signed:

~I(, info rmation p r~ v idc d b~ the C? ns l ru c t i ~ ~ Manager must address the spe cifics of the Owne r's Project as far es pos· SIble, Some o f the m te t p re uvc project cc nduio ns ha ve been simulated in order 10 obtain comparative answers h om respond e"," lt is requ ested Ih31all questions be ans wered on the bast s o f the inform ation as pr ovided he rein.

1.0

389

EXTENDED SERVICES AND GUARANTEE D MAXIM UM PRI CE CM FEES Fees for uie forms and vari at io ns o f th e eM sys tem arc genera lly combin ati on s of an AC M fcc ar rangement and o ne tha t reflects the part icular form or var iat ion be ing provided, (Review Chapter 6. eM Under D ual Services Agreem ents. ) The a rr angements include: Lu mp s um, with o r with ou t a co n tingency clause to co ver an y extended services or increased time result ing fro m acts or occurrences ca used by other tha n the construction ma nage r; Lump Stlll1 plus rcimbursabl cs, where the rei mbu rsable po rt ion usually cove rs the con struction manage r's cos t and exp enses during eithe r the preconstruct ion o r construction phase of the project. and so me times both: Fee enh an cement p ro vlslons mayor ma y not be included , however, their inclusion is more co mmon with CM forms a nd var iation s than they are with the ACM form . Fin a ncial risk enhance men t: construc tion managers assume varying deg rees of financial risk when provi ding se rvices beyond those required by the ACM (ormat. The assump tio n of risk enti tles the C xt to proportionally highe r fees.

390

Chapter 24

24.1 5

EXTENDED SERVICES CM FORM S

24 .1 5.1

Section 24.17

Acquiring CM Services

24.16

The G ~IP form of CM. and its three variati ons, includes a risk element tha t usually war rants an increase in the CM's fee. In addition to the fec for ACM involvement , the cons truction manage r is en titled to a prem ium for assuming financial respo nsibility for the cons truction budget. The pre mium amo unt is based on the obligations placed on the constructio n m ~ln a ge r by the pr ovisio ns of the Owner-Clvt agree ment. T he G M PC rvl form obligates the construction manager to pny for the cost of construction overru ns on a to ta l-project basis. Some G MPC M agree me nts (those involving fast-t rack or phased con tract ing tec hniques) obligate the CM to pay for cost overruns on a phase- budge t bas is. Other G M PC~l agreements ob ligate the CM to pay ove rruns on a budget line item bas is. The t\vo latt er agreements pro vide lillie pe rformance flexibility and are very demanding on the CM's budge ting and estimatin g sk ills.The fees for providi ng a GMP on the total budget can be expected to be conside rably less than the fees for prov iding a G M P on eithe r a phase o r line item basis.

Design- XCM

24. 16.1 Co ntra ctor-XCM

Cons tru cto r-XCM

T his Ct\'t var iation comb ines ACM se rvices a nd the cons tr uctio n of part of the projec t by the const ruct ion ma nager 's own forc es. TIle fee must reflect [be ACM services plus the CM's exposure to the loss or gai n conn ected with pe rformance of the constr uction require men ts. TIle fee am ou nt refl ects the CM's exposu re to the uniq ue projec t co nd itions and, part icularly. the fcc a rra ngement unde r which the C M is to be pa id for se rvices. If the CM's expo sure to constr uction risk is eliminated (as it would be if a costplus percentage. or Jump sum fee arrangement were used for Ihe cons tructor portion of the agreement), no C1\1 fee increase should be expected. In this situa tion, the CM/Cons tructor has no loss expos ure from constructor services: he/she will in fact ea rn a profit from the "plus" pro vision o f the cost- plus Ice a rrangeme nt. 24.15.4

Cont ract orlCo n str uct o r- XCM This variat ion combi nes ACM services with con tract ing and cons truction services.The CM fcc is established to reflect the risks invol ved in providing the contracting and construction functions 3S explained for Contractor-XCM and Const ructor-XCM.

Contract or, Con stru ct or, a nd Contra ct or -Constru ctor GMPCM Vari at ions

T hese variat ions furthe r complicate de te rmi nation of fair and equ itable Ices for construction ma nagem ent serv ices. It is ap propria te to individually cons ide r eac h clement of the total services with respec t 10 CMos e xposure 10 financial risk. Det ermi ning fees for the G}.1P variations follows the steps prescribed for ACM and XCM. as previously sta led . The CM variation obviously deserving of the highes t fee is Contractor} Construclor-G ;"'IPCM . which in analysis is a combination of Cont ractor/ConstructorXCM and G MPCM and represe nts the maximum degree of CM services available that a rc direc tly rela ted to cons truct ion. Fee development must conside r ACM serv ices. contrac ting serv ices.constr uct ion services. and the prov ision of a gua ranteed maximum price for the total project.

This varia tion combines ACM services and the holding o f trade contracts bv the COIl strucrion manage r. A single fee. cove ring ACM services increased LO compensate the construction manager for the financial risks of holding con tracts, facilitates the fee agreement. De te rmining risk value for fee purposes is based on the unique terms of the agreement with respect 10 the type. size. and number of contracts to be held by the construction manager. 24.15 .3

391

GMP CM FEE FORMS

If the Owner-A'E agreement for design services was en tered into without considera tion for CM ser vices, a second agree men t or an amendment to the design agree ment is required.The fcc for eac h CM service is not relat ed in te rms o f a moun t, and it sho uld never be assumed that combining AlE and CM services \vill pro duce total fcc savings. Design- XCM is a combi natio n of standard A lE serv ices and standard ACJ\1 serv ices, and fees should be negotiated within that divided context. If Design-XCb! is select ed at the outse t of the project, a combined A1E -C~1 agreement with a single fee cove ring design and construction management services is negotiated. The fee amoun t for design services and the fee amount for eM services sho uld be genera ted and analyzed sepa rately, as if the services were no t to be provided in combination. II is impor ta nt that the concept of sepa rate services prevail even tho ugh one firm is to provide (hem unde r a single agreement. The re is no overlap of services be tween the two. 24 .15.2

Co mm ents on the Interpretation of CM Fees

24. 17

COM M ENTS ON THE INTERPRETATION O F CM FEES

When reviewing proposed fees. it is important to recognize tha t CM services var}' in qua lity and quantity from one const ruction manage r to anothe r. These varia bles must be properly evaluated when compa ring fees during the final steps of the selec tion process. Whe n requesting fcc amou nts. owners shoul d requi re a breakdown of the ho urs to be expended in each of the obv ious Ct\. t service ca tegories. Eac h CM firm shou ld be requested to provide hour/cost inform ation for the pe rsonne l to be utilized in providing services. From the fee amount. hours. and personnel wages. the owner ca n rcalistically compare the real value of each Cvl firm's proposed services. 111e value of each CM's services sho uld be ra ted on the number of hour s to be devoted to the project and/or to each category of se rvice and the ave rage hour cost of services in total or by catego ry. Analysis of this info rmation. along with prior client

392

Chapter 2<:

AcquirinC1 r' ,' Services

reference Information, will provide a quantitative/qualitative e valuation base for each construction manager and provide valuable SUp pO Tt during fee negotiation s. Estimated hours are required in the RFp, Secti on 4.0. but may be ex pand ed by using the caregories in Section 2.0 o f the RFP and submitted with the scaled fcc propo sals.

24.18

THE IRFPAN D RFP

IRFP was designed 10 dete rmine the overall suitability o f responding Clv1 organizations. The RFP is designed to determine specific suitability for the project at hand. The projec t information pre v iously supplied to interested firms for thei r response [ 0 the IRFP may or may not need enhancement, depending upon the compl e teness of the initial info rmation. . .

TIle

"

'~.

APPENDICES

"

ApPENDIX A A Suggested Technical Knowledge Base for CM Operations Personnel 394 APPENDIX B A Model Program for the Certification of Construction Managers 400 ApPENDIX C An Example of the Use of Innovative Contracting on a Complex Project 411 ApPENDIX D Some Contract Provisions to Convert Single Prime to Multiple Prime Contracts 416 ApPENDIX E Activities During Project-Delivery Phases for the GC, D-B, and CM Systems 422 ApPENDIX F Subcontractor Survey Regarding GC Practices 44S

)(

393

Section A.l

APPE ND

x

eM personnel closely interact with arc hitects. engi nee rs, owners, and various consultnm s du ring the co urse of the proj ect. Inte ra ctio n occurs nt meetings. via phone ancl co mput e rs. duri ng tele con ferences. in correspondence and mee ting minutes. a nd in on e-on-one conve rsa tio ns. Al l these commu nicat ions deal with the technical face ts o f de sign a nd con stru ction as well as the management aspects of project delivery. Many interactions arc at a high technical level (i.e.. tho se with architects and engineers in the civil, mech ani cal, and electrical disciplines). T hese professiona l persons have comptctcd a course of learn ing at the university level or gaine d the equivalen t from experience nod have proven minimum competence by becoming legally registered or licensed. A s sla ted in Ch apter S.Th e eM Organization, a co nst ructio n man ager is a n o rganizati on. not an individ ual-a n organization co mpri sed of specialists and gen er alists who colle ctively possess the expertise to pro vide eM se rvices. The specia lists are th e resource persons whose backgr ounds and educat ion put them on a par with the specialists with whom they must interac t a t high technical level s. TIle gen eralis ts arc the ope rations persons who must huve, ill addition to the ir proficiency in the manageme nt aspec ts of project deli very. a level of competence in th e technical arcu s 10 functi on effectively. Thro ughout a projec t. eM ope ra tio ns pe rso ns inte rac t con stan tly with specialists. both in their ow n orga nizatio n and the o rga niza tions that compri se th e proje ct team. The ir ma nagem ent ro les as commun icators an d decision facilitat ors mandate that they have the requ ired technica l kno wledge. To ide ntify the level of compe tence thnt eM operations personne l should have, the followin g qu estionnaire is included . 111C list is representative o nly of the tech nical kno wled ge eM ope ra tio ns per son s sho uld have. and it should no t be co nstrued as e ither co mplete o r as I n aca de mic meas ure o f ove rall C M co mpet ence. Re ferring to th e CM o pera tio ns per son nel ide ntified in C hapt er S, Lev el l (executive ) pe rsons sho uld be able to answer most q uestions correctly, Level 2 [m an agement ) per sons sho uld be able to answ er a/m ost al/ question s correctly, and Level 3 pe rsons (on -site administra tion) sho uld be ab le 10 answe r :Wlflt' q uestio ns correctly. II sho uld be no ted that simp ly findin g the correct answers to the que st ion s will not de monstra te co mpe tence: it is nece ssar y to under st and the subjec t mat ter be hind the questions. Whe n using the questionn aire , the " I Don 't Kn o w" option should be

395

se lected if there is any doubt concernin g a cho ice oC"True" o r "Fa lsc.t'The ob jec t is not a passing sco re, it is to pro vide a sel f-assess me nt of your comfortle vel as an ope rati on s pe rso n In a CM firm.

A

A Suggested Technical Knowledge Base for eM Operations Personnel

Represent ative Technica l Knowledge for eM Oper ations Persons

A. 1

REPR ESENTATIVE TECHNICA L KNOW LEDGE FOR CM OPER ATIONS PERSONS

001 In some cities. zon ing ordinances establish fire zones. where all buildi ngs must be con structed of non combust ible materi als.

T F ?

002 TIle intent of building codes is to prot ect publi c health and sa fety by es tablish ing a minimum standard of con struction qua lity. 003 Fire re sistance ra tings for all con struction compon ents and

T F ?

mat er ials can be found in the BO CA Code.

T F ?

004 Most bui lding codes in the Uni ted S tates are based on either the 005

006

007 IlOS 009

BO CA Co de. Unifo rm Building Code . or the Standa rd Bu ilding Code. The dollar amo unt of fire insuran ce pre miu ms influen ces the co nstruction standa rds for a building. The C5I r.. ta stc rforrna t divid es const ru ction co mpo ne nts and ma ter ials into 16 prima ry divisions. Th e CSI Masterforma t pro vides example techni cal specifica tions for the 16 primary d ivision s. Th e tot allive load of a building is the sum of furn ishings, occupa nts. movea ble eq uipment , sno w,ice. and water on th e ro of. Wind can exert forces on a build ing or struc ture in a latera l, upward. o r down ward d irectio n.

010 Clay is gene rally refe rred 10 as noncohc slve o r cohesionless so il. 011 Po ured conc rete foo tings sho uld be placed on un d ist ur bed so il, not o n en gineered till.

T F ? T F ? T F ? T F ? T F ? T F ? T F ? T F ?

012 Steel H pi les d riven to refu sal and caisson s drill ed in to bedrock a re comparable stru ctura l sol utio ns for foundati on construction.

T F ?

013 Framin g lumbe r is cons idered "seasoned" if its mo isture con tent is less than 19%.

T F ?

01·1 Th e actual d imen sio ns of a seaso ned 2 X 12 so uthern pine plank is

1'// X Il i/t . DIS A 2 X S wood joist. 12 feel long. contains ap prox imate ly 14 feet bo a rd measure.

T F ? T F ?

016 Medi um stre ngth mortar (Type N) is sa tisfac tory for masonry work above grade.

T F ?

017 If the color of a brick is very dark, it probably has a low rate of wa ter absorption .

T F ?

0 18 When sto ring co ncre te bloc ks o n site pri or to usc, they sho uld be

pr ot ecte d fro m the weather .

T F ?

394

- - - - - - - - - - - - - - - - - - - - - - - ---'- - - - - - - - - - - -- -

- ---

396

Appendix A

A Suggested Technical Knowledge Base for

eM Operations Personnel

be 2 wythcs wide.

T F

?

[0

the wall .

lime, sand and wa ter.

T r

'I

T F ? T F ?

023 An ~'" X 8" x 16" standard concrete masonry unit would weigh approxima tely 30 to 35 pounds.

030 03 1 032 033 034 035

capable of containing. 040 Th e " U" value of a specific materia l is the reciprocal of its "R" value.

041 One uf

"M '~' I i:'f;

043 TIle three ra tings for interior finis hes specifically covered by code

-:~

are flame spread , fue l contribution, and smoke development.

T F ?

047 A n s-ts.so flwood.2 X 12.R feel lo ng would we igh =: 30 r ou nds. 048 Intern al comp ress ive/tensile be ndin g stresses resu lt fro m th e

T F ?

T F ?

10pounds,

T

F ? F '!

T

F '!

T

F ?

T

10 st ruc t ural

me mbers,

049 A penetrome ter is a meas ur ing de vice co mmonly used T F ?

F ?

T F ?

struc tura l member.

a pplic atio n of ex te rna l no n-axia l forces

T

T F ?

tested before the installe d system is tes ted in the field.

046 A 1I4" lh ick steel plate measuri ng 12" X 12" would weig h close to

T F 'I

T F ./ T F ?

the safely Ic.nurcs (If tempered ,gla!'i!'i is that. when hrokcu .

it reduces to small gr anules rather than large sharp s hards.

T F ?

10

approxima te the compressi ve strength of a mate rial.

050 R elative h umi dity is the amoun t o f wate r vapor in an ai r mass at a speci fic temper a ture a nd pressu re.

T F ? T F ? T F ? T F ? T F ? T F ? T F ?

T F ?

051 A be am- to-col umn s he ar co nnec t io n resists the ten den cy o f the bea m 10 slide dow n o r up th e col umn bu t docs no t resis t ro ta tio n. 052 A shear pan e l is a wall, Iloor.or roof su rface Iha t acts as a diaphragm to stabilize it structure against externa l forces. 053 A bloc k o f concre te wh ich p re vents t he late ral mo vemen t o f a Witter mai n at a 90 E cha nge in dire ction is cal led a th rust block. 054 A dif ference be twee n C PM and PERT sc he du ling is tha t C PM selec ts one d uration pe r activ ity a nd P ERT picks three du rations (opti mistic.mos t p rob able, nnd pessimis tic) and rel ics on statistical selection. 055 Th e straig h t-line de p rec iatio n me tho d writes off eq uipme nt faster th an ei ther s um-o f-t he-years or d eclining-ba lan ce me thods,

T F ? T

F

.,

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T F ? T F '!

056 Wh en usi ng prese nt worth to calculate life-cycle cos ts of al ternatives, the higher p resen t wo rth is the econom ical choice.

T F t

057 An item's life-cycle expense includes its purchase, installation, T F ?

opera ting, mai ntenance. rc plnccrnen t. an d fina nce costs.

T F ?

058 A four-cycle engi ne's ho rsep owe r, produ ced under restrain t o f a T F ?

038 In a the rmally-insulated office building envelope, the vapor ba rrier is always placed on the cold face of the envelope system.

039 Th e lower the te mpe ratu re of the air.the more water va por it is

042 A lull-scale mock -up of a cu rta in wa ll sys tems is usually laboratory

;;j

397

Operations Person s

have diffe ren t physical requi re me n ts.

037 Th e co nfigura tio n of the s tr uc tu ral re in fo rcing steel in a one-way slab p recludes the ne ed fo r tem per at ur e s tee l.

~J

eM

045 A n ax ial le ad is one tha t is applied pa ra lie! 10 the lo ng axis of a

036 Post-te nsioned concrete beams have highe r bending strength when the ten sioning strands arc d raped th an when the)' arc stra ight.

..~.. !

Representative Technical Knowledge for

T F ?

029 If corrosion is not a factor, and d eflectio n co ntrols the design of a simple beam , the subs ti tu tio n of A2 42 high streng th s teel for A 36 carbo n s te el woul d no t be ju stified . Load indica tor washers a re used in struc tural steel bolted connections to indicate if a bolt has been properly tensioned . Type IlA Portlan d cement is used whe n it is nccess:lry to obta in a fast initial set in a conc re te pour. w hen used in co nc re te, fly ash increases s tre ng th , decreases pe rmeability. red uces mixing wa te r. and imp ro ves pumpa bility, Th e workability o f con cret e with n low wa ter-ce ment rat io can be improved by replacing Type IA ce me n t wit h Type I cement. Th e same conc rete mix pou red unde r wa te r (by trernie) will reach n hig her event ua l co mp ressive st rengt h th an if po ure d in the d ry. TIle ex ter na l co ntrolling fact or s in co ncre te form design a re the rate of pour and the ambient and co nc re te temperatures.

~

Sect ion A.l

T F ?

026 Efflucrcsccnce on masonry walls can be avoided by selecting maso nry units Ih,H do nOI co nta in wa te r-sol uble salts. 027 111e nrc resistance of an 8" modula r br ick wall is app roxi mately twice tha t of a standa rd S" co ncrete block wall. 028 The exira 181U1f in a WlOx30, compared to 3 WlO Xl~. is mo re in we b thickness th an in the wid th and thickness of the flanges.

...

~

044 A tire separation wa ll and a fire wall serve the same purpose hut

024 TIle s ta nda rd for det erm ining the allowable bea ring ca paci ty of rei nforced ma sonry walls is to b uild a sec tion of wall an d test it. 025 Mo vement joints in masonry walls should be placed at d isconti nui ties (changes in thickness o r height) in the WOI II.

.... ' ~

020 A rowlock modular brick is laid on its end with its face parallel 021 Whe n constructing a rectangu lar masonry foundation wall, the mason first lays up the corners and [hen Hils in be tween them. 022 Mo rtar used in masonr y co ns truc tion consists of Por tland cement,

'II

/~.

019 A 12" thick, sol id masonry wall.Iaid up o f modula r b ricks, wou ld

I,

gov e rnor, is called that engi ne's br a ke hor sepower .

T F ?

059 Fo ur-cycle engines lose power whe n working at high elevations T F ?

and gain power at higher temperatures,

T F ?

398

Appendix A

A Suggested Technical Knowledge Base for eM Ope ra tions Personnel

Section A.l

060 A 30 ton PCSA Class 12-105 cran e can lift 30 tons at a radius of 12' with its basic boom and 10.500# a t 40' with a 50 toot boom. 061 The radius. used to calcu late the lifting capacity of a crane, is measur ed from the base of the boom. 062 Th e practica l dewa tering de pth of a single stage \...cllp oio t system beco mes less a t highe r altitudes. The cubic vard s of sand excavated from an undisturbed borrow 063 pit will pro vide a n eq ual volum e of compacted sand a t the fill site. 064 The LC Y capaci ty of a 5 CY fro nt -en d loader is fou nd by mult iplying 5 C Y by the bucke t's fill factor in a give n ma te rial. 065 Of all excavat ed materi al to be hauled, solid rock swells the most from BCY to LCY. 066 Facto rs that increase the load o n vertical co ncrete forms are: rat e of placem ent, slu mp, vibra tion and tempe ra tures. 067 Th e maxim um des ign pressur e for a con cre te wall-for m design need no t exceed the unit weight of co ncre te times th e height of the pour. 068 TIle design of shores suppo rt ing conc rete deck and beam pours falls into three length classes; short , me dium, a nd lon g. 069 TIle two major factors to co nsider when calcu lat ing a sho re's suppo rting capacity a re its uri-bra ced length. a nd least sectio nal dimension. 070 The th re e basic for ms of heat invol ved in HVA C calc ula tions nrc: sensi ble he at , late nt heat, a nd ra diant hea t. 071 The Briti sh therm a l unit is the un it used in the United States as the measu re of hea t gain and heat loss in HVAC calcu lations. 072 TIle perce nt differe nce be tween the two re adin gs of a sling psychrometer in a space is [he relati ve hu midi ty in tha t space. 073 U ndcrsizing o r o n-the- nose sizing of H VAC equipmen t not only lowers initial cost but also reduces life -cycle cost. 074 Op timum comfort for occ upa nts o f a building is approximately 70"F DB and 40 % RH , 075 An adi abat ic cha nge in air char acteristics occu rs whe n water vapo r is added without an accomp an ying cha nge in air te mper ature. 076 To obtain desi red supp ly a ir quality, a ir is often cooled and th en reh eated. 077 Infiltration of o utside air thr ou gh a building's envelope is not cou nted as pa rt of a building's mak e -up air req uirem ent s. 078 O ne air-change -pe r-ho ur (ACH) mean s that all curre nt air in a ventilated space is replaced within an hou r. 079 Th e tem per ature of th e water e nte ring th e cooling coil o f an HVAC chiller must be less tha n 35°F.

,

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r

~

T F ? T F ? T F ? T F ? T F ?

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,

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T F ? T F '!

T F ? T F ? T F ? "

T F ? T F ? T F ? T F ? T F ? T F ? T l' ? T F ?

I

i

,I

Representa tive Techn ical Knowledge f o r eM Ope rati ons Perso ns

080 In H VAC systems. the transpo rt characteristics and capabili ties of ro und ducts are be tte r in all respects than rectangular ducts. 081 Low- velocity du ct-work tr ansports air at less tha n 2500 fpm . 082 Th e design of HVA C systems is hea vily influenced by the provisio ns of fire codes. 083 A tire-tub e boiler is o ne where fire a nd hot gasses circulate around the rubes and water flows thro ugh the tu bes. 084 En thalpy is syno nymo us with total he at ; th e sum of latent heat and sens ible he at. 085 A bsor pt ion re friger at io n mac hines depen d o n th e use of dry lith ium bro mide and a heal source for their oper ati on. 006 Th e water pressur e in mu nicipa l wa te r systems is gene rally between 70 psi an d 80 psi at a buil ding's meter. 087 Th e wa ter pressu re requ ired fo r the nor mal o pe ra tion of the common build ing plumb ing fixtures is 40 psi at the fixture. 008 In tall buildings, it is not gene ra lly permi ssible to use the same ta nk 10 sto re dome stic wat er a nd fire pr otection wat er. 089 A criteria for stored wa te r in sprin kled buildi ngs is suffici ent volume to cont rol the fire until tire fighting un its a rrive. 090 The purpose of gro und-level siamese fire connecti ons is to allow fire-fighting equipment to tap into the building's fire protect ion syste m. 091 St orm water and sa nita ry waste can use one com mo n buildi ng drainage system if the common dr ain is properly ven ted. 092 Roof dra inage design is usually based on the max imum rainfall. in inches per hour, for th e area in whi ch the building is locat ed. 093 Electrical power tran smission lines carr)' high volt age electricity beca use high volt ages ar c cheap er to tr ansm it than lo wer volt ages. 094 An AWG 18 gage conductor is physically large r than an AWG 10 gage co nducto r. 095 111e usc of bus-du cts is popular in ind ustrial co nstruction becau se o f the ir flexibili ty and eas e in hook ing up electri cal equipment. 096 The colors produced by light fixture sou rces is an impo rtan t factor when the a rchi tec t se lects interi or finishes and colo rs. 097 The design of a vertical transpo rt a tion system is accomp lishe d by using a performance spec ificatio n issue d by the arch itect. 098 An import ant factor in th e desi gn of eleva tor systems is the lo bby waiti ng time. 099 Th e architect or engineer hired by the owne r to prov ide design se rvices has th e legal re sponsibili ty fo r all design de cisions.

399

T F ? T F ? T F ? T F ? T F ? T F ? T F ? T F ? T F ? T

F ?

T F ? T F ? T F ? T F ? T F ? T F ? T F ?

T F ? T F ? T F ?

