Midterm mem

Types of Construction?

Residental homes (40-45%) Buildings (commerical) (25-30%) Infrasturcture (20-25%) Industrial Consturction (5-10%)

Owners

• Starts project

• Starts project, defines need, provides $$$$, manages process

• Public 

  • State/gov, big proj, well-defined procedures, careful finance 

• Private 

  • Smaller usually, informal process, more innovation/cost efficency/flexibility 

• Interests: quality, value of product, schedule, and site safety

A/E

• Design proj

• Selected based on demonstrated ability to do in time frame and good cost

• Prep construction docs

• Arch design building

• Interests: aesthetics, relationships, quality, recognition

General Contractor

• Most contracts awarded to GC who manages and subc portions of work 

• Manages job, keeps on sched, control cost, ensure work is well coordinated and safely done 

• Coord with owner on all matters 

• Interests: $$, time, relationship, reputation

Subcontractor

Largest portion industry (64%)

Do the work

CM Firms

• Pure Cm firm

  • No direct relationship to A/E, GC, subC 

  • Prefer to be involved in design and construction process 

  • Oversees entire construction proj on behalf owner 

    • Owner relationship, sched, productivity, quality, safety, orders/claims, cost, coordinate contracts 

• As GC 

  • Same but 100% work SubC

Trade/Labor Unions:

• Formed around crafts and trades

• Operated by members have constitutions

• Locals serve as contract negotiating body for members in local area 

• Provide training, pension, hiring calls

Suppliers:

• Assist in material and equip selection and asists in prep bids, prep shop drawings

• Designers rely on standard specifications and standards

Insurance & Surety Companies:

• Insurance provides liability and property insurance 

• Surety bid bonds, performance bonds, payment bonds

Bank

• For C provide working capital so can pay for mats, labor, equip, etc until paid by owner 

  • C earn their progress payments (monthly) and no up front payments are made 

  • Monthly progress reported by C → approved by owner → paid $$

• For owner provide short and long term financing

Permitting Agencies and Building authorities:

• Rep interests of public safety 

• Administer publicly funded construction projects 

• Ensure private construction proj comply with zoning laws and building codes

DBB

• hire design professional in charge of prep of design and contract doc 

• Usually competitive bid or negotiation w C 

• C in charge of delivery of completed proj 

• C is only one responsible for work execution 

• Sequential construction process 

• Lump sum bids commonly adopted whereby owner assigns risk to C 

• Trust-based collab between A/E 

Pro- well known, cost already defines, good protection for owner, owner not very involved 

Con - design not rev for constructability, sequential linear process prevents task overlap, few interactions, construction can’t start till design rdy 

Pure Construction Managment (PCM)

• Owner hires a design firm and CM firm based on qualification 

• CM is a professional service 

• Team concept: owner, CM, & A/E 

• PCM as facilitator in conflict PCM get paid fixed fee

• Does: predesign est, cost and constructability input, award contract, admin contact

GC functioning as CM can easily handle post design est, coordination, and control GMP

• May lack predesign est, int during design, contract admin as owner’s rep 

A/E functioning as CM’s can easily handle interactions during design, contract admin 

• May lack accurate cost, construcability info, coord and control, GMP 
  
  

Pro - one trusted common reference point, great flexibility in sched, small financial risk for PCM

Con - participants must cooperate and communicate well, committed from beginning, small incentive for CM, high risk loss of reputation 

CM@R

• Contractual relationships between CM and trade contractors 

• CM does the ones in PCM as well 

  • Packaging construction into seperate contracts 

  • Coordination and control of multiple contracts

Pro - reduced owner risk 

Con - owner takes responsibility for design defects/omissions and may not have full contract control

DB (turnkey)

• Owner hires D/B firm that does both could also be joint-venture firm 

• D/B hires SubC 

• 1 contractual team responsible for design and construction function 

• Owners put more emphasis on schedule

• Also referred to as turnkey - could also include land acquisition, financing, startup, and operation facility 

Pro - fast track, good interactions between D/B, easier to make change, good for complex stuff

Con - don’t get initial price, could sacrifice quality to profit, may take diff direction than owner wanted

CM/DB

CM does D/B and is control of A/E too

CM oversight D/B

owner contract with DB and CM and then DB and CM can talk DB does subcontractors

IPD

• All key stakeholders sign on multiparty contracts before design even starts 

• AIA defines IPD by: 

  • Multiparty contract, early involvement of all, shared risk and reward, liability waivers between key participants, fiscal transparency, joint project goals 

• Integrated leadership, design assistance and collaborative software, no-fault working environment

cost vs price

Cost is what it takes in dollars or resources to produce Price is what someone is willing to pay for that

Lump Sum

• Firmly fixed final price 

• Actual cost known before it begins 

• Minimize risk for owner if proj is well estimated, contractual documents r accurate, and proj is clearly defined 

• High risk for C 

• Generally used with DBB & not possible w fast track 

• High incentive to finish early at low cost

Quantity X Unit price

• Prices for defined units 

• Approx quantities provided by owner - high dependent on accuracy 

• Payment is based on what is actually installed - owner goes on sites and checks 

• Reason for usage - uncertainty in the field quantity 

• C overhead integrated in unit price

•  Lowest bidder selected 

• Risk 

  • Price risk more under C control 

  • Length out of C control

Cost Reimbursable Contracts

• Fast track proj 

• Complex 

• Large risk assumed by owner

Cost + Percentage Fee

• Owner pays actual cost + fixed percent fee 

• High owner risk only