Sect ion B.1

APPENDI X B

A Model Program fo r th e Certificat ion of Construction Managers In

1 9~ .

the C:-'lAA installed a committee

(0

study the subject or-t he certification and

registrat ion o f co ns truction man agers.r The report. in the fo rm of a certi fica tion model. was co mple ted in 1986.1t was dete rmined that regist ratio n (lega l licens ing) is a co nsid eration of state go vernments and may occur in the fut ure. but the current effort should be certi ficati on. Two ce rt ifica tio ns o ptions were inve st igated . one for indi vid uals who made eM their car eer and ano the r fo r firms th at pr ovide eM se rvices to d iems- Finn ce rt ification W:J, S depende nt on individual certifi cation; indi vid ual ce rt ifica tio n stood on its own. A mod el wus crea ted for ea ch option. It was suggested that an indi vidu al's proficien cy be tested in the twelve ar eas of knowl edge (Chapte r 9, The CM Body of Knowledge) with certificat ion granted in as many areas as the ind ivid ual successfully pursu ed. Finn certificati on was mainly dependent on havin g certified ind ividua ls o n staff in all twelve areas. TIle following is a review of th e mode l p roposed fo r C!'.l firm certific ation . It P«> vidcs additional insight int o the practice of const ructi on management as p resented in this tex t. B.1

MODEL OVERVIEW

The mod el provides ce rtifica tion of indi viduals who have ch osen co nstructio n managemc nt ~I S their caree r and firms tha t p ractice con struct ion ma nageme nt by p roviding Cj\'f se rvices to own er s. It is assumed lhal indi vidua ls who have chosen C M as a car eer will be employed by the firms that practice CM. The model bases ce rti ficatio n o f a eM firm o n the mi x and number of cer tified personnel it employs. Th is stack ing arrangement foster s the con cept that a CM is an o rga niza tion and pr ovides the ke y to the pr act ical success of a eMcertificat ion progr am-a marke t is created for certified individu als. Unlike most curren t co nstruction industry certifica tion p rogram s wh er e a fram ed certifi cat e is the only tangible re ward for bec oming certified, cert ifica tion is a pa th to employmen t by CM firms. The model recognize s that co nst ruction manage ment practice req uires expe rt ise in se veral areas o f knowl edge . and that it is possib le fo r expe rtise in all a reas to be veste d in a single indivi d ual. H owever , th e m od el assu mes that un der most project 400

Mode l Overview

401

co nditions th e requ ired con stru ction man agem ent fun ction cannot be phy sically acco mpli shed by an individu al. TIle mod el stro ngly supports the accepted criteria that a CM firm be a multi -discipl ine o rga niza tio n with all of the requ ired discip lines in its employ. Twel ve a reas o f knowle dge were es tablished to de fine the CM body o f knowledge. E ach area o f knowled ge was eva lua ted for its co ntr ibutio n to the performance o f cred ible CM se rvices. Th e a reas o f kn o wledge arc establishe d in a bibliograp hy of app ropriate text s, papers, and arti cles. a nd a d atabase pool o f test ques tions are ava ilab le to measure expe r tise in each ar ea . The test questi on s are co mp art mented into the twel ve areas. an d each q uestion is assig ned a specific degree o f difficulty ( A. B and C. with A questi on s the most difficult a nd C questio ns the leas t difficult). Tests a re formu lat ed randomly by compute r screelion for eac h area of kn owl edg e tested a nd for the appro priate d egr ee o f d ifficult y req uired for a particular cert ificati on. TIle content of ea ch area of knowl edge is es tab lished specifically for eM pe rforman ce. Ho wever, ot her con struct ion industry o rga niza tio ns/associations that certify indi vidua ls have kn owl edge areas thm ar c sim ila r o r overlappi ng. Co nse q ue ntly,prcvisions are incl ude d in the model to acce pt ce rtifica tio n gra nted by other o rga nizelion s/associati on s as credit towa rd C!v1 certificati on. An indivi dual interest ed in becomi ng certified ca n choose from three levels of achievement: Ce rtification as a Specialist (resource per son ) in one o r more of the twe lve a reas o f kn owle dge; a Con struction Manager (op eration s per sons) spa nning all a reas o f knowledge. or a Con structi on Manager-in -Training with an option to e levate to a high e r level. TIle criteria fo r individual certificati on includ es educa tion, ex perience. and expe rtise. Education and experience are d emonst rat ed by documentation.expertise by

examination. Expe rience and education a re prerequ isites to examinati on . Formal educat ion ill co nstr uctio n-rel a ted program s above high schoo l and expe rience in co nstruction and construction-re lated positio ns co mbine to sa tisfy th is req uire ment. Individual certificnrio n req uires periodic updating thro ugh subseq uent examination in add itional a reas of knowledge and cont inu ing educatio n. TIle goa l o f the certificat ion program W;lS to imp ro ve construction ma ~ ag er s ' pc.rIonua nce by st ipu lati ng minimum requ ire men ts for ind ivid uals and firms Involved In the pro viding of eM services and by upgr ad ing CM firms through the co ntinuing cduca tion of their per sonnel. The model accommoda tes eM p rac tice ::I I all level s and in all for ms by requiring co nfo rma nce to existing standards. no t a change in the standa rds themselves. II establishes th e ce rtification of CM firms as the key to cred ibilit y in eM practice by assur ing clients that the firms they hire have co mp etent personn el on staff. The cer tification o f CM firms is practic al bec au se it is based on th e cer tificat ion o f th e firm' s employees. TIle mod el's "s ta temen t" is that a eM firm's capabilities to provide se rvices C3n be confidently mea sured by the capab ilities of the individuals it e mplo ys.The strength o f the model is in the du al-cert ifica tion co ncept. Cert ificati on is awa rde d 10 CM firms base d on thei r ab ility to ma tch current co nst ructio n industry cri te ria. The int ent is to estab lish a firm's po tenti al performance

4 02

Append ix B

Section B.2

A Model Program for t he Certification of Construction Managers

8.2.2

based on exper ience an d av ai lab le exper tise. Experien ce takes in to conside ratio n the types a nd sizes of projects completed; expert ise, the size, divers ity. and de mo nstra ted ability of the firm's per sonn el. The award ing o f ce rt ifica tio n ne ither guaran tee s nor pr o mises th at a certified firm will pe rform to ind ust ry stand ards, but rather th at a firm :

8.2

B.2. 1

Certific atio n Catego ries and Titles

A " Co nstru ction l\la nagc mc n t Spe ci
..

..

To q ualify for e M S certi fica tio n, a ll indi vid ua l must :

Meet the minimu m co mbi ne d ed ucation and ex pe rie nce requireme nt Rece ive a passing grade in the "C' Le vel writte n exami na tion testing th e indiv idua l's expert ise in ove ra ll CM practice o r hold CM IT certification Receive a passing grade in the "A" Lev el writte n exami nation s pecifically te sting the ind ividual's ex pe rt ise in his/he r chose n ar ea (s ) o f spec ia liza t ion. To q uali fy for PCM cert ifica tion. an indiv id ua l m ust: Meet the minimum combined ed uca tion and expe rience req uire ment Receive a passing grad e in a "B " Level wri tt en examination te sting the individual's expe rti se in ove ra ll CM practice .

THE CERTIFICATION OF IND IVIDUALS

Goa ls an d Obj ec t ive s

To q ua lify for CM IT ce rtification, an individual m ust:

Co nstr uction man agem e n t practice is a mult i-di scipli ne se rvice. the success of whi ch is alm ost en tirely dependent upo n the capab ilities of the indi vidu als engaged by th e con s truc tion manager . There are thr ee factors tha t co nt ribute to the individ ual's capabilities: e xpert ise. expe rien ce, and education. To become certified, an individual mu st meet o r exceed the minimum prescribed req uirem en ts in these thr ee areas. The areas of know ledge th at co nt rib ute to the comple te practice of construction mana gemen t in the form of resource pe rso nnel a ~c : Budge t Manageme nt Co ntract Managem ent Decision Managemen t In for matio n M ana ge men t Mat er ial/Eq uip ment Ma nagement Project Managem en t

403

Fou rteen sepa rate cert ification ca tego ries arc re cog nized in two equal p ro fession al titl es and one internsh ip ti tle.

• mee ts the cr ite ria of ce rt ification has a demonstra ted ca pability to pe rfo rm to ind ustry standards has the ab ilit ies listed in a da ta sheet that ev idences a firm' s ce rtification.

Wh en cert ificati on is granted. a certificate and a da ta shee t is issued to the firm. As a condition of acceptance, [he firm is req uir ed to sign an ag reemen t binding it to complia nce wit h the cer tificatio n code o f e th ics. Pri o r to each firm's ce rtification anniversa ry, the lin n must s ubmit an upda ted self- a udi t for m for review.The cc rt iflcutc is e ithe r ren ewed and the d a tu s hee t upda te d o r certifica tio n is withdrawn. firm s that achieve cert ified sta tus are designat ed as Ce rtified Co nstr uc tion Manage rs an d can place the letter s CC~ I a fte r thei r company name. Th e term "cons truction man ager" currently applies to both individual p ractitioners and practici ng firms. T he mode l promotes the exclusive use o f the te rm con st ruc tion manager for the firm pro vidi ng services ra the r th an the ind ividua ls employe d by the firm .This selected usage rei nforces the fact that construc tio n managem en t se rvices ar c provided by C~l firms, no t indi vidua ls.

The Cert ificat ion of Individuals

Qu ality Manage men t Re source Man agement Ris k Management Safe ty Managemen t Schedu le Manageme nt Value Managem en t

Effec tive eM pra cti ce is h ighly depe nden t on the adequacy. avail ability, and pr op e r linki ng o f :.111 areas. Consequently. opera tion s personnel who coo rdi nate th e output of reso urce pe rsonnel are a key ing redient in a CM firm.

Receive a passing grade in the " C ' leve l written e xam ination testing the ind ividua l's expe rtise in ove ra ll eM p ra ctice.

8.2.3

Recipro city O the r construc tion indu st ry gro ups h ave ce rt ification p rogram s tha t arc eq ua l to and com pa tible with so me o f the discip lines a nd a reas o f kn owled ge in vol ved in ind ivid ual ccrti ficntious. These includ ed the Societ y o f Value Enginee rs, the Const ruction Specificatio ns Institu te, an d the Project M anageme nt Insti tut e. Certificati o n duly received from these and o the r approved organization s is acce pted as co nclusive ev idence o f expert ise in compar ab le areas of cer tificati on . Co nseq uen tly, C1\1S sta tus is awa rded to applican ts without the "A" leve l exa mination re q uireme nt in the specializa tio n. H o wever, the "C" Level exami na tion mus t be take n and a pa ssing grade received. A pplican ts seeking CMS sta tus through recipro city with SAVE, PM I, or CS I cer tifica tion mu st s ubmit a wr itten req uest with the ir ap plicati on, includ ing supporting evide nce o f ce rti ficatio n. Other certification rec ip ro city requests mu st be s uppo rted by

404

Append ix B

A Mod el Prog ram for the Certi f ication o f Construct ion Mana gers

Section B.6

document at ion es tab lish ing the credibility o f the ce rtificati on p rogram to the sa tisfaction o f a Ce rtifica tio n Ad ministratio n U nit. 8.2.4

405

E xperien ce may subs tit ute for a ll or part o f the minimum educat ion requirernent.Th c experience equivale nt of a two -year associat e degree program is th ree years: a two -yea r technici an pr ogram . two yeJ rs; a nd a fo ur-year undergraduate ba chelor degree p rogr am , six years. . . . . Th e min imum experience requirement for ce rtificati on IS one year at th e lime application is made. educa tion and expe rie nce equi vale nts not withstanding. As examples. a four -year bachelor degree in an accredited construction program and on e yea r of acceptab le experience meets the minimum req uirements. Seve n year s of acceptabl e ex perien ce without app licable co nstruc tion education, or a two -year associate degree and fo ur years e xperi e nce, also mee t minim um req uiremen ts.

Cu rrent Rec ip ro cit y Ce rtification Equiva lents

The Proj ect M ana gem cn t Professional (PMP) certification qualifies for Construction Managemen t Spe cialist (C MS) sta tus in the specialty areas of Info rmatio n Manageme nt , Material/Equipment Ma nageme nt, and Project M anageme nt. The Certified Value Spc cialist (C VS) ce rtifica tion qualifies for Pro fession al Consuuc rion Management Speci alist (PCMS) sta tus in the specialty areas of Value Manage ment and Budge t Ma nageme nt. T he Certified Cons tr uction Specifi er (C CS) ce rtificatio n qu alifies fo r Pro fessional Con structio n Ma nagemen t Specialist (PCMS ) status in the specialty o f Mat eri al! Eq uip me nt Management and Quality Managem ent.

Certification Renewa l

B.5

THE INDIVIDUAl' S CERTIF ICATIO N A LGORITHM

E nte r (he po ints appl icabl e to yo ur ed ucation and expe rience and entcr the tot al. Educa tion poin ts on ly ap ply to ON E of th e four edu cat io n progra ms listed . B.3

OVERVIEW OF THE PROCEDURE

B.4

CERTIFICATION CRITERIA

To be e ligible for the C fvtS or peM and CM IT examinations. a co mbination o f experi. ence and education is req uired. Educati on mu st be in a constr uction or co nst ruction-related two or four year co llege level program, accredi ted by e ithe r the ACC E or by ABET and evidenced by u valid Associa te o r Bachelor diploma orTech nician certifica te. Ed ucati on credit will no t be give n for inco mplet e programs or programs less th an two years in length . Expe rie nce cred it will be given in lieu of education credit fo r time spent in incomplete and less than two year co nst ruction or cons truction- related programs.

E xpe rien ce must be in the co nstru ction indu stry o r (u po n excep tion) in a closel y rela ted field. Expe rien ce: wit h a con str uction man agem ent Iirtu, con trac tor . architect . engine er . o r as an owne r's representat ive o n con st ructi on projects eq ually qua lify

6 points 5 points 3 points 2 po ints I point

Four-year Bachelor degree : Fo ur-yea r Associate degree: Two -yea r A ssociate:d egree : Two-yea r Tech nician Ce rtificate : Experience. per 12 month pe riod :

Ind ivid uals seeking certi ficati on must complete .10 applicati on form . Ind ividuals can det e rm ine eligib ility levels by reviewing [he req uire men ts se ctio n of th e for m. Elig ible appl icants mus t comple te the examina tion req uest po rtion of the applicati on and forward it to the administ ration unit. Upon rece ipt. review. and approva l. examina tion information is forwa rded to the a ppl icant, including the appro priate areas of k nowl edge with bibl iographies a nd info rmation o n the next examination date an d locat io n. A fter the examinat ion (s) have been ta ken and processed, individ uals urc noti fied o i the re sults. Th ose who pass arc requi red to sign the cond itions of ce rtifica tion sta tement co mmitting him o r he r to the code o f e th ics a nd ot her professio nal ob ligation s before receiving a cer tificate of ce rtification Ind ivid ual ce rtification as CMS and r eM is subjec t to renewal ever y three years, CM IT certifi cat ion remains valid . requ iring no ren ewa l.

Edu cat io n Points: Ex pe rience Poi nts: To tal Po ints: R eq uirem en t for e MS an d peM Applicatio n: 7 o r mo re to tal po ints. Requirement fo r C M IT Application: 1 or mor e tot al points.

B.6

INDIV IDUAL CERTIFICATION RENEWAL

Ce rtification must be ren ewe d every thr ee yea rs on the ann iversary da te of o rigina l cert ification. A re newal fo rm is au tomatical ly sent to the ind ivid ual by the administration unit. Th e person completes the form by providin g the req uested informa tion and returns it to the unit. The req uirement for re newal is eviden ce o f pr ofessional improve me nt and updating du ring the three pr e viou s years. The req uireme nt can be sa tisfied in nny one of fou r ways: By becomi ng ce rtified in o nc or mo re add itional specialist a reas o f kno wledge By receiving co mp le tio n ce rtifica tes from four or more sho rt co urse s By earning 4.8 contin uing ed ucat ion unit s (CE.U:s) in " cou rse or co urses approved fo r credi t

406

Appendix B

A Mode l Prog ram for the Certi fication of Construction Managers

• By formally participating in a construction or construction- related highe r education program for at least o ne semester or quarte r. Ind ividu als that fai l to renew their ce rt ifica tion as stip ulate d above ca n rene w ret ro actively upo n evidence that the professional improvement req uirem ent for the elapsed pe riod of time was met. Ce rtifica tions not rene we d within one year of the indio

vidual's renewal date shall be noted as inactive on the official records.

B.7 B.7.1

Goals an d Obj ecti ves

1. 2. 3. •.1.

eMde pend o n fou r a ttri butes to provide high

performa nce levels

Abili ties of individuals that provide services Management systems used to provide se rvices Expe rie nce gai ned o n pas t projects Basic phi losop hy o f se rvices pr ovided ,

A CM firm must est ab lish its ca pab ilities thr ou gh th e abi lities o f th e ind ividua ls it em ploys to become ce rtified, Th e firm's term o f cer tificatio n is then depend en t o n its capacity and e xper tise in the thre e remai ning areas. Cert ification establishes that the firm: 1. has me l the criteria for ce rt ification ~ 2. has the poten tial to pe rfo rm to establishe d stand ards 3. has speci fic pe rfor manc e capacities an d ab ilities. Cert ification is neither a gua ra ntee nor promi se th at a cert ified firm will pe rform to establishe d sta ndards. Me mber sh ip in the certifying orga nizatio n is no t a pre req uisite for certification, nor does it influence the gra nti ng of ce rtifica tion.

B.B

OVERVIEW OF TH E PROCEDURE

Firms applying for certificat ion must request a nd complete an applica tion for m. TIle crite ria and req uirements a re a part o f the app lica tio n. Wh en co mpleted, the form decisively d eter mines cert ification sta tus, Continuing toward certification evaluat ion is at the applicant 's option. If the applicant meets the requi remen ts and desi res ce rtification, the application is fo rwarded to the Certification Administration U nit. Ifupon review all is in orde r, an audit date and itinerary are set for a visit to the firm. Discrepancies found during the visit o f the audit team must be resolved.

J

Overview of the Procedu re

407

An audit repo rt is sent to the firm shortly after the visit, indicating the approved term of ce rtification and o ffering sugges tio ns for possible improvement. Ce rtification ler ms ex tend from two to five )'cnrs a fte r wh ich th ey require renewa l. Ce rt ificatio n is evide nced by a ce rtificat e with an expira tio n da te, a ce rt ificatio n symbol tha t may be used on the firm' s printed materials. and a standard detailed d at a sheet at tes ting to the firm's capabilities. A s a condition of acceptance, the finn must subscribe to the code of ethics and the condit ions of certification.

8.8.1 Cert ification Crite ria

THE CE RTIFICATION OF CONSTRUCTION MANAGE MEN T FIRM S

Firms tha t prac tice o f se rvice.

Section 8.8

1. 111e Firm's Organ izat ion al E xpe rt ise T he firm must have at its immediat e disposal sufficient perso nnel, that collectively possess the spect rum o f expe rtise specified in the prescri bed area s of know ledge. to execu te projects o f the type, size. and co mplexity they under take under the te rms of the eM services con tracts th ey enter int o. The expe rtise o f a firm shall be measu red in terms of the combined qualifica tions of its entire complemen t of pe rso nnel with credit given for certified individua ls. p rofessional status, and advanced education. 2. TIle Q uali ty of the Firm 's Ma na gem ent Systems 111e firm must hav e a full co mp lem ent o f well-developed man agem e nt system s and pr ocedu res avai lab le to its person nel [0 pe rmit the efficien t a nd effect ive acco mplishm ent of its respo nsibili ties. in acco rdance with th e formes) and var iation (s) of construction ma nagement the finn p rovides [0 owne rs. The level of development of the management systems and procedu res shall be meas ured by assessing: (a) docu me ntation in procedure manua ls or in o the r descriptive mat er ials, (b) ac tua l e xamples of system outputs, and (c) gene ral d escripti on s o f the Jirm 's sys tems an d proced ures. TIle adequacy o f the man agem en t syste ms and pr ocedu res sha ll be measured by co rrel ating the firm 's availa ble syste ms with the sys te ms app rop riate to the C M se rvice(s) provided by th e firm . 3. TIle Firm's Applicab le E xperience The firm must be able to d ocument its applicable experience in suffic ient detail to adequa tely establish its expertise in the for m(s) and var iation(s) of cansrruction managemen t in which it req uests certification. A p plica ble expe rience sha ll be rest ricted to that which a pplies to th e firm's speci fic ce rtification request b ut sh all abo re flect the basic d isciplines tha t co ntri but e to the o vera ll e xpe rt ise o f co ns truction mana gem ent p ractice, E xperien ce det ails shall include pr oject num ber s. types. sizes and co mplex ities, and any u nique serv ices in th e expe rience o f the firm. 4. The Firm 's Basic eM Philosophy The firm must be able to clearly state its philosophy with regard to p roviding construction management services within the context of the formes) and variat io n(s) of eM it practices.

4 08

Ap pe ndix 8

Sect ion B.11

A M odel Prog ram for th e Certificat ion o f Constructi on M anag ers

Evidence a nd Use of Cert if ied Sta tus

-tyr U nd e rgradua te Degree. Construc tio n ay r Assoc. D cgree. Arch/En gr/Ccn st. 2yr Assoc. Ocgree.Arch/E ngr/Consl. Mas te rs Degree. Bu sine ss Admin. 4yr U ndergrad uate Deg ree . Bus. Admin Ot he r O& R pe rso nne l not included a bove Tot al Operations amI Reso urce Pe rsonnel Poi n ts:

. ~le firm sha ll describe its ap proac h [0 th e vario us aspects of eM services WII ~ 1O the conte xt o f ho w specific co ntract ual responsibilities a rc shared, assigned , accep ted , an d carried ou t by th e project tea m. The ti rn ~ m~st ha ve sufficient perso nne l to exec ute its philoso phy as measured by proport rorung the num ber, size, and co mp lexity of the firm 's ongoi ng project s,

409

x 5= x .1 = )( 2 = X

Yo


x 1=

Suppor t a nd Adminis tr a tive (S&A) Pe rsonnel: ( II1OS': pro \'itJmg support lor O& R pe rsonnel in lhe business as pec ts of th e fi nn).

8.9 THE CM FIRM CERTIFICATION A LGORITHM

Tot al Support an d Ad minist rative Personnel: T OTA L PERSONNEL ...

O RG AN IZA TIO N: Certified Personnel [ Ente r th c numbe r of curr e nt ly acuve cer tified pe rsonn el in eac h spccializauon under the applicable

column.)

REQUIREMENT,

Areas of K nowledge

1. ilwJ gct 2. 3. 4. 5. 6.

7. K 9. 10. 11.

12.

13. 14.

(3) Total O pe ra lion s a nd

R e so u rce Points: Tot al O pe rat io ns a nd Reso urce Pe rsonnel:

Ot he r wlsc Availa ble •

D irect ly Em ployed

(Must he gr eater th a n 4.0)

.. ... ,

~ l all at:c llll'rli

Contract Management Decision Manage me nt l nfc r marion Managcmur u Millcr ial/Eq uipmellt M
8.10

The term of each linn 's certification varies according La the audit team's evaluation of the firm's in-place man agemen t systems,experien ce, and phi losophy.lhe maximum certifica tion term befor e renewal is f ive years; the minim um term before ren ewal is two years. A certi fied finn must apply for ren ewa l no later than the expira tion dat e indicate d on the firm's certifi cat e, A renewal application is se nt 10 the firm by the Ce rtifica tion Admin istrati on Unit abo ut six months pr ior to the expirati on da te. The firm is to complet e the fonn and re turn it to the unit. 111e certification re newal form for firms previously certified for a term less tha n the maximum will spe cifically address the status of the suggested upgrad ing noted by the audit team durin g their visit to the firm. An indication of progress in these areas and cornpliance with the mandato ry certi fied pe rsonn el requi rement s is necessary for renewal. Firms previously ce rtified for less than a five year term , an d firms not visited by an audit team within the pre vious five ye ars. will require an a udit visit as part of an y curre nt certifica tion ren ewa l process. Firm s that fail to ren ew their cert ifica tion withi n one year of the expirat ion date sha ll be listed as uncertifie d on the recor ds of the ce rtifying organiza tion. A firm tha t allows certi fi cation to lapse for a peri od of one year or more must seek reinstatem en t th ro ugh the established appli ca tion procedure for new firms.

•

• r ersunnel liSl: d in ~Ilc "Ol!lef'''l';c Available" colullin mUSI be unua a written formal agreement fur ~cr '·.l ccs Wllh Ih" Apl,licanl I" be ctlllsic.lcr.:tl fur credit. Evidence of the arrangement ",u ~l be rfl)~ IJC oJ 10 Ihe Audit Team ;ll lhe lime of lheir visit. R EQ U IR E1\lE:-:TS: Tut al Ce rlified Personnel: (I),--;c~~~=~~~~-

( ~ tu s t

Total Op e ra tions A nd Reso urce Pe rson nel:

(2) Areas

FIRM CERTIFICATIO N RENEWAL

be grea te r tha n 0.80)

or Knowledge 1 thro ugh 12 1111/S1 be fl:prr:.ll·/IIl·tl by ccrtifit·tl per sonnel fu r a firm to be ce rtified ,

A LL PERSONNEL A cco unt for all per sonne l in th e firm 's e mploy bylisting them in the a ppro priate catego ry List each pe rso l\

once ": ~'CI.I though ~e/shc qu alifies in more than one ca tego ry. Selec t the most advance d level of elicit pcr;,\)fl when listing them III a ca tego ry O.PERATIONS an d RESO URCE (O& R) Per sonnel; ( thos e directly involve d in pr oviding C~ l services 10 clients). Registere d A rch. o r EII!!r. Masten Degree.A rch. ~r Engr. ~y r Un de rgra du a te Degre e. Ar ch/En gr.

x 10 =' x x

6= 4=

8.11

EVID ENCE A ND USE OF CERTIFIED STATUS

Eviden ce of a firm's certified sta tus wo uld be in the for m of a Dat a Shee t ve rifying that the firm mee ts the staffing requirements a nd has the necessary syste ms and ph ilosophy in place to provide eM se rvices.Th e Data Shee t would a lso include a list of completed projec ts to support experience requiremen ts.

410

Appendi x B

A Mod el Program for t he Cert ificat ion o f Construction Managers

Th e D ata Sheet woul d be a standard form iss ued by the ce rt ifying body based o n information pr ovided by th e firm and su bstantiat ed during th e audit pr oc ess. It wo uld includ e:

"

.' '.'

A PPE N DIX

• Firm ide ntifica tio n informati on Business or ga nization informati on Perso nnel da ta listing certified pe rson s E xperience info rmation CM services p hiloso p hy eMsyste ms info rma tio n • Work lo ad cap ac ity in form ation . D ata Sheets ca n be se nt in resp onse to requ ests for proposa ls fro m o wners to es tab lish eMcapability and pro vide credi bility to th e othe r in fo rmatio n requested from the owne r. In add itio n to the da ta s heet, the firm wou ld be furni shed a "ce rtified firm " logo for its letterhead s and b usi ness cards to q uickly establish the firm 's credi bility as a CM practitio ne r. Th e logo co uld o nly be used du ring a firm' s certified ten ure.

C

An Example of Innovative Contracting on a Complex Project C.l

THE SITUATION A manufac turing co rpora tion based in E urope needs to exte nd its ope ra t io~s in the Uni ted States. A 120 acre site in the Midwest has bee n selected for the proJ ~ct. The firm alread y has a raw mat er ials p lan t in the Southw: sltha t.~as put in to ~peratlon two yea rs ago a nd now wan ts to bu ild a new raw ma teri als facility and a finished product facili ty o n th e mid west site. " fina ncing is not a p ro blem and b udget lim itati on s appear libe ral. H o we ver, u me . is o f the esse nce. It is impo rtan t th at the facility be in operatio n withi n 22 mont hs to gai n a compe titive edge in the U.S. ma rket. . . This is a tight sche d ule. based o n the 2-' mon ths it too k to desi gn and build the raw ma te rial s plant in the So ut hwes t an d the t 7 mo nth s it took ju st to ~~ nst ruc t the most recen tly finished p rod uc t plant the co mpany bu ilt in E uro pe. Additionally, ~ev­ e ra ! e xisting s tructu res o n the sit e mu st be dem oli sh ed , and co nsi ~c rable eart h movin g. ro ad b uilding. an d site utiliti es wo rk is req uired on the 120 acr e SIte. .. 1l1C co mpa ny hi red a con struction ma na ger to perfo rm a co ntract ability s tudy and prov ide management services for th e cont ract ma nagem ent plan that result ed fro m the study, The initi al co ns truc tability mee ting be tween the company (owne r) a nd eM p roduced the following information .

B.12 THE SOURCE OFTHE MODEL PROGRAM Th e mo del p ro d uced in 1987 and issued in an abridged fo rm in 1988 is esse n tially th e pr odu ct o f the Construc tion Manageme n t Stud ies and R esea rch Group (CMSRG), a part of the Const ruc tion E ngi ne e ring and Mana gem ent progr a m in the Civil and Environmental E ngi nee ring Depa rtm en t at M ichig an Technologica l U nive rsit y. Con tributi ng to the ef fort were me mb e rs o f the CM A A R egist ratio n/ Ce rt ificati on Committee. Th e co mb ined group inclu ded Kr istin e Sunde rs, D avid St ill, D avid McAl vey, Lind a Ph illips, Mer lin Kir sche nrn an , D e rek Cnlc mc nl. a nd Cr aig Marriner. C. E. Haltcnhoff cha ire d the wo rk o f the CMA A co mmi ttee and the co m bin ed co mmittee .

C.l .l

General O wner

1. Th e owne r has compe tent p rocess desi gn pe rso nnel in-h ou se at th e.ir European he adqua rte rs who will be a vailable for de sign re view o n the U.S. project. 2. Th e owne r will o nly dedica te thr ee employees full-ti me to the p ~ojec t at the .s i ~e : a n execut ive person ( Le vel l ) w ith a uth ority to ap prove expenditures for o ngi nnls. modi ficat ion s a nd change orde rs up to $500,000 wit hout prio r appro va,l from E ur o pe; a ma nag eme n t per so n ( Lcve l Z) e xpe rienced in company policy 4 11

412

Appendix C

An Example of Innovative Contracti ng on a Complex Proj ect

Section C.2

(public n.:lationslpublicityllegal) who can make owner de cisions; a technical per SOn (Leve l 2) who is experie nced in d es ig n and construction of the facili ties being constructed,

3. 11lc ne w raw mater ials pla nt will be s imilar bu t no t iden tica l to th C eXis~lilng pla~t. The size will be the sa me. how ev er, the location of the n.ew pl ant WI. require redesigned e lec tr ical and mechan ical sys te ms. and code diffe re nces WIll change some a rc hitectural and s truc tu ra l co m pone nts.

4. The Owner has no objection to multiple pri me cont racts , fast-tr ack o r phased co nstruction, o r any combi na tion thereo f. C1.3

in E urope. . 2. The plan s and sp ecificat ion s a re avai labl e, bu t th e d ime nsio ns, s izes, and ca pac ~. ties are metric, and so me buil di ng III a te rials, prod uct s, an d systems a re not avai la ble or co m pa tible wi th constructio n ill the U.S.

it.

7. The o wne r requi res o n-s ite inspecti on of cons tructio n in addit ion to installation perm its and cert ifications an d labora to ry test ing.

9. TIle ow ne r h as no exist ing affilia tion with bu ilding trades la bor in the U.S. and has no preference regarding th e use of un ion o r merit sho p lab or on the p roject.

C 2 THE INITIA L CO NTRACTING STRAT EGY

C 2.1 For t he Ra w Mat er ia ls Plant Us c D es ign -Build . 1 11 is con tra cti ng system ca n prod uce a project f~ster than any other. A s well , th er e arc other ad van tages: (1) the southwest raw ma terials plan t \\'~s a "pa th-find ing" for m of de sign . build, (2) th e new plan t will be sim ilar , and (3) the existing p lans arc availab le fo r refe rence. Th e o verall delivery tim e of the Sout hw est plan t ca n p ro babl y be redu ced by three months o r more. . . . Con tact the co n trac to r wh o con s tru cted the So uthw est plan t. Inq uire If th ere IS an inte res t in de signing and bu ilding the raw mat er ials pla l.lt in t ~ c Midwc ~t..1hc co ~­ tract arrange me n t would be a design-bu ild jo int ve ntur e. invo lving t~ e o rigina l englneer and contractor. If the joi nt ven ture wa nts to invol ve a loca l en gmcer o r ge ne ral contracto r, there would be no Objection . . . D esign wo uld be reim b ursed o n a co st-plu s-fixed -fee b asis: When d.e s.lgn IS sufficie n tly co m plete, or a t the end o f 30 da ys, wh iche ver o ccurs first. th e jnr n t vent ure wou ld ne go tia te a GMP for th e plant 's co nstructio n. J~ th e .owne r app ro vcs the GMP. o n-site co nstruction sho uld s ta rr wit hi n ten days o f no tif ica tio n. If the G t-.'1P is no t sa tisfac to ry, the ow ner would ha ve the right 10 co n t r~c t co nstructio n to othe rs. T he jo in t ve nt ure would be o bligate d t? compl et e th e d ~s,l gn a.nd prov id e comple te drawings a nd technica l. spcc.i fica tio n~ sU.lta ble fo r co mpetit ive bld di ng by th e owne r with in 60 days after notifi cati o n o f rej ection .

0 1 I. Th e Cr.. .l has fo un d that th ere is a s ign ificant labor pool (bot h uni on and m erit s ho p) 10 mee t co nst ruc tion needs and that compet ent ge ne ral cout ructor s and tra de co ntrac tors (bo th union an d me rit s ho p) arc ava ilab le locall y 10 mee t th e sched ule and provide co mpe ti tio n. 2. TIle eM has fou nd tha t there arc no m ajor tra de con tr acts [ha t wi ll e xpire d uring the next Iwo years and that uni on s are willing 10 sign p roject agree ment s with th e ow ne r if necessar y. 3. TIle 0 \ 1 repor ts tha t local a u thorities will gra nt building pe rmits tra ct doc ume nts in suppo rt of phase d and fast -t rac k co ns truc tio n.

C 1.2

On

pa rt ial co n-

Raw Mater ials Plan t 1. The o wne r explained th at the design and co ns truc tion of the existing raw materials pla nt W,I S
Finis hed Product Plan t

1. Th e finis hed prod uc t pla nt will be a d upl ica te o f the last one bu ill by the o wner

6. Th e o w nc r will p urchase an d deli ver a ll m ajor , specia l, and propri et ary pro cess equip me nt for the pr oj ect to th e sire but want s La use local co ntrac tors to inst all

S. Th e owne r requires co mple te standa rdiz a tio n of mechanical and elec trical equipm en t o n th is fac ility an d with th e e xist ing raw ma te ria ls plant in the So uth west.

413

The drawings a nd specificat ions a re tiled at t h~ ow n~r 's headquarte rs in Europe and are av ailab le for refe re nce pur poses o n this proJCCI.

3. "The O\ vncr will provide a technical sta rt-up Le arn to inspect and couuurssion the faci lity and has a ll necessary use -permits in hand .

5. TIle o wne r prefe rs to mak e a si ngle paym en t on the l Sth of ea ch mont h to cover all bill ings fo r the proj ect rece ived at th e o wne r 's o ffice a t the site prior to th e l ath of that mo nth. Billings m ust be s upported by invoi ces.

The Init ial Contractin g St rategy

C.2.2

Finished Product Plant a nd Site Develo pment Use m odified G en eral Co ntrac ting. Ada pt in g [he d es ign docume nts used .i n ~ur ope sho uld ta ke no mo re th an three month s.This wou ld pe r m it o ne m onth ~o r b id di ng and allocate I S mo n ths for co nstr uc tio n. U sin g modi fied gene ral conlrac t lll~ (separa te ly bidding ge nera l, mech a nical , and elec t rical co n trac ts) instead o ~ C lv~ mult ipl e co nl ra~t ­ ing wo uld re duce the number of co nt racts he ld by the ow ner. simplify co ntr act admin ist rat ion , and make better usc o f eM pe rso n ne l and th e owne r's limited cad re of

414

A ppendix C

Section C.2

An Example of In novative Contracting on a Comp lex Project

on-site personnel. In the absence of budge t restr ictio ns. general co ntracti ng is an acceptable trade-off Co nt ract with a full se rvice archi tectu ral/enginee ring firm (o ne with in-ho use architect ura l, structura l. e lectrical. and mec ha nica l design capabil ities) to mod ify the met ric doc umen ts and prod uce bid packages for the genera l work. the mech ani cal work, and th e electrical wo rk. Th is firm shou ld also ha ve resp on sibili ty for site desi gn includi ng de mo litio n, mass excavation, roads, pa rking and d rainage, and pro d uce se par ate bid packages for de molition, mass excava tion. roads. parking and d raina ge stru ct ures. Proposals fer these wo rk-sco pes sho uld be com pe titively bid by co ntrac tors sele cted o n thei r qu alifications. Dollar proposals shou ld be lump sum for eac h wo rkscope con trac t. 111C cont racts for the mechanica l an d electrical wor k should be ass igned by co ntract to the selected gene ral co ntracto r for co nst ruction coo rdin ation bu t not co ntrac t ad ministra tion pur poses. TIle C fvl sho uld coo rdi na te th e de moli tio n, ma ss exc avation and ro ad s, parking and dr a inage contr actors.

Pr ovide: Bud get Co ntrac t Deci sion

Qua lity Resour ce Risk Safet y Schedule. and Value Managemen t, appropri a te for a mul tiple contrac t project.

Information Matcr iallEqu ipment Project

C.2.7

CM O n-Si te Pe rsonnel 1

Executive L evel Per son

1 Man agement Le ve l Person

Desi g n Co o rd in at ion and Sit e Utilitie s Th e own er 's requ irem ent for sta nda rd iza tion of mechanical and e lect rical eq uipment . on this facili ty, and with the exist ing raw materi als plant in the So uthwes t, wiII requi re comprehe nsive and timely design coordination of the finished product plan t engineer. ing firm and the desig n partner of the design-build co ntrac tor. To ef fect this. a loca l me cha nica l/el ec trica l engineeri ng firm, o r a mechanical and ele ctrical joint venture. sho uld be hired whose respo nsibility will be to en sure sta ndardizaticn.This firm sho uld also design the e lectrica l and site mechani cal nee ds and produce bid packages fo r e lectrical site utilities and mechanical site utilities.

415

C.2.6 Th e Rol e of th e Co nstructi on Man ag e r

2

C.2.3

The Initial Contracting Strategy

Administr ativ e Le vel Per sons

2 Sche d uling Per son s 1 Recepti onist/Word Processor 1 Suppo rt Perso n/Computer Operator

C.2.8

Th e On-Site Org a n ization Cha rt C t-.l

O wner Executi ve Level Person

Exe cutive Le vel Pe rso n

I C.2.4

Testing an d Insp e ct ion 111e nature of the proje cts-processing plants-req uir es co nside rab le high-tech . onsite testing. To fill th is need, an independent testin g an d inspectio n co mpany will be hired by the owne r.

C.2.5

O wne r T echnic al Pe rso n

Ra w Materials Plant Finished Prod uct Pla nt She De velo pment Design Coordination Cons truction Inspectio n Co nst ruc tion Management

1 Design-build 3 Lump sum GCffC 5 Lump sum TC

X X X

U t.'i i ~ n AgrCC lIIl'l1t~

X 1 Architect/Engineer I ArchiteclfEnginec r I Mechanical/Electrical En gineer 1 I nspec tio n Finn I Agency C M Firm

I

T,,"'

Cont rac to rs

I

General Co nt rac tor

I

Fin bh ed Prod uct Plant

I

lSI"

D e velo pme ntt

CM

Owne r Ma na ge me nt Leve l Per so n

Ma nage me nt Le vel Pe rson

CM

Construc tio n I nspectio n an d Testing

Ar chlE ngr. Finish e d Prod uct Pla nt

Ar ch/En gr. Site Dev e lopment

Su m mary o f Co n tr a cts Cons tr uction Co ntracts

)

D esign Co o rdi nation En gi nee r

I

I

De slgu-B uild Contr actor

Adm inistrat ive Le vel Per sons

c-

CM Scheduling Person

I

I Raw Ma teri a ls Pla n!

FIGURE C.1 The On-Site O rgaclzaticn Chari.

Cons t ruc tion Su ppo rt Ite ms

Sect ion D.1

I." A P P E N D I X

D

Some Contract Provisions Used to Convert Single Prime to Multiple Prime Contracts The follo wing is an exa mpl e of co ntrac t provisions that we re used to co nve rt sta nda rd contract do cumen ts for a GC projec t int o a multiple bid eM pr oject befor e standar d C:M dOCU ~lent s were p ub lishe d in 1975. These pr ovision s vividly d em on st ra te th e significa nt d iffer en ces be tween the O C sys te m and the Cf,.·t sys te m.

0. 1

PROPOSAL SECTION

A.

A,I

416

~IANDATO RY INT ER FACES Th e sco pe o f each co ntracto r's work is d efined in th e Division (s) selec ted to be bid. Each co ntrac tor sha ll become fam iliar with th e requ irem ent s of all Bid D ivisions that int erface with the o ne(s) selec ted to be bid. Co nsid eratio n shall be give n to the fac t that the work o f o ne co nt ractor fo llows th e work o f ano the r an d tha t the work of seve ral co nt rac to rs cou ld in terface with o ne Di vision.

E. E.1

WO RK ASS IG NME NTS No thing co nta ine d in the co ntract do cum ent s, and especia lly in the wor k-scope of a Bid D ivision , sha ll be co nstru ed Ol S a work ass ignme nt to any trade. Each Bid D ivision contractor is respo nsible for work assignme nts a nd shall ma ke th em in accordance with th e p racti ce in the area o f the proj ect: a nd in s uch a way that sched uled p rogress shall no t be ad ver sely affected by the decision s.

E.2

Di sput es which ar ise fro m impro per assignments or assig nme nts claim ed by mo re th an o ne trade sha ll be immed ia tely se tt led by the Bid Division co ntracto r and shall in no ca se res ult in a slow-do wn or sto ppage of work o f an y co ntrac tor o n the p roject.

f. F.1

PRE-DID MEETIN GS Meeti ngs with all interested bidders shall be he ld af te r all d oc umen ts have be en distribu ted and before the bid dat e.The pu rpose o f the meeti ngs is to ans we r all questi o ns ge ne rated by the cont ract o r's initial review o f the bidding do cumen ts.The O wne r, A rchi tec t, E ngin eer, and Con structio n Ma nager shall be on hand to an swer quest ion s. Th e sche d ule o f meetings will be se nt ou t by the CM . All Bidd ers a re ur ged 10 attend.

G.

BIDDI NG AND AW,\RDS

G.I

A ll bidd e rs must s ubmit their p ropos als on the for m provided . Failure 10 do so

G.2

TIH:rc is no limit as to the n umber of Bid Di vision s any one con tractor can bid. However, ea ch contractor is requi red to enter a figur e for eac h and every Bid Divisi on being bid in order to be co nside red fo r a ward in th at division. Space is provided in th e Proposal Form for a co mb ine d proposal deduct if a co n tra cto r bidd ing more than one Div ision wishe s on ly to be co nsid e red o n a co mbi ned bid basis. TIle award o f co ntra cts will be based on the dollar value o f the proposal, the qualifi cations of the co nt ra ctor, an d his abili ty to perform . Bidders ar e cautinn ed to fill in n11 blan ks o n the pages o f the pr op osal he is submitt ing b y not ing " N/" " in tho se bla nks not ap plicable to the ir particular proposa l.

I3 1D D IVI SI ON UN IT ~lth ou g~

C.3

D. 0.1

Co nstruction Manager . B.

C.2

417

A1T ENT IO N A LL BIDDE RS Thi s is a Co ns truc tio n Managem ent Proj ect. Th ere is no Gene ral Con tractor. A.II co ntrac tors on th is Proje ct are co nsidered prime con tr ac to rs. Th e O wne r ~vl1l awa r~ sepa ra te,co ntrac ts for all Bid Div ision s (defined work -scop es ) Involved In the Project. Th e Project will be co ntro lled and coo rdinated by a

13.1

C. C. I

Propo sa l Sectio n

each Bid Division includes a conve n tional segme nt of s ubco ntract-

mg, mul tiple-contract performance requi res adjustm ent s be rnndc so that ea ch bid d ivision is a unit of co ns truction in itself. E ach co n trac to r shall review the re sp onsibilities within the wor k of a division an d pro vide for all o f it in th e pro po sal. I31D DIVISION DE SCR IPTIO N For clar ification p urposes the sco pe of the work invol ved in ea ch bid d ivisio n is specified in three catego ries: " E XCLU D E D," " INCLU D ED," and "A LSO INC LUD E D." Info rm ation und er the heading "EXCLUDED " is to defi ne a po ~n t o f lh~ g.inllil1g and el iminate fri nge involvemen ts that might be pe rceived as included in the sco pe o f work. " INC LUDED" items are the obvi ou s and conventional wo rk- scope of a bid d ivision. Information un dc r "ALSO INCLUDED " identifies un con ven tiona l and less obvi ou s item s o f work included in the di vision , ,IS well as the fri nge invol vements th at co uld inad ver te ntly be missed in eva lua ting the scopeof the wor k.

will jeo pa rd ize the offerers' chance s of receiving an award.

G.3

H. H. I

ACCEPTANCE OR REJECfION OF 13IDS TIle bidder acknowled ges the rig h t o f the Owner to accept o r reject a ny and all bids and ( 0 wai ve any infor mality o r irregularity in any bid rec eive d.

H .2

Th e bidde r ackn owl ed ges th e righ t o f th e O wner to acce p t any com bination o f Bid Divisio n proposals.

418

Append ix 0

H-J

H.4

l. 1.1

J 1.1

1.2

K. K.I

K.2

L.

L.t

M. M.I

N. N. I

Some Co ntract Provisions Used to Convert Prime Co ntra cts

l11C bidder, by sub mitting a bid , represen ts that award will be accept if o ffered , regar dle ss of who the o the r Bid Di vision co ntr acto rs ma y be. Th e bidder furthe r represents that nei ther his Wo rk nor the Wor k of othe r Bid D ivision cont rac tors will be pr eju d iced because o f sex, race. color, cree d o r labo r affiliation of o the r co ntractors under Contract to the O wner o n this project.

MILEST01'lE C01'lSTRUCTI01'l SC H E DU LE Proposed Miles to ne da tes for the Pr oject have been developed by the Co nstruction Man age r, using a co mp ute rized Critica l Path Me thod (C PM) approach. Each bid der is required to review the da tes and the ir implie d time spilns a nd endo rse o r amend them for work bei ng bid, A space is provided 011 the Proposal Form f or the bidder's end orsement or ament/memo SC HEDU LE E1'IDORSEMENT OR AM ENDM E NT The Milestone Sched ule as end orsed an d/or a mende d by the success ful bidde rs and accepted by the Owner will be used as th e basis for th e con struct ion sche d ulc by which the p roje ct will be built. TIle effect of any am endm ent to the schedule s hall be con sider ed whe n select ing a contracto r for performance o f the work. Bidder s ar e obligated to com ment o n the propo sed schedule if in their opinion it does ne t rea listically depi ct th e seq ue nce and/or lime interva l for performa nce o f th e work in their Bid D ivision(s). OWNER PUR CHASED MATERI ALA ND IO R EQU IPMENT A s an cxpcdi en t. fhe Owne r will pu rchase certain material and equipment 10 be incor po rated into the wor k by designa ted Bid Division con trac tor s.The d esigna ted contracto r shall accept delivery. unload , handle, store, and install the items. Upo n delivery, the des ignated con trac tor sha ll verify p ro duct suitability. q uan tity, quality, and cond ition a nd shall accept full re spon sibi lity fo r ca re. custody. and con trol. Delivery sta tus sha ll be re ported 10 the Field CM. RETA INAGE ON OWNE R PURC HASED ITE~ I S TIle Ow ner may re ta in five thousand do llar s ($5,000.00) o r ten pe rcent (10 % ) whic hever is the lesso r. on ma teri al/eq uipmen t p urc hased from suppliers for inclusion in (he work , until it is sa tisfactor ily installed.The pu rpo se of this provision is to ensu re proper co nforma nce to the plan s and spe cificatio ns. P RO MPT NESS OF EXECUTIO N It is th e int entio n o f [he Own er to complete the. Proj ect in the sho rtes t pra ctical time.Th e co nd itions inherent to con struct ion notwithstand ing. it is the intent o f thi s cont ract th at each co ntracto r maintain th e pr ogress es ta blished in th e M ileston e Schedu le and Sh ort Ter m CA P, PE R FO R ~I A N C E OFTHE WOR K All contractors s hal l d ilige ntl y pro vide input to the Short Te rm Co nt rac to r A ct ivity Plan (C A P); the day-to -day sche d ule that moves the projec t fro m milesto ne to milestone. It is the ob ligation o f all con tr act or s [ 0 p rov ide reso urces and ma npowe r to me et th eir CAP comm itm ents.

Sectio n 0 .1

O. 0 .1

0 .2

P. P.I

1'.2

P.3

Q. Q.1 Q.2

Q.3 Q.4

R. R.t

R.2

S. 5.1

Prop osal Section

41 9

PR OGRESS PAY ~ IENTS Th e O wne r intends to favo r co n trac tors wh o adher e to the CA P. Con trac tors \..'he ma int ain co mmitted CAP progress sh a ll be eligible for Pr ogress Payments with ou t a re ta inage d educt ion . Co n tracto rs who fail to maintain co mm itt ed pr ogress shall be subject to retain age.on the full am ount of pr ogress paym ents d ue, at the dat e the Pr ogress Paym ent is sched ule d to be sub mi tted by the con trac tor. The CM shall determine a contract or's sched ule s tatus. PAY~ I E NT FOR STO RE D MATERIA LS To o ffse t escala tion o n sho r t-lea d mat eri al/equ ipment item s purchased by contra ct or s, and en sure th e receipt o f competit ive bids, the Own er will provide pay me nt for cont rac t item s sto red o ff-site as well as at the site o f the work . To q ual ify for paym ent. m ateria l/equ ipment s ha ll be pro perly sto red , protect ed a nd insured aga inst lo ss o r d am age. inspected by the eM. and dedicated 10 thi s project only. The cost o f o ff-site sto rage shall be included in Bids Divisio n pro posal. Mate rial/equipment stored on -site , within project property limits.shall be in th e area des ignated by the CM. Th e Ow ner takes no respon sibil ity for materinl/cquipmen tlost thro ugh theft o r mishand ling; they sha ll be rep laced by the cont ract or withou t co st to the Owner. CO NT RACT O R' S COST BREAKDOWN Each contractor's Sched ule of Values shall include three mandatory line ite ms: Ho use keeping. Final Clea n-U p, a nd Pu nch List. Progress Payment per centa ges s hall he applied to Housekee pin g in accordance with the COn {mClOr'S ca rrying o u t o f thi s com ract respo nsibilit y, Progress Paymen ts s ha ll not be req uest ed for Final Clean -U p un til th is item has bee n 100 °A., acco mplished in term s of th e co ntract. The value o f th e f inal Punch Lis tl ine item sha ll be 10% o f the co ntrac t valu e. o r fo r certai n contractors. ,10 am o un t be tween 2 % and 10% as deter mined to by the Owner.

QUALITY C01'lFORMAN CE Quality Conforma nce is the respon sibility of the contractor perform ing the wo rk . Each cont ract o r sha ll insp ect his work daily. Inaccurate, faulty. defective . an d un completed work sha ll be corrected o r co mpleted by the contractor when it is o bserved to be so . Contractor q uestions pertai ning to qu alit y s ha ll be add ress ed to the AlE eithe r dire ctly o r th rou gh [he Field CM. Ne ither the C~ I nor AlE is respon sibl e for det er min ing q uali ty co nfor ma nce. exce pt d ur ing each contractor 's Punch List pr ocess. INT E RFA C E Q UALITY CONTRO L Wh en a co ntrac tor d etermines that the quali ty of his work is in jeo pardy as a result of the sche d ule o r th e coordi na tion of th e pr oject . o r for any o ther

42 0

Appendix 0

Section D. l

Some Contract Prov isions Used to Conver t Prim e Co ntract s

\'.3

reason. (he con tr actor shall imme diately st op work. and jus t as immediate ly, infor m the eMo f his ac tio n an d the reason s therefor e. 5.2

If the situa tio n is not sa tisfac to rily corre cted by imm ediate action o f the e M. the contract or sha ll re d uce the situat ion to writ ing o n the sam e da y the sto pwork actio n occurred and s ubmit it to the eM with a cop y to the AlE. Upon su bseq uent investigation by the e M an d NEt a deci sion shall be made and the con tra ctor s hall proceed with his wo rk under the te rms o f the deci sion.

So3

H the co nt rac to r finds no sa tisfaction in th e decision, he is ent itled to pursu e sa tisfac tion under the dispu te resol ut io n terms of th e cont rac t.

T. T.l

MATER IAL AND EQ UIP~lENT EXPED ITING TI,e eM will initiate and coo rdinate an e xped iting pr ogr am in cooperatio n with each con tracto r that incorporates all critica l items of material/equi pment pr ovidcd by Bid Div ision co ntrac to rs.

T.2

To en sur e timeliness a nd accuracy, ea ch Contr act or shall co op erate by provid ing order and ac kno wledg men t doc umen ta tion (with out pricing) as requ ired by the CM .

T3

TA

Cont ractors s ha ll further coope ra te by kee ping the e M informed o f any and all ch anges in the deli very commit me n ts inco rpor a ted into the exped iting program . and whe n dee med ne cessar y by the eM. p ro vide mat eria l/eq u ip men t supplie r COni ac ts for d irect use in ex pe d iting by th e eM.

..

~

IV. IV.!

X. X .I

X.2

X.3

TI,e eM exped iting p rog ram is a back-up prog ra m a nd sha ll not relie ve Contracto rs fro m thei r pe rformance respon sibilities p resc ribed elsew he re in the con trac t documents.

u.

PROTE C nOi'i O F T II E WORK O F OT HE RS

Y.

Lll

wh en inte rfacing with work o f o the rs, con tractors sl1O.1 11prot ect o ther co n tra ctor s' wo rk as if it were thei r own . Ca re shall be taken no t to da mage work of ot he rs in any way.

Y.I

U2

Wh en it is necessa ry for a co ntracto r to mo ve pe rson nel o r transport materials or eq uip me nt ncross floo rs, grades, ro o fs, o r o the r surfaces, tha t co ntract or shall p ro vide ap prop riate sur face pr ot ect ion to prevent da mage to those s urfaces.

U.3

The co ntrac to r tha t damages the work o f o thers to the p oint whe re . in the op inion o f the A lE, re pa ir is req uired, sha ll fully com pensa te the offend ed co nt rac tor for rL' pair i ll g the dam age. L AYOUT A ND ME ASU RH I ENTS Layout and meas ure ment s pert ain ing to the wo rk of a Bid Divisi on is th e Bid Di vision co ntrac to r's respo nsibility.

V. V.l Y.2

Each con tract or shall exa mine the co nd itio n an d di mensional acc u racy of the work his work is relia nt upon bef or e begi nning work. Flaws and ina cc uracies shall be reponed to th e CM the same d ay they nrc discove red and the co ntracto r shall no t proceed with his work unt il correc tion s are made o r the situa tion reso lved by the A l E.

z. z .!

Prop osa l Sect ion

421

If a co n trac to r inadver tent ly or knowingl y pr oceeds with his wo rk on a con trac to r's wo rk that is flawed or ina ccura te, the co ntrac to r who procee ds sha ll be liable for all costs o f co rrection o f his wo rk when the situ ation is reso lved . MANDATORY AT rENDAN CE AT MEETIN GS It is th e respons ibilit y of each Cont ractor to be approp riately represe nt ed at eve ry P roje ct M eet ing. Progress Mee ting.and special meetings when requested 10 do so by the CM ,A/E . o r Owne r. PUNCH LI ST PROCE D U RE Whe n a co nt rac to r's wo rk is 95% complcte.n bla nk Certifica te of Subs tan tial Co mp le tio n will be forwar ded to the co nt ractor by the CM .Th e co nt rac tor shall fill ou t the Ce rtificate a nd d esign at e a fu tu re da te, the D at e o f Substant ial Co mp letion. The cont ractor sha ll attach (I) a list of work that req uire s correclion. (2) a list o f work that is in complete. and (3) a Punch List Schedule tha t demonstrates tha t the lists can be completed in 30 calenda r days fro m the Date o f Substa nti al Comple tion a nd retu rn it to the C~l The Cnl and AlE will ve rify the lists and sche d ule, amend them if necessary. and ret urn them to the co ntracto r. When th e CM and AlE ag ree with th e contrac tor 's lists o f punch list work. the Certi ficate of Substa ntial Com ple tio n will be forwar ded to the O wncr for signa ture an d returned to the co n tractor. TIle co ntracto r sha ll begin punch list wo rk no lat er than the D at e of Substantial Co mp let ion. Co ntract ors failin g to mee t pr ogr ess as de fined in thei r P unch List sche d ule are s ubject to term inat ion with two wo rk ing days no tice. to pe r mit ano the r co n tractor to finish the COil tracto r's wor k , as we ll as o the r con tractors 10 finish th eir work . on sc hed ule. PRE-O'" SIT E A CfI V IT Y MEET IN GS Ever y Co nt rac to r shall ntce t with the CM a t IhC' site, a t least one week p rior [ 0 beginni ng wo rk on -she .Th e meetin g is 10 ( I) re vie w the tech nical spe cifica tions pertaining to th e co ntra cto r's wo rk , (2) re view the con trac to r's Q ua lity and Safely Pla ns, (3) d iscu ss staffin g a nd the co nstruction mean s, met hod s, a nd tech niq ues to be e m plo yed , (4) in trodu ce and int egrate th e con tractor int o the CA P, and (5) gene ra lly orie nt the co nt ractor. RETU RN ACfIV 1T IES Each Co ntract o r is requ ired to repo rt to the Field CM be fo re sta rt ing a \vorking d ~IY af tcrun a bse nce fro m the s ite o f three o r mo re \vo rkin g duys.Thc pu r· pose o f re port ing is to a lert the I-icld CM to I he ccrnracto r's re involv e mc nt and to prov ide an updat e o f any co ndi tions that co uld affect the wo rk o f the co ntra ctor since las t at the site.

Sectio n E.1

Activitie s During The Nine Phases of a GC Building Project

423

Co.

x

AP P E N D

E

Activities During ProjectDelivery Phases for the GC, D-B, and CM Systems E.1

Services in the AIE· O wnc r agreement if the project mo ves ahead. Engineering project con tra cts usua lly include feas ibility se rvices as part of basic services d ue to th eir unique enginee ring req uirem ents. The docume nta tion pro d uce d d ur ing Feasibil ity ranges from a Progra m Sta tement, with or witho ut Sketches or Ro ugh Dr awings, to formal Conceptua l Drawings and highly developed Bro chures and Conceptual Mod els. The ma nda tory do cumentation req uire ment should be sufficien tly detailed and reliable information fro m whi ch the N E can productively begin the Schematic Design Phase. On many projects in bo th th e Publ ic and Privat e Sectors. the en d of th is phase establ ishes the need to locate a Funding Sou rce fo r the project. Th is requires est imates of proj ect costs to the degree of acc uracy acceptable to the fun ding source. Depe nding on the detail of the documenta tion. the range of budge t accuracy at the end of the feasibili ty phase m ay be 30% plus or minus.

~,.

E.1.2

A CTIVITIES DURING THE NINE PHAS ES O F A GC BUILDING PROJECT

Th e design phase of an archi tectura l project is d ivided into three sub -phases : (1) Schema tic Design. (2) Design Dev elopment and (3) Co ntrac t Docum ent s. The des ign phase of an enginee ring projec t is d ivided into two sub-phases: (1) Preliminary Design and (2) Fina l Design.Th e pu rpose o f sub -phases is to provide an O wner Review point a nd also a means of det ermining design prog ress (or AlE payme nt purposes. Th e sub-phases of des ign are loose ly defined in ArE design agreeme nts, makin g it d ifficult for an yon e to revie w in-pr o gress des ign doc umen ts an d de termi ne exac tly which of two adja cent sub -phases the design is ac tua lly in. AlE s inte rpre t desig n subphase de finitions for their o wn conve nience unless gu ide lines a re se t befo re desi gn begi ns.

The sequence of activit ies requi red to delive r a bui lding project using the Ge ne ral Con tracting System follows the GC sta nda rd cont ract docu ments for an Arc hitectural

Project. E.1 .1

GC Desig n Phases

GC Feasibilit y Ph ase

Th is is the phase where the project is conce ived and a nalyzed by th e owner. It begins when a need for a fac ility is recogniz ed and en ds when a decision is made to con st ruct or not const ruct. Th e len gth of this phas e is dictated by th e o wne r's requ irem en ts and

liming demands. Project definition gains focus as req uirem ents a rc cons ide red a nd discussed.

Definition is generally given in broad para meters, such as minimum square footage of space an d maximum bu dget expendi ture. The feasibil ity phase is also called the Con cep tua l Phase or Progra mmin g Phase. During this phase, Special Cons ult ants will be most hel pful. The Bnstc Services of the AIE ·O\v·ner De sign Co ntrac t do no t cover se rvices d urin g this pha se. I f AlE ser vices are deem ed necessa ry, they can be cont ract ed for sep arately o r inclu ded as Additional (I ]

12]

(3)

fiGURE E.l 111l: Nine Phases of a GC Building Project .

42 2

I']

E.1.3

GC Sch em atic Des ig n

O n an archi tectu ra l projec t. the Sche ma tic Design Pha se beg ins whe n the Fea sib ility Phase e nds. De sign has a d iffe rent mean ing to architec ts and e ngineer s. Arch itectural Desig n integra tes use and sp
424

Appendix E

Activities During Proje ct -De livery Phases for the GC. D-B and eM Systems

Spec ificatio ns are not yet being form ulated. bu t Design Cri teria is be ing recor ded as de cision s are made on Build ing Syste ms, Mat e rials A nd Eq uipmen t. The Probab le Cost or Cons tru ction is de term ined and com pared with the owne r's bud get as design definition de velops in drawings and desig n crite ria is established.The owner 's Ori gina l Budget, whic h is often established without drawings. is th e AlE's constan t concern as Design Delinea tion and Material Se lection s a re made. The A lE tries to De sign To Bud get from th e beginning of the de sign pha se. It is possible to maintain the Probable Cost Of Co nstru ction with in 25 % plus o r minu s during schema tic de sign. Th e schem atic desig n ph ase en ds when the A l E submits acceptable Schematic Drawi ngs an d an acceptable Prob abl e Cos t of Con stru ct io n to the o wne r.

E.1.4

GC Des ign Dev el opm ent Phase 111e Design Developmen t Phase begins when the o wne r signs off on the Schematic Des ign Pha se. Work ing from the approved Schematic Design, the AlE furt her refines the de sign throu gh inc rea sed deline at ion and d ocum ent ati on .The G oa l of this ph ase is to complete and coord inat e all architectural a nd en gineering design deci sion s so th at final del ineati on and documentati on can be acco mplishe d during th e Co nt ract Documents Phase. Drawings enlarge fro m 1116'" and liS", to liS" and 11-1" scale, and details nrc drawn in larger sca les. Walls and parti tio ns, sho wn as lines on Schematic D raw ings. are shown in sectio n with th ickness and scale. Open ings are loca ted and d imen sio ned . Space is allocated to accommodate electrical. mech ani cal, an d structural req uirem ents. Other des ign disciplines are coo rd inated. Build ing Systems decided upo n du ring schematic des ign are detailed and fundamentally specified. Outl ine Specificat ion s begin to tak e shape. based o n de sign dc cisions made during the sche ma tic phase . Building Elevations and Secti on s are developed to assist in dimension ing and D esign Coordinati on . The Proba ble Co st of Construct ion is updated based on incre as ed de sign defini tio n. Its accuracy should he in the rang e of 15 % by the end of the phase. Designing to Cos t rem ains a goal, alt hough sta ndard design ag ree men ts makes this obligation a contract opt ion of the owner ra ther tha n n il a utomat ic requireme nt. TIle phase is complete when the AlE submits the Design Development Documenta tion and an updated Probable Co st of Con struct ion to the owner and they are accepted. Any chan ges the owne r makes to Previ ou sly Approved Schematics ar e charged as Addition al Servi ces 10 the owne r.

E.1.S

GC Con struction Docum en ts Phase 111is phase is product ion intensive. re quiring considera ble perso n-hou rs to fully doc ume nt the design that evolved during the previous two phases. Bidding Documents, which include Wor king D rawings. the Project Manual (fr ont end and technical spccifications), Instructions to Bidd ers. and Proposa l Fo rms are devel oped as flawlessly as possibl e and d istributed to Bidd ing Cont rac tor s. Alt ernates. if necessary. and Allowance s. if nece ssary, are decided upon. The Advertiseme nt For Bids is dr aft ed by the NE and issued in the name of the own er.

Sect ion E.1

Act iviti es During The Nine Ph ases ot a GC Buildi ng Proje ct

425

Final D rawi ngs arc 1I-t. sca le w ith large r scales for con structio n detai ls. Th e Drawi ngs arc sec tioned to accommodate Civil Site. A rchitectural. Structural , Mechan ical , and Electrical disciplines, and the instru ction al req uirem en ts for these d isciplines are included in their proper sec tion in th e Techn ical Specifications. Fron t-E nd Specifica tions, inclu ding the Genera l Co nd itions of the Con tra ct for Construction, Supplementary and Special Conditi on s of rhe contract are selected and ed ited for inclusion in th e Project Manual. Interest ed Bidde rs arc identified an d, wher e possible, Prequalified as to th eir ability. Se ts of bidding documents are printed an d distri buted to interested G Cs in exchange for a Biddin g Docum ent Deposit o f a sufficient amo un t to cover costs if they arc no t returned in good co ndition . Complete se ts of Bidding Documents arc sent to Plan Room s 10 facilitate re view, quantity take o ffs. and pricing by Trade Cont racto rs. Usually, on ly GCs arc pe rmitted to ob ta in individual se ts of bid ding doc umen ts; trade co ntracto rs genera lly rel y o n Plan Rooms or othe r named loca tio ns, such as the office s of the own er and AlE, to get the information they need to submit proposals. When the owner is sa tisfied tha t Co nt rac t Documen ts and Bidd ing Docum ent s are complete. and the Proba ble Co st of Con st ructi on is with in 5% o r less of the bu dget. the owner signs off on the Contract Docum ent Pha se.

E.1.6 GC Biddi ng Phase Bidd ing Phase: O vert. Co mpe titive Bidding is the usual requirement a ll Public Projects. O n Privat e Projects. ow ne rs so me times nego tiate com fact s, or usc a combi na tion of bidding and negotiation. Thi s phase could be called the Nego tiation Phase, if the owner elec ts 10 use that pr ocess of acquiring a cont ractor. The Uiddin g Phas e is the first phase in which contrac to rs become invol ved in the project. Th e be ginning of the bidd ing phase is the e nd of th e Design Phase. During this pha se the Probable Cost of Con struction is converted (Q the Actual Cost of Const ruct ion thro ugh the competiti ve bidd ing process. TIle AlE is not free of respo nsibilities during this ph ase. There a rc Qu estion s From Co ntractors rela tive to the Bidd ing Documen ts which require re spo nse s; Reque sts For Substitut ions to act up on : Pre-B id Me etings 10 or ganize and atte nd; and Pre- Bid Add e nda to issue to Bidde rs of Recor d when changes are made in the Co ntract Documen ts. (Th is to ensure that all bidd er s ha ve the sa me information on which to develop their proposal.) A final. thor o ugh review of th e Cont rac t Documents mu st be acco mplished. bef or e tbc Rid Da te. G enera l Contractors and Trade Contractors a lso have plen ty to do. Bidding requi res Co nstruction Planni ng. Quant ity Su rveys. and Estimates of constru ction COSIs. In esse nce, [he GC mus t co mple tely build the proj ect o n paper from 11 con struction cos t perspec tive and do it du ring the brief per iod (seve ral week s on ave rage, and dependen t on the projec t's size a nd complexity) Sc I aside for assembling proposals. The GC qu an tifies and estimates the co st of the work reser ved for his own for ces and so licits Trade Contract or Pr op osal s for the work he intends to have done by Subcontracted force s. Trade Contractors will get bidding and technical inform ati on from Plan Room s (es tablished by local Constructio n As soci ation s) .....hich hav e been supplied Bidd ing

426

Appendix E

Activities During Project-Delivery Phases for t he GC. D-B and eM Systems

Doc uments by the owner via the AlE for their use. To complete their proposals,Trade Co nt ractors qua ntify and price their wo rk and ob tain quo tations for Mater ia l and Eq uip men t from va rious Suppliers. Un less specifically defi ned. Trade Co nt rac tors determi ne their o wn wor k-scope. price their work accor dingly. and give o ra l Proposals to GCs. who have the Option of Us ing or Not Using the qu oted prices. GCs receiv ing tr ade con tractor prop osals must Co mpare them in ter ms of work-scope a nd price . Wit ho ut a GC-prescrib ed Work Scope. GCs have difficult y compa ring Cos t Pr op osals submitted by the same tr ade. Few if any Contract co mmitme nts are ma de by the GCs to Trade Co ntrac tor s pr io r to the Ow ner 's bid dat e. Trade Co ntrac tor Pro posals
GC Aw ard Phase

TIle Awar d Phase is a suspe nse ful pe rio d fo r trade co ntractors and gen eral cont rac tors, especially the Appa ren t Low Bid der. Qu estion s o n prop osals may ari se which requi re cla rification , a nd Pe st-Bid Q ualifica tion of the 10 \" bid der ma y be sugges ted by the N E. TIle ow ne r must make the very impo rtant decisio n of wheth er to accep t the low bidder or not. The Owner must take all o f the presc ribed actio ns which gove rnin g law an d statutes specify a nd cons ide r the adv ice of the NE. When an Awa rd decision is made by the Owner, act ion can be taken to enter into the Contract For Con struction. It is sometimes convenient or expeditious for the o wner to issue a Noti ce of Award leite r to the con tract or sta ring any pre-condit ion s. such as provid ing Labor and Mate rial/Perform ance Bo nds and Insurance Cert ificates. A Notice to Proceed may also be issued by th e owne r in the event the signing of the Co ntrac t Fo r Co nstructio n will be del ayed due to a tech nica lity. The No tice 10

Section E.'

Activities During The Nine Phases o f a GC Building Project

427

Proce ed usually imposes co nd itions o n the co ntrac to r to e nsure aga inst a nr pot enti al proble ms be fore Insurance. Bon ds. o r Fun d ing hav e bee n arranged , Bid Docume nt Deposits arc excha nged for unm ar red se ts of d rawings ret urn ed by unsuccessful bidd ers. and Bid Bo nd s (o r othe r forms of Bid Sec urity) are re turn ed to the m. The Awa rded Co nt ra cto r proc eeds to Buy Out the projec t. mobilize for ces. and commence co nstruction. The Contract Ti me sta rts when the contractor beg ins operations as required in the Co ntract For Construct ion o r the Noti ce to Proceed.

E.1.8

GC Co n structi on Phase

111e GC has co nt ro l of the site a nd the project accord ing to lhe terms of the Co ntract Fo r Co nstructio n duri ng the Co nstruction Phase. As an Indepe ndent Co ntracto r. the GC is respo nsible for co mple ting the project On Time, In Co nforma nce with the Tech nical Spe cificat ion s. an d for th e Bid Price stated in th e Pro posal. The AlE has responsibility for Con trac t Adminis trntion d uring the co nstructio n phase. Thi s con sists of Checking Shop Drawings, Prod uct Da ta a nd Samples, Pro cessing C ha nge Orders. Ce rti fying Progress Payments, and se rving as the exclu sive Liaison bet ween the co ntrac to r and the ow ne r. Th e re arc o the r respon sibilities requi red by the Ag reem en t.Th e AlE is the Judge of Per fo rman ce Unde r the Contract of bo th the co nt rac tor and the ow ner and is the first level of D ispu te Resolu tion be twee n the two part ies. Inspection of the contractor 's wo rk is not D specific AtE respo nsibility but , by co ntra ct, the AlE is to look a fte r the owner 's inte rests and interpre t the Cont ract Docum en ts in per for man ce. Th e independent con tra ctor sta tus of the GC place s Pe rfo rma nce Respo nsibility so lely o n th e sho ulde rs of the Gc. Th e A lE , howe ver, Judges G C Perfo rmance and acco rd ingly ma kes co nstructi ve recomm enda tio ns 10 th e owner. The Reject io n of the GC 's wor k and th e Denial of Pro gress Paymen t Requests arc the pr e rogat ives of the AlE. In esse nce, the A l E Ca nno t S top Work th at is nOI acco rd ing 10 specifica tio n; t he A l E can o nly tell the contract o r thaI it will no t be accep ted or paid for by the owner. There arc signa l poin ts duri ng the co nstruction pha se th at demand the atte ntio n of the Al E. One is the Date of Substan tial Completion (the point in the project whe re the ow ne r can usc the facility, o r pa rts ther eof, fo r its intended pu rpose) . The Al E Ce rt ifies this da te fo r the o wne r's conc ur rence ; it is the da te wh ich Term inates the Con trac t Tim e. A no ther impor tan t j unct ure is the lift)' pe rcen t co mpletion point where the Reta ined Am ou nt (mone y e arn ed bUI not paid to the G C by the owne r as insur ance aga inst GC failure 10 comply) is ofte n red uced. so me times ha lved . Th e Cont ract Starts o n a docu me nted date a nd ends when the GC accepts Final Pay ment und er the terms o f the contrac r.The Construction Phase star ts when the contract is awarded [Q the GC and ends whe n all con struction is completed. Th e nature of con stru ction req uires that the Con struc tion Pha se and Occup an cy Phase ru n concurrently du ring a var iab le pe riod afte r t he Date of Sub stan tial Complet ion. Th ere arc a lways work item s to be co rrec ted o r co mpl eted by the GC o r a Subco ntrac to r ami La te nt Defects which need a tten tio n afte r the facility is occupied by the owner.

428

Appendix E

Activit ies During Project-Del ivery Phases fo r t he GC. D-B and

eM Systems

Activi ti es Duri ng Th e Eleven Phases of .a D-B Building Project

429

At the Da te o f Substantial Completion. the A lE and the GC agree on the items

the project will be wit hin the ow ne r's b udge t wh e n final bids from ge ne ral co ntr actor s

which sti ll remain to be do ne. This list is ca lled a Punch List and con sists of large and 5111a1l ite ms. only som e of whi ch will preve n t th e owne r' s full uti liza tio n o f the fac ilit y

a rc rece ived. . ' . T he proble m with wa iting un til bid s hav e been rece ived to arr ange lI,nanclIIg IS that the N E fee s for the desi gn and bid din g ph ases (about 80% of an N E s total fee for the pr oject ) must be paid by the own er , e ve n if th e pro ject must be ab andon ed du e to exces sive co nstr uction proposals. . , If the owner can ab sorb AlE design and bidding fee s. financing IS best arranged a fter bid s have been received . A t that point, constructio n cos ts are usually 95% esrabIished.Tbe remain ing 5% can be covered by a conti ngen cy, . It is also worth the expe nse to inco rp or ate a "d esign to bud get" clause III th.c Owner-ArE de sign agreement ; however, th e clause should limit the ran ge ~nd magmtu de o f the AlE 's prerog at ive [ 0 chan ge design to acco mmo da te cos t reduction s,

the o wner.

In prac tice, man y of the smaller item s never gel sa tisfactorily co mple ted fro m the AlE o r ow ne r's per spective, and the Contract Amount is co nse q uen tly adjus ted downward.

E.1.9 GC Warr anty/Gu arantee Phase Th er e a re criteria whic h de te rmine th e le ngt h of th is ph ase and the O wner, Al E. and Contracto r in vol ve me nt d u ring this phas e. The phase provides a peri od o f time for latent d efects in construc tion, o r mor e impo rta ntly, equipment and materi als, to su rface before th e GC is con tractually excused from rem edial ac tio n, The G C' s contra ct us ua lly requires th e contractor to Warrant his workmanship fo r a period o f on e year after the Date of Substantial Com pleti on . The su re ty is usually kep t involved for the same period by the terms of th e Labor /M at eri al and Performance Bonds, Various ite ms of equi pment and materia ls which wer e inco rpo rat ed into the constructio n have Specific Wa rranty Conditions for varying leng ths of time, usuall y me asured from their install ati on o r opera tio nal date or from the date of s ubs tan tial comple tio n. Th e st..m dard architect's agreement Doc s Not exte nd into th e Warranty/ Guarantee Ph ase. It is ter min at ed sho rtly after the Date of Substantial Co mple tio n and relates to issuance o f the final Certificat e For Pa ymen t by the AlE. Th e Warranty/ Guarante e Pha se is not th e final op po rtu nity for th e G C to correct item s which wer e no t co nstructed accord ing to the Co ntract Docu ment s. Stat ut e of Limitations laws esta blish a time pe riod during which an o wne r can see k red ress for Breach of Co ntrac t. in the event that a problem involving the G C' s perform ance und er the con tract ar ises.The owner ca n hire an attorney and tak e legal issu e.

E.1.10

Sect ion E.2

Financing GC Proj e ct s Although financing is not a " phase of con structi on," its timing during th e p roject is a n important considerati on of the owner,Two realities m ust coincide: (1) the con struct ion cost o f the projec t to the o wne r must be justi fied , and (2) the projected cos t o f the pr oject must be estab lish ed as accurately as poss ible. . 111e GC system h J S two po in ts d ur ing the project whe re financing can best be arr ange d , one at the e nd o f the Fe asibilit y Ph ase an d the o ther af ter the Bidd ing Ph ase, Each point ha s its ad van tages and d isadvantages which sho uld be conside re d befor e making a selection. Th e pro blem with ob taining financing afte r the fea sib ility pha se is that the final cos t of con str uction cannot be concl us ive ly established ba sed o n the information avai lable. At thi s poi nt, financin g mu st provide for potentially significan t ove rruns o r the scope of the project must be su ch tha t it ca n be reduced to o ffse t cost overruns, Un less ther e is a "des ign to bud get" clause in the A lE ag re eme nt for d esign se rvices or a p rag ma tic " co ntinge ncy" in the owner's budget, the re is no guarantee th at

E.2 ACTIVITIES DURING THE ELEVEN PHASES OF A D-B BUILDI NG PROJECT

TIle progression of activities required to dcJi\l~r a bU,ildin g ~roj e ct using th.c ,0-3 Contrac ting Sys te m in the Publ ic Sec lor uses a Bid - Design- B uild sequence of event s.

E.2.1 D-B Feasibility Phase At thi s pha se, the project is conceived and analyzed. ~y t~ c o wne r. It be gin s when a need for a facili ty is recognized and ends wh en a decls,~n IS made to c~n~truct or not. Th e length of thi s phase is d ictat ed by the o wner's reqUirem cn,ts a nd urmng ~emands. Proj ect Definition ga ins focus as requ irem ents ar e cO,I1~lde rcd and discussed , Definit io n i s ge nerally given in broad param et er s, s uch as 1I111llm UII1 sq ua re footage of

Fin:.nc ing

Iii

131

Feasibility

Bidd ing

AWJ.rd

(91

(II I

Const ru ction

Wa rr3l1lY

Financing FtGURE E,2 The Eleven Phases of a

o-n Building Project .

430

Appendix E

Activities During Project-Delivery Pha ses for the GC. D-B a nd

eM Systems

Section E.2

D-B Bidding Pha se O n Priv at e Projects, o wners ha ve the op tio n to bid o r to negotia te co nt racts or to usc 0 combinati on of bid ding a nd nego tiat ions. Th is ph ase wo uld be called th e Nego tiation Phase. if the owner el ec ts to usc lh ill process 10 ac quire the se rvices of a D-B Con tra cto r. TIle O wne r has a wide ran ge o f resp o nsibil ities d uring th is phase a nd must be fam iliar with the co nst ruc tio n ind ustry to make it success ful. If a Docum en ta tio n Co nsultant is e ngage d. th at co nsult a nt's assis ta nce will bene ficia lly guide the pr oje ct thro ugh this phase. Interested D-B co ntrac to rs must be locat ed an d pre qual ificd . The Projec t Re qui rem en ts Docum en ta tio n must be dist ribu ted to q ual ified D-n co nt racto rs. Que stion s fro m co ntrac tors rel ati ve to the Do cu me nta tio n will re qu ire respo nses; R equests For Subs titutio ns must be act upo n; Pre-Bid M eetings mus t be o rgani zed a nd co nd ucted; and Pre -Bid Addenda may have to be issued to Bidd er s when changes a rc made in the Documentatio n. (A ll bidders sho uld have the same informol io~ fro m which to de velop their pro pc sal.} A final revi ew of the Documentat ion must be accomplishcd bolo," the !lid Dat e. D uri ng the Bidding Pe riod. D- B contracto rs a re e ngage d in two ma jor ac tivities. ( I) d evel opin g a Design Pro posa l. by conve rt ing the projec t requ ireme nt doc ument ation into a more De finitive Design . and (2) de veloping a Cos t Pro posa l based o n th at defin itive design. The Design Proposal should be in the for m of a D efinitive Desian in sufficient de tail to Visually Convey the sha pe . size. cha racter, and function ad equacy of the projec t to the o wner, in com pet ition with o the r D-D con trac tor's defini tive des igns. Th e d esign must p rovide accu ra te info rmat ion to the D-B co n trac to r for Co ns truc tio n Estim at ing purposes. TIle Cos t Proposal requi res co nst ruc tion Schedul ing and Pla nning. Q ua ntity Surveys. and Estimates of const ructio n cos ts. In essence. the D-B cont rac tor must

J

431

bu ild the p roject o n pape r a nd do it during th e b rie f peri od (seve ra l week s on aver age. depe nd ing on the proj ect's size and com ple xity) set aside for assem bling proposals. Th e GC q ua ntifies and est imates the cost of the work reserved fo r his o wn fo rces and so licits Trade Contractor Pr o posals fo r the work he inte nds to have do ne by Subcon tracted forces. Trade Co nt ractors mus t ge l bidding and technical info rmation from D- B contracto r's offices by invitatio n. To co mple te th eir p roposals. Trade Co n trac to rs must discuss the req uirem ents wit h the D-B co ntractor. qu an tify aud p rice [heir wo rk. a nd o bta in quotatio ns for Mat e rial and Equ ipm en t from appropriate Suppliers. Trad e Co nt rac tors de termi ne their ow n wo rk-sco pe fro m th e Proj ect R eq uiremcn ts Documen tation. pri ce their wo rk accordin gly. a nd give Proposals to the: D- B contractor, who has the Op tion o f using o r no t using the offers. Ho wever , it is com mo n for bidd ing D- B Con tractors to give Su bco ntract com mitme nts to Trad e Co ntractors before th e Owner's bid da te. Wit ho ut finished dr awings and de fin itive techn ica l specifications to bid from . trad e con trac to rs hav e the op port u nity to use eq uipme nt a nd mat er ials that are most ec o nom ica l to install yet fall safe ly within the parame te rs of the Project R eq uire me nts Doc ument at ion .Trade con trac to r p ro posals must be Co mpared in te rms of the mate rial/eq uipment Pr ovided as well as work -sco pe a nd cost. D-B co nt racto rs mus t be alert (o r Pre -Bid Ad den da, and if issued. re vise their Propo sal s accor d ingly with th e help o f th e involved trad e co ntracto rs. Each Bidding co n tracto r mus t acknowledge receipt of Ad denda in the ir Proposa l. If ad de nd a a re no t acknowle dged. the O-B's bid will requi re car eful re view hy the Ow ner. If D -B p ro posals a rc compe titively bid. they m e usu ally req uir ed to be recei ved by th e o wner at an ap poi n ted place before a de signat ed time . Pr o posals arc usually ope ned p riva tely by the ow ne r. and they a re rare ly s ha red with bidde rs. Th e ow ne r has the righ t to Reject A ny a nd All Bids, waive Irr egularities, an d accep t th e o ffer which is In Th e O wner's Best Interest s. A fter all bids have becn rec e ived, the o wner q uestions and reviews ea ch one a nd ma kes a de cisio n. TIle owne r may ma ke an Awar d o r Reject all bids. No te: Design-B uild Pro posa ls nrc so licited , using the Project Docum entat ion a nd Pre- Bid Meetings as the basis fo r assembling p ro pos als.Th e overall Qua lity of the docume n tation will ultima tely d et ermine th e Compe titive Ver acity of the. p roposa ls rece ived. Th e mo re Co mple te. C lear, an d Con cise the p roject requirements documenta tion is. the mo re Accu rate an d Co mpe titive the bidd ing will be. Ad di tionall y, the Privat e natur e of th e bidd ing process. and the A bsen ce o f the Lega l Requireme nts applicable in the publ ic sec tor. o pe ns co n trac to r proposa ls to conside rable Negot ia tion s befo re an awa rd is finally made. Th e are as and top ics o f ncgotia rio n ar e such that an ine xpe rienced owne r will not benefit fro m them with out the help of a Co nsulta nt who is approp ria tely qu a lified .

space and maximum b udget ex pen diture. Th e fea sibility p hase is a lso called th e Concep tu al Ph ase o r Progr am mi ng Ph ase. Du ring th is phase. Special Co ns ulta nts will be most helpful. Th e do cument ation produced during Feasibility ranges from A Progr am Staleme nt, with or without Sketches, to Conceptu al Drawings and high ly-de ....eloped Broch ures and Conceptual Mode Is.Depe nding on the documentatio n, the budget accuracy range at the e nd of the phase shou ld be plus o r minus 30%. Docum en ta tion : Aft er the Fea sibility Ph ase ha s been co mple ted and a decision has bee n mad e to p roceed with Design and Co nstr uctio n, the Ow ner' s next a nd exceptionally importan t step is to pro duce Doc umenta tion that ph ysica lly describ es the Pro je ct in s ufficient det ail to eliminate a mbiguity when d esign-bu ild con tractors in te rpre t the p roje ct' s requ ire ment s for pricing purposes. Pr oject R eq uire men ts Documenta tion usually co nsists of Perform ance Specifica tio ns, D rawings and Sketc hes that co nvey the size, sh ape, cha racte r, and q uality o f the pr oject 10 be construc ted. Ad equate d ocumenta tion ca n somet imes be p ro d uced by all as tute owne r. More of te n th an not. o wners hire Design Professio nals to assist in dev elop ing the Proj ect Req uirements and E specially the Docum en ta tion .

E.2.2

A cnvit tes During The Eleven Phases o f a D- B Buil din g Proje ct

E.2.3

D-B Award Phase Th e Award Ph ase is n suspe nsef ul period (or th e D- B co ntr ac to r and the trade co ntr acto rs. Q ues tions 0 11 proposal s ma y a rise which requ ire clarifi cat ion, and add it ion al Quali fication q uest ions m3)" be app ropriat e. Nego tiati on s rel ati ng to design , time. cos t.

432

App e ndix E

Activities During Project-Delivery Phases for the GC. D-B and

eM Syste ms

Section E.2

E.2.6

and quality usually take place. Se veral weeks and several meetings will tran spire before the owne r finally selec ts the D-D cont rac to r for the award. Wh en a n Award decision is ma de by the Ow ne r. action can be ta ke n to enter int o the Contract Fo r Construc tio n. 11 is someti mes co nven ient Or expeditious for the owner to issue a Notice of Awa rd letter to the co ntr actor stating any pr e-conditions. A Not ice to Proceed may also be issued by the own er in the eve nt the sig ning of th e Con tra ct Fo r Construc tion will be dela yed du e 10 a technicality.

Desig n Developme nt Phase

Contract Do cume nts Ph ase,

Drawings e nlarge from 1/16" and 1/8", to 118" a nd 1/4" seal: , and d~lails a re dra wn in larger sca le. Walls and par tition s. sho wn as lines o n Schematic Drawings, a re sho w.n in sec tio n with thickn ess and sca le. Open ings are located and dimensioned. Space IS allocat ed to accommodat e electrical. mechanica l. and structural req uir ements. Coord inat ion of o the r design d isciplines is accom plished. . B uilding System s decid ed up o n du rin g sche mat ic d esign are detailed an.d fu nd~ ­ menta lly spe cified . O utline Speci fications beg in to tak e sh3~. base d o n des~gn decisio ns mad e du rin g the sche ma tic phase. Building ~lev~t1ons and Sec tio ns are dev e lope d 10 ass ist in d ime nsion ing and in Design Coo rdinat ion . Designing Wit hin Th e COSl Propo sa l re main s a gOi.II o f the D -13 co ntrac tor . . Th e Design Devel o pme nt Phase is complet e when the D-B co n trac to r s ubmits the D esign Develo pment D ocu ment s to the owner and they are accep ted as conform ing to the Pr oject R equirem ents Documentat ion . Any changes the o~vnc r m ak~s 10 Previou sly A pp ro ved Sc hematics. which result in more or less con struction co st, Will be incorporated in a plus. minus. or net C hange Orde r. . ' No te :The contract award is made to the D-13 co ntrac to r on the baSIS of a D esign Prop o sal and a Cos t Pro po sal. Both ar c d evelop ed fr om the :roject Req uir em ents Documentat ion prov ide d by the own er . Th e cos t propos~l su br:rutte d to the o wne r was based on the D-B co ntrac to r's d esign pr o posal a nd Modi fied [incre ase d or dec(l~ased) to adjust for o wne r design chan ges made a fte r biddi ng or d uri ng the sche ma tic and d esl an de velop me n t de sign su b-phases, , ~ If the cost pr o posa l is in th e for m o f a Lu mp Sum o r Gu ara nteed Maximum Price, the curre nt cost propo sal as Modifi ed is valid a nd must be h on or~d by ~ h~ D-B co n trac to r. It is assum ed tha t the D-B co n trac to r has de signed t he projec t wit hin th.e mo dified cos t p ro posal and that th e lump sum or guar anteed max i,mu~l p rice figure IS co nseque ntly pr ot ected . If th e cos t p rop osa l is in th e form ,o ~ ~ Unl l :f1 ce S~hcd u le o r o n a Cos t Plus basi s, the p roject cos t is th e ow ne r's respon sibilit y and IS mo nit or ed du ring th e de sign su b-phases as th e probable cost of co nstruct ion. . . Howeve r, it is co mm on for D-B con tr acto rs to work und er a split comp~n~at1on ar rangc me nt-one am o unt to be pa id fo r desig n and another a mou nt to be paid for cons tr uction. D esign compensat ion is often o n a Cos t Plus Fec ~rrangem.ent an~ Con st ructio n co mpe nsa tio n mad e o n a Lu mp Su m, Guara nteed Maximum Price. Cost Plus Fcc or U nit Price Sched ule. Wh en de sign compensati on and co nstruc tion compc n~ati on are sepa rate d , th e eigh th phase o f the project, Co st Confirmat ion , bec o mes cru cial to bot h the o .....·ner and

TIle design phase of an a rchitectural project is divided into three sub -phases: ( 1) Sche mat ic Design, (2) Design Development, and (3) Co ntract Document s. Th e de sign phase o f an engi nee ring proje ct is d ivide d into two sub-phases: (1) Pre liminary Design and (2) Final Design. Su b-phases provide Ow ne r Review points and a means of determ ining desig n progress for payment. The sub-ph ases of de sign a re loose ly defined. ma king it difficult for anyo ne to re view in-prog ress d esign d oc uments and d etermine exactly where the des ign is in the two adja ce nt sub -phases. D-B co nt ractors in ter pre t d esig n sub -phase definition s fo r their own co nvenie nce unless some guidelines nrc SCE be fore de sign begins. Sche ma t ic Des ig n Ph a se

On a n a rchitec tu ra l projec t, the Schema tic De sign Ph ase beg ins when the co nt rac t is awarded. The term Design ha s different meanings to archi tects and to e ngi ne ers. Architectural Design int egra tes use and space, combining form and aest he tics into O ccupat ion al Functio n. En ginee ring Design deals with the effects a nd for ces o f natur e by prod ucing or injecting des ign so lut ions with Physical Perfo rmance Cr edibilit y. Workin g toge ther . arch itects are of te n involv ed in engineeri ng projects; engineers ar e always involved in a rchitec tu ral proje cts. Schema tic d esign is the sub -p hase wh ich requi res the most demanding Liaison with the owner; the tim e when Comm un icat io n be tween owne r a nd de sign pro fcssional is most critical. 11H: Project Requ ire me nts Docum en tati on must be R eviewed and Refined and Successfully Co nveyed to the D- B co nt ractor fo r Accura te Inc orporati on into the de sign . Schema tic design pro vides the oppo rtu nity to critica lly re view thc Design Prop osal s ub mitted by the D- B cont rac tor. no ting the sha pes, sizes, a nd rel at ion ships o f the required spaces.Alternative Sol utions a re de veloped by the D-B co ntrac tor a nd co nsidered by the o wne r. Drawings are sti ll very p relimi nary; small sca le (1116'" a nd l IS") without detail. Ske tches are pro vided to show space loca tions and rela tionships. Technical Specifica tio ns are not yet fo rmulat ed. but Design C rite ria are be ing refined as decisions are made on Bu ild ing Sys tems. M aterials, and E q uipme nt. Th e Cost o f Co nst ruction is tracked as progre ss is made and co mpared with the Cos t Prop osal. Th e D-13 contractor's highest priority as final De sig n D elineat ion an d Material Selec tions are made is to remain within the bu dget. Th e schematic design pha se ends when the ow ner accep ts the Sc he ma tic D ra wings as re presentat ive of the De sign Pr o po sal.

433

TIle Design Develo pme nt Phase begins when the ~)wner . signs o ff on the Schema tic Design Phase. Wor king fro m the app roved Sche matic D esign.t he De-B c~n t raClO r furthe r develops the design th ro ugh increased delineation and docume nt~lIo n ., Th e G?al of thi s phase is to comple te and coordi na te all a~chi tectural and en~lI1eert ng ,deSIgn deci sion s so that final del inea tion a nd do cu men tatIon can be acco mplished du ring the

E.2.4 D-B Design Phases

E.2. S

A ct iviti es Dur ing Th e Eleven Phases of a D-B Building Project

the D -B co n tracto r. TI1 C COS l Co nfo rma tion phase (s I1 O\v n in figu re Appe ndix E.2 as occu r ring a fter the cont ract d ocu me nt phase) essentia lly Begins du ring the Design D evelo pmen t

i

_ _ _ _ __ J_

~.

434

Append ix E

Activities During Project-Delivery Phases for the Ge, D-B and eM Systems

Sect ion E.2

r,

phase (or as soo n as the D-B contractor can firmly commit to a lump sum or guaranteed maximum price). Some D-B contracts require the D-D contrac tor to "provide a lump sum price to the owner as soon as design is suClicicntly complete to do SO." This has been gene rally inte rpre ted as after desig n is app roximatel y 80% compl ete (sometime ea rl)' in the contract documen t sub-phase of the design) . On split compensation projects, the owne r often re tains the opti on to terminate the contract with the D-B cont racto r and use the design docum ent s. when completed by the D- B contractor. to so licit co nstruction proposals from other part ies. One reason for this is that the: Cost Confirmation numbe r has not been exposed to compet itive bid. ding and. if it seems excessively high, the owne r has the right to seek a more cconomical construc tion sour ce. The possibility also exists tha t the relati onship betwee n the owner and the D-B contractor rna)' have dete riorated during the des ign pha se. In this case, it is better for both parties to discontinue the con tract ar rangeme nt. D-B contracts should prov ide eno ugh flexibility to accommodate bo th proceed a nd no t proceed provisions.

E.2.7

E.2.8

D-B Construction Phase The D-B con tractor has contro l o f the site and the project according to the te rms of the Contract For Constr uction during the Const ructi on Pha se. As an Independent Contractor . the D-B contractor is responsible for comple ting the proje ct On Time. In Confc rmnnce with the Project Requirements Docume ntation. the Drawings and Technical Specificat ion s. and within the a mou nt sta ted in the Cost Proposa l as amende d b), Change Orders or
_ _ __ _

43 5

Th e Owner (with/witho ut the assistan ce of a Co nsultant) has responsibility for Co ntract Adm inistration du ring the construction phase . Th is consists of ap provi ng Shop Dra wings, Product Da ta and Samples, proce ssing Change Or ders. ce rtifying Progress Payme nts.j udging the D- Ocon tractor's Per fo rmance. resolving Disput es. and prov iding an ope n Liaison with the D- B cont ractor o n day-t o-day activit ies. . A not her O wne r respon sibility is estab lishing the D ate Of Substan tial Cornpleticn-e-the point where the owner can use the facility. or parts the reof. for its intended pu rpo se.This date is the da te which lega lly End s the Cont ract lime. The Contract Start s on a doc ument ed date and end s when the D-B contractor accepts Final Payment under the term s of the contract. The Construc tion Phase starts with on-site activity. The nat ure of construction requires tha t the Co nstructio n Phase and O ccupancy Phase run concur ren tly du ring a va riable period after the D ate O f Substanti al Completion. Th ere are always wor k items to be co rrected or complet ed and La tent Defec ts that need atte ntio n afte r the facility is occupi ed fully or partially by the o wner . Still ano the r Owne r responsibility is issuing Punch Lists. These lists con sist of large and small items which a re inco mplete or not accep ta ble as comple ted, only so me of which will preve nt the owne r's full use of the facility. Pu nch lists a re produced by a walk-thro ugh inspection of the project, .IS a cond ition of cer tifying substan tial completion. and issuing the final payment check to the D- B contractor. In prac tice. many of the smaller punch Jist items never gel sa tisfactorily completed from the owner's pe rspective. a nd the Contrac t Amount is conseq uently adj usted downw ard .

Constructi on Documents Pha se This phase is production-intensive, requiring considerab le per son powe r to fUll y docume nt the design that evolved du ring the previou s two phases. Construction Documents. which include Working Drawings and the Project Manual (front-end and technical specifications) nrc developed and provided to the owne r. Working Drawings arc 114" scale with larger scales for constr uction details. 111e Drawings nrc sectioned to accommodate Civil Slte.Archit ccrural, Struc tural. Mechanical. and Electrical discipl ines. and the instructional requirements for these disciplines arc included in their proper sectio n in the Techn ical Specifications. Note:The D- U Syste m can accommoda te Fast-Track Con str uctio n because of its built in. Single Contract. design and build resp onsibility. Fast-track ing is where con. structicn begins before the projec t design is comple ted. As Iouu datiou design occurs in the late stages of completion, fou ndation construction begins based 0 11 the found at ion design completed. This design-build sequence is re pea ted as design prog resses un til the construct ion is completed. If fast-tracking is used on a project, the proje ct's Design pha se can not be com. picled using the Conve ntional Th ree Sub-phase pro ced ure outlined here. TIle com . plc ted Work ing Drawings and Specifications will bejn ade available to the owner a t the End of construction in the form of As-Built d rawings-c-dra wings and specifications that accura te ly portray the projec t as construc ted.

Activitie s Dur ing The Ele ve n Phases of a D- B Building Proje ct

E.2.9

D- B Warranty/Guara nt ee Phase

There a rc crite ria which determi ne the length olt his pha se and the involveme nt of the O wner and the D- B Co ntractor. 111C phase provides time for late nt defects in ca nsrruction. o r more impo rta ntly, equipme nt und nuue rln!s. to surface before the D-B contrac tor is contractually excused from re medial action. TIle O-B contract usually requ ires the con tracto r to Warrant his workm anship for a pe riod o f one year aft er the Da te Of Substantial Co mple tion. If Suret y Bonds ha ve been provided by the D-B contractor. the surety is usually kept involved for the same pe riod by the te rms of the Labor/Mat erial and Pe rforman ce Bonds. Various items of equipmen t and ma te rials which are incorpor ated into [he construction howe Specific wa rran ty Co nd itions for varying lengths of time. usually measured from their installation or ope rationa l da te or the dat e of substantia l compl e tion. The O wner sho uld make sure that all of these special warranties have been Cataloged and Filed for futu re. timely reference. A compl e te file of Ope rati ng An d Maintenance Manuals for mecha nical and electrical equ ipmen t. and a supply of frequently needed Spare Pa rts. should be dclivered to the Owne r bv the D- B contractor. The Warran ty/Guarantee Pha se is not the final opportunity for the D-B con tractor to cor rect items no t const ructed according to the D-B Con tract.The re are Sta tute Of Limitat ions laws which establish peri ods of time du ring. which an owne r ca n seek redress for Breach Of Contract in the event that a proble m arises involving the D-B contractor's pe rfor mance.The owner must then hire an at torney and lake legal issue.

J'--_

436

Appe ndix E

E.2.10

Sect ion E.4

Activities During Proje ct-De live ry Phases for the GC, D-B and CM Systems

o f basic servtccs.) . . AlE and Clvl firms so me times pr ov id e limited feasibility pha se services ~I t h?~t ad d ition al fees as an incentive to a n o wne r to e ngag e th eir ser vices fo r the p roJcc.t If I I moves a head. par o bvious reaso ns, this p ractic e is fro wned upon by so me professiona l associa tio ns. (Ow ner s sho uld be awa re that feasibili ty sc rvicl:~ pro vided u nder these co ndi tions can have a sel f-servi ng moti ve- to move the pr oject ahe ad o ne way or

ano ther.) Th document ation p rod uced urjn fe asibility ra nges from a Pro gram taterucn t, v.-ith. 0 without Sketches or. Rough rawings. l fo rmal Conceptua l' Drawings nd high ly_deve loped Broch ur s a nd Conce p tual Models. Docume ntation sho uld be sufficie ntly det ai led a nd re liable to perm it the AlE and the eM to productivel y be gin the ir respo nsibilities in the Sche ma tic Design Pha se. . . On ma ny p rojects in both the Public and Private Sectors, the ~nclus.lon of ~ h,s phase establishes the. need to locate-a Funding Source fo r the projec t. Th.ls reqUlre~:> es tima te s of p roject costs to th e degree o f accuracy accep tab le to a funding so urce. D ependin g o n the de tail o f the docu me ntatio n. the ra nge of bu dge t accuracy at the end of the feasibility phase sho uld be plus o r mi nus 15%.

ACTIVITIES DURING THE NINE PHASES ON AN ACM BUILDIN G PROJECT The progr essio n o f ac tivities req uire d to deli ver a building project using the ACM Co ntracting System is accor d ing to the sta nd a rd co ntract docume nts for a n AC l\.·! A rchite ctu ral Project.

E.4

437

The p roject gain s d efinitio n as requiremen ts arc c?".sidered and disc ussed. Defi nit ion is genera lly given in broad pa rameters. suc~ ~~ mlOlmu m.squa re footage of space and maximum b ud ge t expenditu re. The feasibility phase IS also called the . . Co nceptual Phase or Facility Progra mm ing Phase. Du ring this ph ase. Special Con sul tan ts will be mo st help ful. The BaSiC.SerlJlce~ e f the N E. O wne and til =Owne Contracts do 1101 \:JS1l:l1I v ervsc n ng lhi phase. If A lE o r CM services ar e deeme~ advantageous. they ca n be ~on t racte~ separa tely o r included as Addi tiona l Se rvice s 10 t he respect ive 3~r:~ me n ts.l f the projec t mo ves ahead. (En gin eering ag re eme nts usuall y include fea sibility services as pa rt

Financing Although finan cing is no t a " phase of co nstr uction," its a rra ngement d uring the pro ject is an impo rtan t co nsid era tio n for the o wne r. Two rea lities mu st co incide: (I) the con str uction cos t o f the p roject ( 0 the owne r mus t be ju st ified. an d (2) the pr oject ed cost of the project must be establi sh ed as accur at ely as possible. The D-B sys tem . With out Fast -Tracki ng. has two points d uring the pr oject wher e financing can be a rranged , at th e end of the Fea sibility Phase and. befo re the Co nstruction Phase. Wh en Usi ng Fast-Tra cking, the only o ppo rtun ity to finance is at the end of TIle Feasi bility Phase, ,IS co nstr uctio n will beg in befo re the design phase is com ple te. TIle problem with ob ta ining const ruc tio n financing a fter the feasibility phase is that the final cost of co nstruct io n ma y not be est ablished un less a Lump Su m or G uara nteed Maximum Price payment sche me is in effect. Project finan cing under U nit Price or Cost Plus paymen t arrangem en ts at thi s point mu st pr o vide fo r po tential ove rruns o r an unde rstandin g that the sco pe of the p roject ca n be reduced to o ffset cost o ve rru ns. O b viou sly. p rojects th at are not Fast -Tracked can be co nvenient ly fina nced initially for d esign and s ubseq uen tly for cons tr uct io n, a nd they often a re.

E.3

ACM Feasibility Pha se

ACM FEASIBILITY PHASE This is the phase wher e J project is co nceived a nd ana lyzed by the o wne r. It begins when a need for a facilit y is recognized and e nd s when a d ecision is mude to co nstruct o r not co ns truct. TIle length o f the fe asibility phase is d icta ted by the o wner 's req uiremcn ts and th e timing d emands o f the projec t.

E.S ACM DESIGN PHASES TI1C d esign p hase o f an ar ch itectu ral proj ect is divided into th ree sub-ph ases: ,(1) Sc he ma tic Design, (2) Design Develo pment an d (3) Contract D OCllm~n t~. TIle d~s~g n phase o f an e ngine eri ng p roject is d ivided ~ n to two sub-p hase.s: ( 1) ~re ll m lO ar)' D~~Ign and 2) Final Design. Th e sub-phases p ro vid e an Owner Review POlO t and es tablish 01 means o f de te rmi ning p rog ress for AlE a nd C;vl pa yment purp o ses. . . Th ese sub- phases ar e loosely de fined in design a nd C M se rvice: ag ree me n ts. makin g it d ifficult for anyo ne to revie w i ~.p rogre~s d esign and .CM services and mak.c a dete rmination o f exactly whe re the services arc 10 the two adja ce nt sub- ph ase s. AlEs and Clvls inte rp ret d esign sub-phase de finition s to their own benefit unl ess some guid elin es are se t be fore th e design phase be gins.

(II

E.5.1 15) IlIdding

FIGURE E.3 Th e Nine Ph ases or an A e M Building Project.

Schematic Des ign Phase O n a n a rchitectura l project . th e Sche ma tic Design Phase hegi ns when the Feasibility Ph ase en ds. De sign has a di fferent mean ing to a rchitec ts and to cn~lO~crs. A rchitec tura l D esign integrates use a nd spa ce, co mb ining forms ~nd aesthe t1~s 1010 Occ upational Fun ction. E ngineering Design must con form to architect ural des ign b ut

438

Appendi x E

Act ivities Dur ing Project-Delivery Phases for t he Ge, D--B and eM System s

additi ona lly deal s with the effects and forces of natu re o n the design. pro d ucing solutions with adeq ua te Physical Performance Cr ed ibility. Wor king together. architects ar e often involved in engin eering projects; engineers are alway s involved in a rchitectural proj ects. Schematic design is th e sub-phase which requires the most cooperation a nd demanding Liaison with th e owner. the time whe n Communicati on be twee n owner . A lE, and Cr-. t is critica l. The Conclusions reached by the owner d uring the Feasibi lity Phase mus t be Accurately a nd Th o roughly Conveyed to the AlE and CM an d Accurately Incor porated into the design . The sta rt of Schematic Design is the start of the C ~ I and A lE 's Pr oject Managem en t respon sibilities and th e form at ion of the Project Team co nsisting o f the Owner, A lE , an d eM.Th e initial activities ar c team Brainstorming an d Orgnnizmional meetin gs to cla rify tea m interac tio ns and esta blish a clea r path toward synergistic results. 111e expe rt ise and knowledge of each [cam member provides Ch ecks And Balances duri ng a ll pha ses of the project. The re is no designated Tea m Leader . The Owne r has the contra ctual righ t to make Most decision s. However, the owner defers 10 the expertise of the A lE and eM and the comm on goal of the te am by requiring that team leadership shift from one member to the othe r. depending on the inp ut requirements at the pa rtic ular poi nt d uring the project. Du ring the Schematic Design sub-phase, the A l E lea ds Design activities, the C~f leads Project Manage ment activities. and the o wne r follows the lea d by provid ing necessa ry Infor mation and decis ions. Schema tic design produces Proje ct Configuration (the shapes. sizes. locat ions. and relat ionships of the requi red spaces). Alt ern ati ve Solu tions a rc suggested and re viewed by the AlE. Ct\I, a nd owne r. Drawings arc very prelimina ry.small scale ( 1116" and liS") withou t det ail. Ske tches nrc provide d to delineate th e project config uration. Te chn ica l Speciflcu tions arc not yet bein g fonu ulntcd , but Pe rfo rmance Specifica tions and Design Crite ria are bei ng record ed by the Te am as decisio ns nrc mad e o n Buildin g Systems. Materi als, An d Equi pme nt. Dcsigna bifity And Co nst ructablllty studies begin and con tinue thr ou ghou t design. An Estimate O f Cons truction Cost is de te rmined by the C1\1 and compared with the owne r's Feasibility Budget . TIle Feasib ility Bud ge t (often establ ished with o ut drawi ngs) is the co nsta nt crite rio n of the AlE and CM as owne r-informa tion is con verted to Design and Material/E q uipm ent Sele ctions are mad e. The CM provi des o ngoing (not periodic) estima tes of con struction costs as the N E proceeds with design. Econ om ically cor reel Building Systems deci sions are collectively made by the Team through Value Eng ineering and Life-Cycl e Costing stu dies insti tu ted by the CM . By properly considering alternatives. it is possible to maint ain the Estimated Cost O f Construction within plu s o r minus 5% d uring sche matic design . During the Schematic Design pha se. the CM a lso develops a Program Schedu le with input from the Owner and AlE and begins the Conrractab iliry and RiskManagement review processes and the de velopment of the C~l Project Man ual. The schema tic design pha se end s when the A lE sub mits acce ptable Schematic Dr awings, and the C M submits an acceptable Cost Of Construction and Pr ogram Schedu le to the owner.

Section E.5

E.5.2

ACM Design Phases

439

Design Dev elopment Phase The Design Development Phase begi ns when th e owne r Accepts the Schematic Design Phas e Documentati on fro m the NE and CM. Working from the approved Document at ion . the AlE furthe r refines the de sign through increa sed delineation and docume ntation. The eM initi ate s Consuuctabilir y re view proc edures and continues o ther respo nsibilities. TIle Goal of this phase is to co mplete a nd coo rdi nate all design decision s so that final delinea tio n and documentation can be completed du ring the next phase. the Contract Docu me nts Ph ase. Dra wings enla rge fr om 1/16"an d liS". [ 0 liS" and 1/4" sca le. an d det ails arc d rawn in lar ger scales. Walls and pa rti tion s. shown as lines o n Schem atic D rawings, are shown in sec tion with thickness anti scale. Openi ngs nrc locat ed and dim en sion ed. Code req uire me nts and local Build ing Regulations are incorporated. Ancilla ry space is allocated a nd space is designat ed to acco mmoda te e lectrical. mecha nical. an d st ructu ra l req uiremen ts. D esign Coordina tio n of the \....o rk of other des ign disciplines is ongo ing. Bu ilding Systems de ter mined during schema tic des ign are de tailed and funda men tally specified. Outline Specifications begin to lake shape, based on des ign and ma teria l/equipmen t decisions made during the schematic phase . B uilding El evati o ns and Sections are dev eloped to re fine dimensio ning and aid in Design Coo rdi na tion. TIle Estimate Of Co nst ruc tion Cost is upda ted as design de finition impro v·es. Its accu racy shou ld re main in the 5% range. D esigning Within The Budget rem ains Ihe goa l of the Team . The phase is comple te whe n the AlE submits the Des ign Development Documentatio n. the eM subm its a Cos t Of Con struction and Schedule to the o wner, and they are Accepted. A ny chan ges the owner makes to Previously App rove d Sche matics are cha rged us Additi on al Ser vices ro the owne r by th e AlE and some times by the eM.

E.5.3

Constructi on Documents Ph a se This phase is pro duc tiou-intcnsivc. req uiring consid erable pe rso npowc r from th e A lE and Ct\1 to fully document the desig n an d con trnctab ility proced ures that evo lve d uring the previous 1\v0 pha ses. Bidd ing Docume nts (which include Wo rking Dr awings). the Project Manu al (fro nt-e nd and technical speci fications). and Instructions To Bidders und Pro posal Form s arc de veloped for dis trib ution to Bidd ing Con trac tors in the next phase. Alte rna tes. if necessary. arc selec ted, and A llowances deci de d upon. Th e Adve rtiseme nt For Bids is dr afted by the CM and issued in the name of the owner. Fi nal Dr awings are 1/-l" scale with lar ger scales for cons truction details. The Drawings arc secti oned to accom modate Civil Site . Ar chitectural, Structura l. Mechan ical. and Electri cal disciplines. The instr uctio nal requi rements for these disciplines are included in their prope r sec tion in the Techn ical Specificati ons. Fro nt-E nd Specificati ons. the General Cond itions of the Cont ract fo r Cons truction. Supplem en ta ry and Special Cond ition s. and Did Forms are dev eloped a nd edi ted to accommodate specific CM cont rac t req uirements and added 10 the Projec t Ma nua l.

440

Appe ndix E

Secti on E.S

Activities During Project -Delivery Phases for t he GC. 0 - 8 a nd CM Systems

.. ,

ACM Bid d in g Ph a se Overt, Competi tive Biddin g is the usu al requ irement o n Pu blic Projects. On Pr ivate Projects. owne rs so metimes negotiat e co n trac ts or use a co mbinat ion of bidding and negotia tion . TIlis phase cou ld be called the Negot iati on Ph ase. if the owner elects to use that p rocess to acq uire a con trac to r. Th e s ta rt of (he biddin g ph ase e nds th e Design Pha se. During this p hase. the Est imated Cos t O f Co ns tr uct ion will be co nve rted to the Actual COSI Of Constructio n using the cost infor matio n obtained from the co mpe titive bidding process. Bidding doc ume n ts a rc pr in ted; Com plete se ts arc distri b uted Exclusivel y to the Contractor s who request them in exchange fo r a Bid ding Document D epo sit sufficient to cover pr inting and ha ndli ng cost s. 111C deposit will be returned if the documents are return ed in good con ditio n by the uns uccessful bidders. To increa se bidding int ere st , co mplet e se ts of Bidding D ocu me nts a rc so me times sent to Plan Ro om s to perm it review. quant ity tak e offs. nnd pricing by Trade Co n rrnctor s. Howeve r. contracto rs must obtain the Did Form s for the project from the A /E , CM. o r owner. TIle A l E's and CM's respon sibilities du ring this pha se nrc respo ndi ng to Quest ion s From Co n tracto rs con cern ing the Biddin g Docume n ts which require respo nses; ac ting o n Req uests For Su bstit u tions; orga nizing and a tten di ng Pr e-Bid Mee tin gs; issuin g Pr e-Bid Add enda to B idd ers of Record when chan ges in the Contract Documen ts are made (to en sure that all bidd er s have the same info rmation o n which to de velup the ir pr oposal ]; and a final . tho rou gh rcvlew o f the Contract Docume nts be fore the Did Dat e. Co n trac tors also ha ve plenty to do . Bidding reqUires Construc tion Plann ing, Qu anti ty Surveys. a nd Es timates of ccns truc rion costs. Each bidde r must "b uild the project a ll pa per" fro m a co nstructio n-cos t pcrspccu ve a nd d o it during th e peri od (a few week s on average, depe ndent on the p roj ect's size and comp lexity) se t aside for asse mbling p ro posals. To complet e thei r proposals, Con trac to rs quant ify (ca tegorically determi ne th e quantity of wor k required in the work scope), o bta in q uo ta tions for Mat eria l/ Equipm ent from Suppliers. and est imate the costs of labor and constructi on eq uipment.

44 1

Co ntractors are not usuall y perm itted to d efine the ir own work-scope.Th ey must submi t their proposals, based p recisely o n the l.'OIJ( eH l of the Work -Sco pe De script ion s writte n by the CM and provided in the Bid din g Docume nt s and as shown o n the Bid Fo rm for the work-scop e(s) they a re bi dd ing. Cont rac tors must be ale rt for Pre-Bid Ad denda a nd, if issued, revise their Proposal s accor d ingly. E ach Bid der mu st ac kno wled ge receip t of Ad d enda on th eir Proposa l Form . If All issue d addenda are not ac kno wledged. the Co n trac to r's Bid will not be consider ed by the O wner. Th e Locatio n and Time for rccci v ing proposal s from Contra ct ors all Pu blic pr ojecrs is first stated in the Advert iseme nt For Bids and lat e r es tablished in th e Instr uctio ns to Bidders. Proposals mu st be received at the appo inted place be fore the sta led time. B ids thai are received Lat e ar e nOI accept ed . Only Responsive Pr o posals, those s ubmi tted in acco rda nce with the Instru ction s to Bidders. ar c con sidered for awa rd. At the Bid O pening, proposals a rc opened and p ublicly read . Due to large number o f bidde rs (so me times over 100), p ro posals are opened in Wor k-Scop e gro ups. Th is aUO\v's bidders to limit their presence to readings of p ro posa ls in the gro up(s) in which they have an in ter est. Pr o posals for each numerically su ccessive Work-Scope group ar e opened and re ad , one a t a tim e, in ra ndom orde r. Mandat ory proposal en closures such as Bid Bonds arc ackno wledged vocul ly and the Dollar Proposal read. If Award C riteria ot her than Price is to be con sidered (such cr iteria had to be previously stated in the Ins tructions to Bidders) , the bidder's response to that criteria mus t be Re ad at the time o f opening his/h er pr oposal. Althou gh the own er usually reser ves th e right 10 Reject An y and All Bids, Wai ve Irregulariti es. and acce p t the offer which is In The Owner's Best Interes ts, Ihe low bid is rsually accep ted. A d ecision Not to awa rd th e p roject to the Low Bidd er can promp t a legal chal lenge from the low bidde r.

TI1C C M deve lop s the Co nstruction Schedule ( to co nfirm rhe projec t can be constructed with in rhc allo tted time ) and the constr ucti on po rti on of the Milest on e Schedul e wh ich prov ides bidd ers with a gene ra lized sched ule for bidd ing p urposes. Th e Cf\, l writes Wor k-Sco pe Descripti on s for all D ivisio ns of Wo rk that co mp rise the tot al Proje ct and R evie ws the Bid d ing Documents fo r am biguit ies and errors. Contractor Bidd ing Pro ced ures arc established by th e Team and includ ed in th e biddi ng d ocuments. Bidd ing o f Lon g-Lead I tems, prev io usly identifi ed by th e Te am . is arranged for. TIle eM identifie s int er ested co ntractor s a nd, where pos sible, Prcqual ifi cs the m based on their performance ability. Cont rac tors o n th e Did List arc per siste ntl y enco uraged 10 s ubmit p ro posals a t bid lime. When th e ow ner is sa tisfied tha t Bidding D ocument s are co mp le te, the Cost O f Construction is within 5% o r less o f th e b udget . and a satisfactory Const ruc tion Sched ule ha s been produced. the owner signs off on the Con trac t Document Phase. E.5.4

ACM Design Phases

E.5.5

Awa rd Ph as e After bid s hav e been p ub licly rc ad , the own er takes them und er Advisem ent. With assis tance fro m the AlE and CM, the Owner co mp reh e nsively reviews ea ch proposal and eve ntua lly makes a n award decision.The op tion s available to the o wne r in each Work -Scope ca tego ry arc to make an Award , Reject nil bids in a spe cific work -scope ca tego ry(s) . o r a llow the sta led proposal holding time 10 Expire. Th e Awa rd Ph ase is a bu sy time for the CM a nd the AlE. and a suspe nsef ul period for con trac tors, esp ecially th e Apparent Lo w Bidder(s). Q uesti on s on contracto r proposals. regarding Qu antit ies, Pri cing. and Sched ule may a rise which requ ire contractor clarifica tion . Pos t-Bid Qualificati on of ce rta in a ppar en t low bidder s may be re com me nded by the Team. With input from the AlE and CM , the o wne r must make th e final de cision to accept a bidder or not. The Owner mus t take in to co ns ide rat ion exist ing laws and sta tute s and co nsider the advi ce o f the AlE and CM. It is commo n for the CM to reco mme nd awards to the A /E , who in turn reco mme nd s awa rd s 10 the owne r. A s eac h Awa rd decisio n is made by the Own er. Contracts For Co ns truc tion ar c prepare d. It is so me times conveni en t or expeditious for th e owner to issu e a Noti ce o f

442

A ppendix E

Activities Dur ing Project-Delivery Phases for t he GC, D-B and eM System s

Section E.5

AW
E.5.6

"~

,"

1. Each co n tra cto r's D a le o f Subst an tial Comp le tion; that poi n t whe re a com ractor's Work is su fficien tly co mpl e te to pe rmit Subseq uent contracto rs to begin wor k without interference from the contractor seeking substantial completion status o r whe n a cont ractor's wo rk is tot ally complete. The NE Ce rtifies these dat es up on reco mmend a tion of the C f\.1 an d co ncu rre nce of th e owne r. Thi s d ate Terminat es the Cont ract lime of the subs tan tially complet e o r to tally complet e con tractor . 2, TIle 50 % co n trac t comple tion poi n t where the Re tain ed A mo unt (mo ney earned b ut nOI pa id to the contrac tor by the o wne r as insu rance agains t co n tracto r failur e to complete ) is of ten Red uced . sometimes halved. Th is date m ust be de termined by the CM , re viewed an d app rove d by the AlE. a nd ag ree d to by the o wne r.

ACM Con struct ion Ph a se Th e: CM ha s control o f the sit e in behalf of the Owner a nd the: respon sibility of Coo rd ina ting the contracto rs' work . Usi ng updat ed sched ule inp ut from Sta rt -Up Co ntrac tors. the C1\'1 produces a Short Te rm Contractor Activity Plan (CAP)-a con structio n schedu le ba sed o n the first portion of th e D et ai led Cons truction Sc hedule and schedu le inform ation p ro vided by con trac to rs with the ir proposals. Co nt rac tors construc t the proj ect acco rdi ng to the te rms o f the ir Cont rac ts Fo r Co nstructio n, As Indepe nden t Contractors. they arc re spon sible to co mple te the ir Work -Scope(s) in ac co rda nce wi th the Sho rt Term CA P, In Conforma nce with th e Tec hnical Spe cif ica tio ns. anti fo r the D ollar Amou nt stilled in the Contract. TI1C A l E and C ~ 1 sha re the resp o nsibility fo r Con tract A dmi nistrati o n du ring the con struct ion ph ase. TIle A lE Ch eck s sho p drawings. prod uc t dntn
443

Th e AlE is the Final interpre te r o f co ntr ac to r pe rforman ce relati..'e to the D rawings a nd Tech nica l Specifi catio ns. H owe ve r, the eM is the Judge o f the co ntractors ' time pe rfor ma nce and ma ke s co rr ec tive recom me nd atio ns to the o wne r whc n sub -pa r performa nce is not e d. Th ere ar e signa l poin ts during the co ns tructio n p hase that demand the co mb ined atte ntion of the CM and A lE:

Material/Performance Bonds and Insurance Certificates. 1111.: C:-'1 Co ordinates th is pa rt o f Co nt ract A dminist ra tio n. A Nerice to Pro ceed mav also be issued by the ow ner in th e e vent that the signing o f the Co ntrac t Fo r Constr~ction is d elay ed d ue to a technicality.Th e no tice to p roceed usually imposes con d itio ns o n the co n tractor to e nsure against an y potential proble ms before Insuran ce. Bo nd s, o r Fundi ng have been arranged. Bid Document Deposits are exchanged for unmarred sets of draw ings ret urn ed by unsuccessful bidders. and Did Bond s (o r other form s of Bid Security) a re retu rned . Awarded Contractors proceed 10 Buy Out the project. Mobilize forces/equipmen t, beg in the submi ttal of Shop D rawings. Pro d uct Data and Samples, and com mcnce Construction operations, TI1C Cont ract Ti me fo r the Project beg ins when th e first Sta rt-U p Con trac to r begins construction opera tions as req uired in the Con tract For Construction o r the Notice To Proceed .

ACM Design Phases

Each Contract Sta rts on a spe ci fied d at e an d ends when the contrac tor accepts Final Pa yme nt under the co ntract terms. The Cons tr uctio n Pha se sta rts whe n the co ntract is a wa rded to the first Start- U p Co ntra cto r and ends whe n the wo rk o f the Last Co nt rac to r is d eclared s ubstant ially co m ple te by the Own er. TIle na tu re of cons truc tion permi ts the Con struction Phase and the Warrant y Phase 1O ru n con curren tly d uring a pe riod afte r D ates o f Sub sta n tial Co mple tion . After cont rac tors claim thei r wo rk is co m ple te. there nrc alwa vs wo rk items to be co r. reele d or co mple ted by Co nt ra ctors an d Lat ent D efects which 'nee d a tte n tio n. , A s a cO,ndition ~f Substa ntia l Com ple tio n, the A lE . e M , and co n trac to r agree o n the Items which rc nuun to be co mp le ted o r need co rrec tio n. This Pun ch List co ns ists (If items which will no t pr ev en t ut ilizat ion o f the co ntracto r's work o r p reve nt s ubsequ en t cont rac to rs fro m proceedin g wi th the ir work , O n well-man aged pr oj ect s. o nly o ne Pun ch List nee d s to be iss ued . On o the r pr oj ect s. two . three o r mo re rna)' be req uir ed. In p rac tice, some item s never get sa tisfac to rily co m ple ted fro m the A lE o r o wne r's pe rspe ctive. In th is ca se. th e Con trac t Am oun t is adj usted downwa rd by a Cha nge Orde r and a not he r con trac tor is used to comp lete the wo rk . E.5 .7

ACM Wa rr a n ty / Gua ran tee Ph a se Th ere are crite ria which dete rmine the len gth of this phase and the Involvemen t of the O .....ncr. A l E. a nd Co nt ractor d uring this p hase, Th e phase provides time for Lat ent Defects in co ns tr uc tio n, equipmen t, an d mate rial s to surface before the Co ntrac to r is contractually excused from remed ial action . 111C co ntract fo r co nstruction usually req uires the contrac tor to Warran ty the workm~nship for a pe!i od of o ne year after th e Date o f Sub stantial Completion. Th e S uret}~ 15 usuall y kept involved for the same peri od o f time by the terms of the Labor/ Mater ial and Performance Bond s p rovided to the Owner by the Contracto r. Addi-

444

Appendix E

Activities Du ring Project-Delive ry Phases for t he Ge, 0-8 and eM Systems

tiona lly, va riou s item s of equi pme n t an d ma terial s which wer e inco rpo rated int o th e construction have Sp ecific Warranty Con dit ions for varying lengths o f ti me ( usually mea sured from th eir Inst allatio n o r O pe ratio nal D at e o r from the D at e o f Subs tantial

AP PEND

Completi on ). The standard architect's agreement Does No t extend services in to the Warranty/ G ua ra ntee Phase. It is terminated sho rtly afte r the date of Project Substantial Comp le tion and rela tes to t he date the final Ce r tificate Fo r Pa yme n t is issu ed to a contractor by the NE. H owever, the Ow ncr-C bt agreeme nt usu ally exte nds to the Com ple tion of the wur ranty/Guararuc e Phase and req u ires the eM to arrange fo r Ad ditional work or Correction of work that falls u nder warrant y/guarantee provisions. The Warran ty/Guar an tee Phase is not th e final o ppo rtunity for Contractors to cor rec t ite ms wh ich wer e no t constructe d acco rdi ng to the Cont ract Docume nts. Th ere are Statutes o f Limitat ions which establish legal Tl r ue Per iod s du ring which owners ca n sec k redr ess for Br each of Con trac t in the e vent a problem invo lving a co ntractor's p erforma nce arises.Th e owne r would ha ve to h ire an attorn ey and tak e legal action.

E.5 .8

F

Subcontractor Survey Regarding GC Practices The info rma tio n in this append ix was extracted fro m the Trade Subcontractor Attitude Su rvey co nduc te d by Mar k F. Ahl born , curren tly a Lecturer in the Civil an d E nvironm ~nt~ l

Enginee r.ing D ep ar tmen t. Mi ch igan Tech nol ogical Uni ve rsit y, H o ughto n, Science degree in Civ il E nginee ring nt M'I' U in 1986. Ma rk was in the graduate Co~s truction En gineer ing and Managemen t Pro gram a nd a me m be r of th e Co ns tr uctio n Ma na gem e nt S tudies and Resea rch Group (C MSRG) ~t h a t co nducted co nstruc tio n en gineeri ng and management resea rch be twee n 1980 a nd 1996.11lc au thor was the program's men tor. . !he s urvey co nd ucted in 1986 su bsta n tiates the ass ump tion s that influenced the d irec tio n of the dev el op men t o f the eM system in the 1970s.111crc were 1219 su rveys sen t ou t and 270 usable respon ses.

· ~ l c.h l g a n : as p ~rtl a l fulfillmen t o f the requ irem en ts for a Ma ster o f

Fin an cin g

Alt hough financi ng is nO I a " phase of co nst ruction," us arrangem ent during the proj ect is an imp o rtant considera tio n of the owne r. Two realities mu st coi nc ide: ( 1) th e co nst ruction cost of the proj ec t mus t be justified by the ow ner, and (2) th e proje cted cost of the p roject must be accurately established. TIle CM system pr ovides two po int s du ring a proj ect whe re financing can best be arranged .one at the end o f the Feasib ility Ph ase and t he oth er alter the B idd ing Ph ase. Al though the amo unt o f financing, as de termi ned alte r th e feasibility phase all a CM projec t, is nor as accura te as when dete rmi ned af te r bid d ing, the CM process has inhe rent cost contro ls that can main tain bo th budgets within about 5% of e ach o the r.

x

F. 1

GENERAL

1l.3

We .a re usu ally awa re of all ge ne ral co ntractors tha t are bidding on a part icular

projec t. 8.4

e.9 e.1O

F.2

Agree : 80.1% Disagr ee : 10.8 % :Ve s ubmit bids to ALL general contractors pre pari ng bids for a pr oject of In ter est to us. A gree : 30.2 % D isag ree; 3.8 % Subcon tracto rs usu all y s ub mi t the same p rice to all gene ral con trac to rs bidding On the same projec t. Ag ree : 39.5(10 Disagr ee : 54.2 % S ubco llt ra~[Q rs generally submit the ir " best co mpeti tive price " to ge ne ra l contract ors pnor to the da te and time ge ne ral co ntractors su bmit bids to the ow ner. Agree : s r .r % Disagre e: 27.1 %

PRE-BID SHOPPING

e.l

In our experience. we have submi tted bid s to ge ne ral con trac tors tha t p ractice "pre-b id s hopping." Agree : 73.3% D isagree: 13.6% 445

446

Appendix F

C.2

C.3

F.3

Subcontract or Survey Regarding GC Practices

Sect ion F.B

We are aware of certain general contractors tha t frequently practi ce "pre-bid sho ppin g." Agree: 86.6 % D isagree: 4.4 % The elimi nation olt'p rc-b id shopping" is desirable from the subcontractor's viewpoint. Di sagree: 6.4% Agree: 79.2%

C.lS

C.S

C.6

Whe n sub mitting bids Lage neral contractors, the sco pe of work we are to pe rform is usuall y explained to us by the gen eral contractor. Agree: 33.3% Disagree: 46,6%

In o ur experience we have submitted sub bids to genera l contractors that practice "pos t-bid shopping." Ag ree: 73.4% D isagree: 14.8 % We are aware of certain gene ral contractors that freque ntly practice "post-bid shopping." Disagree: 6.4% Agree: H4.8 11/11 Th e elimination of "post-bid sho pping" is desir able from the subcontractor's viewpoint. Di sagree: 8.5°/0 Agree: 84.4%

0.2

Gene ra l contrac tors usua lly cond uct PRE· DID meetings with subcontractors to clarify bidding requirements. Ag ree: 17.9% Disag ree : 66.5% Pre-bid meetings wou ld be be ne ficial to the subconrractcr's und erstanding of the req uired work -scope. Agree : 81.7% Disagree: 3.6% Vague work-scopes ca use subcontractors to add contingen cy amounts to their proposals. Ag ree: 86.1% Dis agree : 5.6 % A well-defined, written wor k-scope would red uce the contingency amounts added to a subco ntrac to r's proposal. Ag ree : 92.8% Disagree: 2.0% A well-defined, written work-scope would enable subcontractors to submit a more accu rate proposal. Agree: 96.0% D isagree: 4.0%

D.3

0 .4

REACTIONS TO BID SHOPPING

C.7

CS

C II

el2

Cl3

F.S

we have lowe red our bid pr ice to general contractors in response [ 0 bid sh op-

0.6

ping pres sure s. Di sagree: 34.6% Agree: 51.8% A su bcontracto r's pric e to a gen eral contrac tor is inflat ed to compensate for the ef fect of bid shopping. Disagree: 33.8 % Ag ree: 45,4% When lo wering a pr ice in response to bid shopping. subco ntracto rs often reduce costs as well as overhead and profit figured in the bid. Ag ree : 53.3% Disagree : 25.1 % Realizing that bid shopping is likely to occu r, a su bco ntracto r increases the amount of overhead and profi Lfigured in the bid to compen sat e for :Jny red uctio n. Agree: 43.8% Di sagree: 32.7% In order 10 obt ain work (in respo nse to bid sh opping) we have lowe red our ove rhead and prof it to a leve l below that which we feel is comfortable. Disagree : 44.6% Ag ree : 39.1 %

F.7

It wou ld be de sirable if all subco nt ractors were abl e to bid a project on ce on a defined work- scope. with no oppo rt unit y to adjust the pr ice after bid su bmitta l. Agree: 8·:'5% Disagree : 8.4%

SUBCONTRA CTOR SELECTION

E.I

E .2

E.3

SUBCONTRACTOR PREFERENCE S

C.14

In fair compe titio n, with no pote ntial for bid shopping. we wo uld sub m it ou r lowest poss ible price the first time. Agree: 91.6% Disagree: 3.2%

OJ

0.5 FA

447

F.G WORK · SCOPE DEFINITION

POST·BID SHOPPING

C4

Cont ract Administrati on and Coordinat ion

F.B

I

J

Whe n an awarded general contractor selec ts a subco ntractor for his project , the choice is mo re of te n based on pric e ra the r than quality pe rformance. Agree: 88.8% Di sagree : 2.8% General contractors of ten sho w favo ritism by awa rding wo rk to certai n subcon tractors. regard less of price, Agree: 43.9 % D isagree: 34.7 % General co nt rac tors ofte n show favor itism by awa rding work to ce rtai n sub contra cto rs, regardless of the subcont ract ors ' AB ILITIES . Agree: 50.6% Disagree : 22.3%

CONTRACT ADMINISTRATION AND COORDINATION

F.2

General contractors usu ally provide efficient processing of su bcon trac tor Change Orders. Agree: 12.4 % Disag ree : 70.9%

448

Appendix F

FA

F.7

F.8

Sub contracto r Survey Regardi ng GC Practices

Submit ting subco ntracto r's claims to an owner thro ugh a general contractor is a satisfactory process. Agree: 28.3% Di sagree : 43.9% It would be be nef icial to sub contractors to submit their claims directly [0 owne rs instead of through general con tractors, Disagree: 18.7% Ag ree : 55,4% Genera l contractors close ly moni to r the construction quality of th eir subcontracto rs,

F.9

E to

El3

F.15

F.16

El7

F.IB

F.9

Ag ree : 23.5 1,1/0 Disagree: ~ 1.0 % Ge ne ra l cont ractor quality inspections a re tho ro ugh enough to prevent extensive subco ntractor rewo rk. Agree: 13.2 u/u Disag ree: 58.2% TI,e a mou nt of punch list wo rk by subco ntractors co uld be red uced if gen e ra ' con trac to rs pa id closer att ention to q uality co ntrol. Agree : 16.5% Disagree : 6.8% Most gene ra l con trac tors provide exc ellent coord inatio n of subcont rac tors in the field. Ag ree : 13.9 % Disag ree: 63.3% We have of te n been sche d uled on a project by the ge ne ral con tracto r o nly to lind that we cannot co mme nce o ur work as promise d. Agree: 86.J % Dis3gree: 4.0 u/o Significant interface problems betwee n trad e subco ntracto rs ar ise during the co urse o f most projects. Agree: 6...t.l % Disa gree : ]3 .5% Ge ner al co ntrac to rs usua lly solve tra de subcontractor interface proble ms in a sati sfactor y manne r. Agree: 23.9% Disagree : 40.3% A t the right price. an idea l jo b wou ld be o ne th at invo lve s the minim um number of moves o n and off the pro ject. an d minima l trade subco ntract o r interface pro blem s. Agre e: 96.1) % Disagree : 0.4%,

PAY MENT PROCEDURES G.1

G.2

0.3

When wor king for a ge neral con tracto r. progress payme nts earned by subcon tractor s ar c usua lly receive d by su bco ntracto rs in a time ly manne r. Agree: 15.5 % Disagree: 69.7% Del ays in receiving earn ed progress payments fro m the gen e ral con tracto r increases the subcontrac to r's cost of doing business. Agr ee: 94.9 % Disagree: 3.6% Ge ne ra l co ntracto rs of te n usc subcontracto r progress paym en t dist ribu tion as it means of leverage to imp rove subco ntrac to r perform ance. Agree : 63.4% Disagree: 10.0%

Sect io n F.9

G.4

G.5

G6

Payment Pro ced ures

449

Delays in receivi ng earned progre ss pay men ts from gen eral contractors have a nega tive effect o n the subco ntrac tor's pe rforman ce o n the projec t. Ag ree: 72.9% Disagree: 13.2% If a subcontractor could be ass ured of fair, timely progress payments, a lower price would be pro vided to ge ne ral contractors for trade co ntract work. Agree: 16.4% Disagree: 6.8 % A method of receiving earned progress payments directly fro m the own e r. ra the r th an th ro ugh the ge nera l contractor. would be de sirable to subco ntracto rs. Agree: 86.0 % Di sagree : 4.4%

Glossary of Construction Ma nag e me nt Terms Il cn eficial O CCUI' :lIIC)'

GLOSSARY OF CONSTRUCTION MANAGEMENT TERMS Add endum

Supplementary documen ta tion issued pri o r to the cont rac t award th at ch anges or clari fies info rma tion sta led in the b iddi ng docume nts, A d d itlo na! Se n-ices

Services provided over and above those de signated as basic servic es in o wner agreement s with AlEs and e Ms. Al E

Ar chitcctlEn gineer: the design professional hired by the owner 10 pro vide design and de sign-related services. A gency

est ( AC~1)

Also: Pure e M; Professional Ct-t eM Witho ut Risk ( Abb r PCM : CM j A contract ual Ionn o f the Ct.·1 system excl u-

sively performed in an agency relationship be tween the co nstructio n ma nage r and owner. A eM is the form from which other eM fo rms and variatio ns arc derived. Ageu l (or Ag en cy ) A legal relation ship whe re one party is au rhorizcd to act in hc hall of, and in the best int er est o f, ano ther party, as defined ill an ag ree ment between the pa rties.

A pp are nt Low Bidde r Th e bidder who h:1Ssub miue d the lowest competitive p roposal as de te rm ined by a cu rso ry e xamination of the bids submitted. A pp roved Uiddo:rs List The lisI of co nt ractors 11I:lt have survi ved pre q ua lifica tion tests. A pproved Cha ngeli C hanges o f a ny natu re in co ntr act req uire me nts which have bee n agreed upon thr ough a change approva l proc ess and approved by the owner. A r ro w Uiagnllu Chlxk: C ritical Path Sche dule: Cri tical P
See: SI:l.T1-UP: Commissioning The point of project com pie ucn when the o wner can usc the co ns tructed facility in whole or in part for its inte nded pu rpose even though final completion may not be achieved.

Bid A bind ing of fe r. usua lly expresse d in dollars, 10 pr ov ide specific ser vices within cle arl y Sla ted req uireme nts,

m Il Bo nd A pledge (rom a thir d p
ni d D h 'ision Also: Division of Work; work-Scope A portion of the total project rese rved (or cont ractors (or bidding. and pe rformance purposes. Bid n h 'h lon D cs crl puo u Also: Division of Wor k Description: Work-Scope Description A narrative description of the concise workscope to be bid and performed by a contractor. Hid( din g) Docu men ts The documents distribu ted to con tractors hy the ow ne r (or bidding purp oses, 111Cy includ e dr awin gs. sp ecificat ions. form of co ntract. general and supplementa ry condi tions, proposal forms. and other information including addenda ,

A greement Also.' Contract A legal document that binds two or more parties to specific and implied obligations.

A:;-Huill D r a w iu l: ~ Also: A s-B uihs : Check: Record Dra wings. D rawings p roduced dur ing. or after construe(ion and amended to show the exact location. geometry, and dimensions of the constructed project.As-Built Drawings are nOI the same as Record Drawings,

Check: Pre -bid Shopping: Post-bid Shopping, Scope

AndUar,)' lle nefits Subordinate secondary benefits that automari c:i1lyaccr ue from the performance of an unassocia ted prime responsibility.

Basic Sen lees Check: A dd itional Services, Reimbursablcs The se rvices specifically list ed in the services agreement as basic services.

E nhanceme nt Ne go tiations to obtain lower cos ts and pr ices bot h prior to submitting proposals an d afte r signing contracts.

450

Bid Shopping

451

lt ouus-I' enalry Clause Check: Pen alty-Bonus Clause A positiverneganve incenti..-e to comply with a schedule. A bonus is paid for timel y pe rformance: a penalty is assessed for untimely performance. The dollar amount of the bonus and penalty must be equal. Blldge t Elililllllic A n estimate o f cos t based o n rou gh o r incoruplere informa tion, with a stated degree of accuracy, The more info r matio n available, the more accurate the estima te. Loosely called a "ba llpark" es tima te. Bull et in A delineat ion , narra tive or bo th descri bing a proposed change for pricing by a co ntracrcns) and for conside ra tion as a change by the' owner. Change Ord er Also: Contract Modification The document tha t alters the cont rac t amount, co ntract urne. or cc r urac t requirements of the or iginal cont ract enter ed into by the owner and a co ntrac tor. C ha nged Condilio ll.\ Also: Concealed Condltlons: Latent Conditions Conditions or circumstances, physical o r c rherwise. which su rface afte r a con tract has bee n sign ed and which a lter th e circ umst ances or co nditio ns on which the com rac t is based .

Churl or Accounts Also: Account Co des: Codes of Accou nts ...\ n alpha/nume ric identificatio n system for budget line items that ensures that project expenditures are pr operly debited/credited in the project budget as paymen ts are made in beh alf o f the projec t. C hecks a nd Bulunccs Th e ter m used 10 describe the usc of the overlapping expertise of each team member during team decision making, Cla im A fo rmal notice sen t by a cont ractor to en owner asse rting the fact that the terms of the: con tract have been b reac hed and co mpe nsa lion is be ing sought by the cont ractor fro m the owne r.

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I.

Gloss ary of Construction Management Terms

Cle rk-o r-the- work A n indiv idu al empl oyed by a n owner to repr esen t him on a pr oject at th e site of the work. The clerk-of-the-work 's abilities. credentials. and responsibilities vary a t th e disc ret ion of the own er.

em Check: CM ; Con structio n Man ager : Co nst ru ction Management The abb reviation for co nstr uction manager (a person employed by a CM 10 prov ide C~l ser vices on a pr oje ct). Not commonly used. CAl

Check: cm; Con struction Manager: Const ruction Management The abb revia tion for Construc tion Manag ement (the project- de livery system} and Co nst ruction Manage r (a firm that provides eM servic es o r per son s who work Ior a CM firm) .

Cl\1 Fee Ptus Rcbn bursa blcs A form of payment for e M services whe re the construction manager IS paid a fixed o r perce ntage fcc for CM expe rtise. plus preestablished hou rly, daily, week ly, or month ly costs for field personnel and equipment. C1\I For ma t

TIle interactive con tra cting approach to providing a project' s needs. use d by the C M p rojec t tea m [ 0 manage a project. , CM I'ar lnering A contrac tual co mmitment by the Owner,NE, and CM to achie ve a common gonl, and do ing so without a s take holde r's exp osure to a pote ntial for conflict of interest in pu rsuit of tha t goal. e M Phllosopb y

A n enlightened ap proach to accomplishing an owner-oriented end result using a system of motivating con cep ts and pri nciples for achievemen t. C \ I I' w ccdurcs J\hi llllal Th e dep ository for the pro priet ary micrcm an agc mcnr procedur es used by the C~ 1 10 det ail and facilitate the se rvice ob liga tions owed to a clien t. C) l Pr oj ect Mallual Check: Project Manu al The common deposi tory for the micrcmanagement procedures to be used on the pr oject

by the learn to accomplish p roject req uiremen ts. CM Services The sco pe o f services provided by a construction manag er an d available to own ers in wh ole o r in pa rt. CM services ar e not consisten t in sco pe or performan ce from one eM firm to

C onstr ucti on Coo rdina tion The orches t ra tion or in terfacin g 01 performing co ntractors on-site. Co nstruc tio n C USI

See: Cos t of Co nstru ction Cuns truc tiu n Documen ts Drawings. technical specifi cat ions. an d adde nda: the co ntract docume n ts that refer to the physical co nstruc tion requi r cmcn ts established by the AlE.

an other. Co llatc rat In l onnation Information of va lue that is unexpectedly made av ailable thro ugh t he ro utine performonee of an al he r activity or activities, Co mmissioning See: Start -up; Benefici al Occupancy The process at or near con st ructi on co mpletion when a facility is tried out (p ut into use) to see if it functi ons as designed . Usually applied to ma nuf actu ring rypc pr oject s. Co m p letion Sche duke Also: Occupancy Schedu le A schedule of the activit ies and events required to effect occupancy or the use of a facility for its in tended purpose. It is used to determine if construction progress will me et the occupancy date. Cond luo ns o r the Co ntract Terms th at refers to the Ge ner al Conditions and the Supplemen tary and Special Con di tions o f the con trac t for co nstruc tion . Con flict or Inte rest A situa tion where it is d ifficu lt for a party 10 de arly choose a direc tion or make a decision bec ause of a se lf-inter es t in the o utcome of the si tuation. Con s tr ucmbifi ty

Clwck: Cc ntrac tability TI1C c ptlmlzl ng of cost, lime. and qua lity factors with' the material. equipment, construction means. method s. an d techniques used o n a pro jec t; accomplished by match ing ow ner values with avai lab le co nstruction industry pr actices, Co ns truc tion Bu d get TIle ta rget co st figure covering t he construction phase of a proj ec t. I t includes the cost of co ntr ac ts with trade: co ntractors. constructi on support items. other purchased la bor, materia l and equipment , and the con s tructi on man age r's co st bu t not the cos t of land, AlE fees. or co ns ultan t fees.

Glossary of Con structi on Management Te rm s

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..

Cons tr ucti on l\l:.lnagc nu:n l A project-d elivery system tha t use s a co nstruc tio n manager to facilitate the des ign an d con struction of a project. Co nstr uc tion l\1:ln:lger A firm or business organ izati on with the expertise and resources to manage the design. con rrac ting. and construction aspects of project deliv er)'. Individuals who work for a eM firm are also referred to as Construct ion Managers. C onstr uctlou Sc he d ule ALro: De taile d Construct ion Sc hedu le A gra phic, tabular or narra tive representation or de piction o f the co nstruction por tion of the project-delive ry process. showing activ ities and durations o f ac tivities in sequential o rder.

Con str uction Support Item s A lso: General Condi tion Item s Purch ases, services. or ma te rials requ ired 10 Iacilitn te co nstruction at the si te. A s pa rt o f the co nstruc tion budg et , thes e arc financial obliga tio ns of the owne r an d the logistic respo nsib ility o f the C M. C Ollstr ucliolt Tcum Check: Project Te am The de signa ted leaders of each trade cont ractor plus the Levcl Z an d 3 Ma nage rs (Pe rsons) of the ow ner . AlE, and eM . CUlISlrllclor- XC l\1 A variation of th e extended services form o f C M whe re the construction manager self- pe rforms some of the con struction o n the pr oject . Ccn tingcn dcs Line-i tem amounts in th e project budget. de dicated to specific cost a reas where o vers igh t is an inhere nt problem in projec t delive ry.

453

Cu ntr act Ad ministr at ion Servicing the interactive provisions in the can tr acts for cons truc tio n betwe en the ow ner and the conuactor fs). Co nt ract D ucur ne nt Ph ase The final p hase of design o n an arch itectural project when construction doc uments arc com pleted and bid din g documents formulated . Co nt rac t Docu ment R e vie w A/so: Hidd abilit y Review A revi ew o f Bidding am] Cont rac t Document s on a continuing basis. or at sh ort inte rvals dur ing the pre construction ph as e. to pr eclude errors. ambiguities. and omi ssio ns. Cont rac t r> O CUlH (,lIl ~ Th e: documen ts which collectively form the con tract betw een the co ntract or and the owne r. The y consist of the biddin g documents less bidd ing information plus pre-award addenda and post -award Chang e Orders, Cnnlrad ahilil)' A lso: Contractibility; Check: Constructability Th e optimizing of cost. lime. and quality Iacto rs with the co nt rac ting s truc tures and tech niqu es used on a projec t; accomplished b)' matc hing o wne r contracting req uiremen ts with available co nstruct ion industry pra ctices. Ceu tmc tc r ClIn:k: Trade Con tractor; Genera l Co ntractor A business enti ty that contrac ts to perform a defined scope of work on a co nstruction project. C U ll l r act u r/Cu lI~ t r IJ C l tJ r- X CI\1

A vnr intic n of the exten de d se rvices form of

CM whe re the co nst ruction manager holds co nst ructio n co ntract s an d se lf-pe rforms con s truc tion o n the project. COlltrac lnr - XCl\l A va riati on o f the exte nded services form o f CM where the con struction manage r hold s ccns trucuo n contra cts for the project. Cuu tw l C M Also: Proj ect Ma nager : Level 2 Man ager; Level 2 Per son A person designated by the CM firm to inter face with the owne r's an d AlE 's representatives on the project tea m at the seco nd managemen t level. Coo rdi nation M ~ ~ l i ll g See: Pro gre ss Meet ing; Field Mee ting

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Glossa ry of Construction Managemen t Te rms

Glo ssa ry of Construction Management Te rms

Coordinator Als"o: 0.1 Coordinator;Project M anager 's Assistant A person designated to assist a Control CM, Proj ec t Manager. or Level 2 Man ager in exe cuting the CM fo rmat. Cos t Control Also: Cos t Man agement Deliberations, actions. and reac tions to project cos t fluctuations during a p rojec t to maintain the projec t cost within the project budget. Co st(s) o r Construction See: Construc tion Budget Cr edibili ty The quality of something that makes it be lievable. Critical Date Sched ule Sec: M ileston e Sche dule Critical Path( s) The continuous chain(s) of activ ities fro m project-stan 10 pro ject-finish, whose dur ations cannot be excee ded if the proj ect is to be comp leted on the project-finish da te. A seque nce of activities that collectively require the longest d uration to complete (the duration of the seque nce is the sho rtest possible time from the start event to the finish event). C rtttca l Pat h Schedu le Check: Arro w Diagram: Precedence Diagra m A schedu le that utilizes the Critica l Path sche d uling tec hnique using eit her the a rro w o r preceden ce diagramming met hod . D esignah ilily A prag matic. value-based assessment of th e desig n in co mparison with the staled physical and aesthe tic needs of the owner, Des ign- Build (0 -8) Co ntracting A cont rac t structure where bo th design and construction responsibility are vested in
Schematic Phase to the Contract Doc ument Phase during design. D ~s ign-XCl\I

A variation of the extended se rvices form of e M, wher e the NE also provides the CM function. Di rect Costs The costs di rectly attribu ted 10 a work-scop e. such as labor , materi al. equipme nt, and su bco n tra cts but not the cost of operations overhead and the labor. ma terial. equ ipment. and subcontrac ts expended in support o f the undertaking. Direct Lab or Costs Cos ts accruing (ro m expended labo r excluding the bon us po rtion o f ove rtime, insurances. and pay roll taxes. Dire ct Mat er ial Cos ts Cos ts accr ui ng fro m mater ial acq uisition incl uding pu rchase price , Irelght. and taxes.

Division or w or k Also: Work D ivision: Wor k-Scope: Bid D ivision; See: Did Div ision Divis ion or Wor k Description Also: Wo rk D ivision Description; Work -Scope Description; Bid Division Descrip tion; SUo' Bid Div ision D escr iption Drawings G ra phic represen ta tions sho wing loca tion, geo me try, and dimensions o f a project or its ele me n ts in sufficient det ail to facilitate constructlcn. Dua l Services Th e providing of more than one principal service under a single contract or another contract (s). Dynamic Decision s Decisions that are made without team deliberations. Autonomous or bilat eral decisions based o n policy, procedures, o r experience. D vn um ic R isk The risk inherent to a speculative decision. TIle risk-taker can either gain. lose, or break even from the risk. E mploym e nt Agreement A contract binding an employee to an employe r for a specific length of time a nd (or disclosed compensation .

Escr ow A ccount Money put in to the custody of the third party by the first party for disbursement to the seco nd part y. A b rief te mpo rary depository for progress payments until a uthorized for relea se accor d ing to lite deposito r's e xplicit inst ructions. Esti mated Co st to Co mplete An estimate of t he cost stil l to be expende d o n a work-scope in o rde r to co mplete it. The difIcr ence between the Cost to Da le and the Est ima ted Final Cost. Estima led Fin al C O!lo I An estlrnate or the final cost of a wo rk item based o n its Cos t to Date and the est imated cost to comple te it. The sum or the Cost to D ate and t he Es timated Cost to Complete. E thics Se lf-imposed rules or standar ds of pe rforr nance (o r pr o fessionals se t by the org anizatio n or association to whic h the professio na l be longs o r by the public t rust. E xtended Se rvices Sec: A ddition al Services Diss imilar services included in a co ntrac t to be pe rformed over and above those th at are included as the principal services of the con trac t. E xten ded Se rviccs-Cn! (XCM) A for m o f eM where o ther se rvices suc h as des ign. co ns truction, and co ntrac ting are includ ed ..... ith ACM services pro vided by the co nstruct io n ma nager. Fucih tnto r A person who leeds by logic. suggestion and example more so than by direction.

Fast. Track( ing) The process of designing portions of 3. project while portions already desig ned are unde r construct ion . A series of co ntrolled des ignbuild sequences that collec tive ly co nstitute a complete p roject. Fe asi bil ity Ph ase

Also: Pred esign Ph ase: Co ncep tual Phase Th e ph ase of a p roject preceding the Design Phase used to de termine fro m various perspectives whe ther a project should be const ructed or not,

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Fcc Enhan cement The a......arding of an additional Iee. ove r and above the basic fee (o r services, based on the performance quality of the party providing the basic service.

Flduc lary One who stands in a special relationship of trust , confidence , and responsib ility regard ing contracted obligations. Field-Based CM Field O rganizatio n Check: OUicc·Based e M Field Organization A p rojec t organization st ructu re that bases the

CM's 2nd Level rep resentative and cer tain resource persons in the field rathe r t han in the office. Field Cons truction Man3gc r Also: Field e M: Level 3 Ma nager; Leve l 3 Perso n; Supe rintende nt, Site Manager A perso n designa ted by t he eM firm to inte rface with the ow ner's lind AlE 's represen tatives on the project learn at the third managementlevel. A per son located at the si te and cha rged to adm inister the procedu res established by the ream's Le\'e1 2 Manager (o r the construction of the project. Field Man agement The coordination and ma nageme nt of o w nercontracted resou rces on-s ite d uring cons tr uetion.

Field Or der An orde r issued to a contractor by an autborizcd team mem be r to perform work not include d in the cont rac t for co nstruct ion. Th e work wi ll become a Change Order. It is an expedient used in an e mergency or need situation. Fie ld Sched ule Also: Construction Schedule See: Short Term Construction Act ivity Plan

(CA P) Fina l Co mple tio n Th e point at whic h both parties to a contract decla re the o the r has sa tisfac to rily co mpleted its responsibilit ies und er the co ntrac t. Final Design Pha se The designation used by enginee rs (or the last portion of the design process prior to biddi ng.

456

Glossary of Co nstru ct io n Management Term s

Glossary of Const ruction Management Terms

Financial and M an agcllIen t Control Svstcm ( F~ I CS)

. A lso: Mana gem en t Control System (MCS) A ma nua l o r compute rized system used by the team 10 guide the course of a project and record its prog ress. Finan cial S ta kchotdce A party involved by co nt rcct rc perform a prescribed definitive ph)'S.iot:'M1 work-sco pe for a sum of mon ey, who s tan ds to lose or gai n mon ey from th e even tua l outco me o f th e projee l or how it is per formed. 1'10al A sched uling term ind icating tha t an activity or a seq uen ce of act ivities does no t nccessar-' ily have to sian o r end on the sched uled da tc(s) to maintain the schedule. Force Acc ount Work Wo rk don e an d paid for on an expe nde d time and ma terial basis. Ge ne ral Co ndilio n IlclIIS See: Construc tion Suppo rt Items Ge ne ra l Cond itio ns (o f the Co ntract for Co nstruction) SCI:: Front-End Specifications 111e pa rt of the- co nt rac t that prescr ibes the rights"responsibilities. and relation ships of the panics signi ng the ag reement and outlines the administration o f the contract fo r co nstruction . General COlilracting Syste m The trad itio na l project-delivery system that utilizes the services o f a gen e ral con tractor: the GC asse mbles a nd s ub mits a pro pos al for th e work On a project and the n con trac ts di rectl y with the o wne r to construc t th e projec t as a n inde pendent contractor. General Co ntractor A busi ness e ntity that provides independent con trac tor se rvices to o wners thro ugh the use o f subcontractors when using the ge ne ral contracting system. G uara nt ee An agree ment by which a pa rty accepts responsibility for fulfilling an obligation. Guaran tee d ~lax im ulII Pr ice C., . ( G) I PC) I) A form of the eMsys tem whe re the co nst ruc tion man ager guar ant ees. in ad d ition to pro viding AC M se rvices, a ce iling price to the owne r for the cos t of const ruc tio n.

Hu man R esour ces Persons who ha ve inherent and acquired abililies to fun ctio n to the bene fit o f an employer. IR FP (I nitial Requ est For Pr oposal ) The first request for uniform detailed information from prospective eM practitioners being screened for a project. Indire ct COSIS Costs fo r items and activities othe r than those directl y incorpor ated int o the b uild ing or s tru cture b ut co nside red necessar y to comple te the project. In-House R esources Resources. physical. mone tary. o r human. available within an organization fo r providing cont racted services. In te rvie w De corum The rule s an d pr ocedure s established by the o wne r fo r interlacing with firm s co mpeti ng for pro vid ing services on a QBS basis.

Job Descrlptton A broad-scope explanation of a position's requireme nts indicating the d uties of the positio n a nd the expe rtise and capabilities requ ired of a pe rso n to adequa tely pe rform in t hat position. J ub-Slte Overhead Supportive and necessary on-si te const ruction e xpe nse. such as construction SUPPOfl costs, supervision. bonus labo r, field personnel, a nd office expen se. J ilin! ven tur e Par tne r A part y that contracts wit h nncth cr sim ilar party on a project basis to provide grea ter financial str ength , improved se rvices or more acceptable performance qua lifications as a combined o rganization to design. bid, and/or co nst ruct a specific project. La bo r and f\l:Jle ria l Bond Check: Sure ty; Perfo rmance Bond A guaran tee pro vided by a su re ty to pay claim s aga ins t the ow ner fro m contractors and su ppliers who have not been paid fo r labo r, ma terial. an d equipment incorporated into the project Let ter o f Int ent Check: Not ice of Awa rd; Noti ce to Proce ed A notic e from no own er 10 a co nt racto r s ta ting. that a con trac t wilt be awar ded to the ca nt rae-

tor providing certain e vents occur or specific co nditions arc met by the contractor. Lic n

Also: Mechanic's Lie n The righ t to take. hold, or se ll t he p ropert y of a debtor as security o r paymen t for a debt. Lire-Cyc le Co st The cos t of purchasing, installing. owning. operating , and main ta ining a construc tion elemen! ove r t he life o f the facilit y. Lo ng-Lead Items Ma te rial and equipment required fo r construcuon wh ich have del ivery dat es too far in the futu re to be included in a co ntr acto r's co ntract at bid time. The)' are p re purchased direct ly by the owner. Lo ng-Lead lime 111e tim e be tween the purc ha se da te and deli very d ate of long-lead items. Lump Sum Fee A fixed dollar amoun t which incl udes a ll cos ts of se rvices incl uding overhead a nd p rofit. Ma nagement Information and Co ntro l System See: Financial and Man agem en t Co ntro l System Manageme nt Pla n A mic ro schemc to pr od uce pro ject req uireme nts in terms of policies. pro cedures and tim ing d eveloped from the ma nageme nt strategy, ;\lanil gclllc llf St ra tegy A macro- and micro-approach to structuring con tracts a nd man aging a project; based on owner policies, project demands, and co nt racting p ractices in the project area. Master Sche du le See: Program Sch edul e M echa nic's Lien Also: Lie n A legal claim against an owner's prope rty by a project particip ant to the value of monies ea rne d but no t pai d fo r by the own er or an employ ing co ntracto r, !\liIestone Selected st ra tegic eve nts of signa l im po rtance to p rog ress used in th e miles tone schedule. l\ li lc~lo n e Sch edule A schedule of miles tones spa nning fro m the start of co nst r uction 10 occupa ncy. used as th e mai n me asu re oC pr ogres s to kee p th e pr oject on schedu le.

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Mu ll iplc Riddin g Sol iciting and receiving bids from t rade or work-sco pe contr actors when using a m ultiple-co ntrac ting format. Multiple Co ntracting A contracting formal that separat es the projeel's single wor k-scope into a number oC interfacing smalle r work-scopes, to be individually and competitively bid o r negotiated. M ultiple P rime Con tract s Co ntracts with work-scope contracto rs, ind io vid uall y awa rd ed by the owne r unde r a multip ic con tractin g formal.

Nega tive A lt ribufcs A q uality. cha rac ter. procedure. or practice inherent to a sys tem (o f co ntr acting) that im pairs the system's pe rforma nce. Notice of Aw ar d

Check: Let ter of Int ent; No tice to Pr ocee d A le tter from an o wne r to a contracto r sta ling that a contract has been awar ded to the contr actor and a co ntract will be forthcomi ng. Noti ce to P ro ceed Check: Notice oCAward ; Le tte r of I ntent A not ice from an own er d irecting a co ntracto r to begin wo rk o n a. contract. subjec t ( 0 specific s ta ted conditions,

OCCUp:lIIC)' Pha se Also: Warranty/G uarantee Phase ; Warr an ty Phase; G ua ra ntee Phase A stipu lated length of time following the con struc tio n pha se, duri ng which co ntracto rs are bo nded to en sur e that materi als, equ ipm ent. and work man ship meet the re quir emen ts o f their co ntracts, and that supplier- and ma nu Iacturer-providc d warran ties an d gu arantees remain in force. O CCUI)allc')" Sche dule

See: Co mpletion Schedu le O mce· Hascd C l\1 Field O rgunlz at ion Check: Fie ld-B ased CM fi eld Or ganization A project organization structu re tha t bases the CM's 2nd Level represen tative and n•.'source pe rsons in the home office rather than in the field. On-Sit e Supe rvlstc n She -based personnel with supervisory respo nsibilities.

458

Glo ssa ry of Constructio n Ma na g e ment Terms

O wner-Cl\t (OC M ) A form of the CM syst em th at utilizes the owner as the constructio n manager. Owner's Rep resent ati ve A per son assigned to a proj ec t to repr esent the owner on the projec t team ill o ne of the th ree manageme ntle vels, Part neri ng Check: at Part ner ing A re comm itment to the fundamen tal terms of a co nstr uction co ntrac t b rou gh t a bout by the humanistic int eracti ons of the par ties to the co ntract; the sta keholde rs. Pe na lty-Bo nus Clause See: Bo nus-P en alty Clause Percenta ge Fee A fee for services, expressed as a percen t ot the final cos t of construction . Perforrnencc Bond Check: La bor and Ma teri al Bond : Sure ty A guarantee provided by a sure ty to co mple te a proj ect accord ing to the terms of the contract documents in the event that the bonde d co ntrac tor defaults o n the contract o r to pay the owner the face value of the bon ded am ount. Pcrfonuun cc Co ord ina tio n See: Construc tion Coo rd ina tion Ph ased Biddin g AI.m : Stage Bidding

111e pr ocess o f receiv ing pr oposals from contr acto rs on pr ojects that lire con st ruc ted as more than one to tal work -scope. Ph ased Co nstr uction A lso: Stage Constructio n A unitized approach to cons t ruc ting a Iacilhy by designing and cons tr ucting se para te pr oject element s. Each cle me nt is a comple te project in itse lf. 1)lal1S See: Dr awings I'osltlve A ttributes A qu ality, cha rac ter. procedure, o r pr act ice inhe ren t to a system (o f co ntracting) tha t elevatcs the syste m's pe rforma nce. Post -Bid Shopping Nego tia tions betwee n prime contracto rs (buy. ers) a nd tr ade contractors (selle rs) to obtain lo .....e r prices after signi ng a prim e co nt rac t with an owne r.

Glossary o f Con stru ction Management Te rm s

Pol cn tial Cor Ccnthct or Intere st

A co nflict o f int e rest th at could occu r but has not ye t materi alized. Pr e-Bid Sho pp ing Negot iat ion s betw ee n prim e co ntrac tors ( buy. ers) and tr ade co nt rac to rs (sellers) to o b tai n lower p rices pr ior to SUbmitting prime co ntract proposals to own ers, Pr ec eden ce D iagr am Check: Critical Path Sche dule; C ritic al Pathfs): Arrow Diagram Al so known as th e activit y-on -node method. This me thod uses a node (geomet ric s ha pe) to represen t activi ties with connecting lines to show the logic or seq uence of activities. Pr eccustruct io n Phase All re quired p hases prio r to the sta rt of co nstructio n. Pr cd eslgn Ph :l5C A lso: Fe asibility Phase The ph ase pri or to the start of design . P reliminary Des fgu Ph ase Applies to e nginee ring projects; the initial desig n eff or t following signing o f the ow ner/ engineer ag reeme nt. It is followed by the Fin al De sign Phase. Prime Co n tract A co nt rac t he ld by an o wne r. l'rhne Co n tracto r A co ntractor who h;JS a co ntract with an o wner. Priv at e Secto r Th e doma in where projects are funde d with ca pita l o the r than from ta xes. Prod uct Dat a

See: Shop Dra wings Pro fessio nal eM See: Agency CM , Pure

eM

I'rofe~s ion al

Liahility Insur ance Also: Errors and Omissions in suran ce I nsura nce prov ided by des ign professiona ls and con struct ion man ager s that pro tect s the own e r agai nst the financial results of neg ligen t acts by the insu red . Professiona l Se rvice s Se rvices provided by a prof essiona l. in the legal sense o f the word . or by an individu al or firm wh ose co mpetence can be me asured ag ai nst an es tablished sta ndard o f care.

Pr ofession alism Esse ntially; con siderate. courteous. e thical be ha vior when de aling o r communicating with ot hers o n a co nst ruction project.

Pr ogram Management A sub sti tut e ter m fo r con stru ct ion manageme nt. somet imes used when two o r mo re pr ojects are co ncu rre nt ly managed by a CM for the owne r, or when the CM on ly func tions as an adv isor to t he owner. Program Sch edul e Also: Mas ter Sc hedule A schedule tha t s pa ns from the st a rt o f de sign to occupancy ; includes the signal ac tivities which co n tro l the pr ogress of the project fr om sta rt to finish. I' rogmm Team TIle owne r. AlE, ami eMrepr esent ed by the ir Level 1, 2, an d 3 Persons. Used intercha ngeab ly with Pr oject Tea m. P ro gress Meetin g A b o: Site Coordination Meeting, Coord ination Meet ing A mee ting de dicated essentially to contractor prog ress during the co nst ructi on p hase.

Pr ogress Paym en t Pa rtial payments on a co nt racto r's co n tract amou nt . period icall y pa id by th e o wner for work acc omp lished by th e co ntr ac to r to da te . Project Bud get The target cost of th e pr oje ct es tablished by the owne r and ag ree d to be achie va ble: by the team. The Pr oject Bud get us ually incl udes the cos t of co nstruc tio n and the CM fcc, plus any o the r line-item cost s (land. legal fee s, inte res t, design fee s. eM Ices, erc.) tha t the own er wishe s to have included in t he budget. I'roj eel Cos lS Costs expended o n a project and which deb it the line items that co mprise the Project B udget. Project M an ager See: Co ntro l e M . Lcv'c1 2 Manager. Level j Person Proj ect ;\ 1!i1ll1ll1 Check: e M Pr oject Ma nual Wri ue n inform a tion that a ugments the drawings.The Project Ma nua l co ntains t he Gener al Conditions, Su pplementa:y and Special Co ndittons. the f o rm of Con trac t, Adde nd a. Cha nge Orr..Icrs. Bidd ing Informati on a nd

Pr oposa l For ms as ap prop ria te. and Techn ical Specifications.

45 9 the

Pr oj ect Meet ing A meeting d edicated essentially to con tracto r performance a nd p rog ress payme nts, invol ving sup ervi sors from cont ractor hom e offices and the team 's Lev el 2 an d 3 Mana gers. Pr oj ect Team A lso: Co nst ruc tio n Team; Check: Program Team C onsists o f the a rchitec t/e nginee r. co nstr uetion mana ger. and ow ne r, repres ent ed by their Le vel 1, 2. and J Pe rsons, plus the de signated leaders of co ntrac ted constr ucto rs. P ubl ic Sec to r Th e domain wher e owners fund project s with mo nies tha t come in who le o r in pa rt from taxes. Pure eM See: Agency eM. Profession al C M Q ua lilJ Th e value lev els o f material and eq uipme nt selected by th e AlE. Conformance to the technical spe cificatio ns during co nstruction. QualilJ Assurance 111e pr ocedure establishe d by the Project Team to injec t and extrac t the leve l of quality designa ted by the owne r. Q ualil)' Co nlro l Th at part o f the Quality Assur ance procedure that de te rmines if spec ified qua lity is attained . Qu alit)' Englnc er tng Th at part of the Quality A ssur an ce procedure wher e the req uired le vel o f qu alit y is accurately inser ted into the cons tructio n docu ment s by the AlE. Questionabl e Practices . Practices. standa rd o r otherwise. that are no t totally pro du ctive or are unf riendl y o r un fair to those part ies tha t th e pr actice s int er face. R F P (Reques t For Pr oposal) The second request for uni form d etailed infermarion fro m prospecti ve CM practitio ners be ing scree ned for a pro jec t. Re cord Drawings Check : As -Bu ilt D rawings A set o f contrac t docu ment dra v..ing s. mark ed up as construc tion pr oceeds, which sho w the exact loc ation, geo me try. and dimen sion s of all cleme nts o f the constructed project as installed.

460

Glos sary of Co nst ruc tion Management Terms

Glossary of Construction Management Terms

Reim bu rsable Expense Also: Reim bursa ble Ch arges to th e o.....ncr cove ring co sts for services that coul d not or intenti on ally we re no t qu antified at the time the fcc arrangem ent was made. Sa mp les See: Shop Dr awings Schedule ervaf ues Th e bre akd own of a lump s um pr ice into s ubitems and sub-costs for ident ifiable co nst rueticn elements. which can be eval ua ted by ex amination fo r contrac tor prog ress payment pu rpos es. Sc he matic Design Ph ase The init ial De sign Phase on an a rchitec tu ral p roje ct when the A lE de linea tes th e owner's needs in a gen eral way. Shop Dr awings Auo: Product Da ta; Sa mples Detailed information prov ided by mate rial an d equ ipment s upp lie rs de mo nstrating that the ite m provide d mee ts the re quire ment s of the contract docum ents. Shu rt Ter m Con trac tor's A cthilJ l' l:m A lso: Short Term CA P; CAP; Sh ort Interval Schedul e A field-ba sed sche dule tha t plan s co ntractor ac tivities on a cay-to-da y, week -to-wee k basis from milestone 10 miles ton e. Sp ecial Condltlous A im : Supple mentar )' Con dit ions Amendments ttl the General Co nd itions that cha nge standard requir ements 10 unique requirements. app ropriate for a specific proje ct Spc cla! Cousult unts Exp erts in highly specialized fields not inhcrcn t to an owner , AlE, o r eM. Specif ications Detailed statem ents co ver ing procedu res. and qua ntitative and qu alitative in format ion pertai ning to material. pr odu cts, and equipmen t to be incorporated in to 3 proje ct. Start-Up Check: Comm ission ing: Ben eficial O ccup ancy The peri od pr ior to o wne r occupa ncy when mec ha nical. electr ical. and o ther systems are activated and the o.... ncr's operating and mainrenance staff arc inst ructed in their usc.

Sta tic Dccislon s Decisio ns t hat arc mad e or can be made u nde r t he Cull in fluence o f the pr oject tea m' s checks and bal ances. Sta tic R b ks R isks inhere nt to the project -delivery process which occ ur or can occu r b)' accident and hav e no oppor tuni ty for gain in the manner o f their di sposal. Stu dy and Repo rt I· ha.'lc Check: Feasibili ty Phase Principally applicable to eng ineering projects. Includes th e investigat ion and d etermination o f a situa tio n(s) an d the re com mendation of de sign solutions 10 an o w ner's needs. Subcont ractor A contracto r who has a contract with a prime

contractor. Subs ta ntial Co mpletion The date on which a co nt ractor rea ches a poi nt o f compl et ion, when subs eq uent interfacing contractors can pr oductively begin w o rk or the o wne r can occ upy the proj ect . in who le o r in pa rt , wit hou t undo inte rfe re nce. Sub-subco nt ra ctor A co ntrac to r who has a co ntract with a subco n tracto r. Supe rint end ent A jo b tit le usually reserved for the ad mini st rative lev el pe rson wh o supervises th e work of an o n-site co nt ract or ,

Supc rvlslun by II Fiell! el\l To co ordinate and guid e. but not inspect, th e performance o f co ns tr uctio n resources cont ractcd for by the o wne r. Supplementa ry Cundl uous Supplement s or modifie s th e s tand ard clau ses o f the general conditions to accommod ate specific project require ment s. Slnc rgi.'> m A ctions by two o r mor e perso ns to achi e ve an end res ult thai cou ld no t be achieved as well by one of the per seus, Team Check: Pr oject Tea m: Con struction Team Te chnl cal Ins pcctlo n Check: Quali ty A ssu rance : Qua lity Control Match ing technical specification cr iteria with visua l or mech anical tests on th e proje ct site,

or in a rem ot e location o r taborat cry, 10 ascc rrain con formance. Technical R eview The cri tiq ue of desi gn solutions, o r cri teri a used Co r design solutio ns. by a part y o the r than the one pro viding the so lutio ns o r criteria. to d etermine ade q uacy an d s uitabili ty o f pu rpose.

46 1

Value l1H: int rin sic worth o f so me thing dete rmin ed o n a n individu al basis. value E ngilll.."C r Also: Certified Value Specialist A person qualified to perform value engineering service s fo r a client.

Tech nic-oil Speclflcano ns Wriuen crit er ia that au gm ent t he dra w ings pe rta ining to the technical co nstn..ctio n o f the proj ect that cannot be co nveniently inclu ded on the p lans.

Value Enginee ring A techn ical re view pr oce ss: the close matching o f engineering de sign to the value an owner derives from the design.

Te nu re Th e duration , term . or len gth o f time required b)' agree ment o r precedent for pe rform ance o f services.

Check: Cont ract ability: Ccnstructability: Design-

Test ing Ap ply ing standard proced ures to de te rmine if p resc ribe d tech nical crit e ria ha ve been mel in pe rfor mance. Timcliue A syno nym for sche du ling of act ivitie s in the co ntex t of time.

l1 111 e1)' Performan ce Co mpliance with

3. time

requirement .

Tr ade Co nt rac to r A lso: Performing Con tractor A contractor th at specializes in providing! insta lling sp ecific cle men ts of the o ve rnll co nst ruction req uirements of a project. Up-Fron t Services Free or red uced-ra te services provided to pros pec tive clien ts in the Inte rest of obtaining a co ntract. Ofte n nuionalizcd as a part o f a firm 's se lling o r pub lic rel ati ons program .

Value " lana};CUlcnt

abili ty: Value Engineering The marching of pro ject decisions and directions with the exp ressed requ irements of the n.....ncr . from an own er value der ived pcr spcc-

rive. Valne "1 :llI a ~er A pe rson qualified 10 perform value ma nage me nt services for :l clien t.

Wa rr:lIll)' Also: Guar antee A ssurance by a providing pa rty tha t the wo rk, ma terial, and equipment under warranty will pe rform as p rom ised or as required by co ntract. wa rra nty I' h..se Also: G uar antee Phuse. Warram y/G uaramec Phase Sec: O ccupancy Phase work-Scop e Se e: Bid Division wo rk-Scope Descrip tion See: Bid Division Des cript ion

XCM Set': Ext en ded Services Cr-. 1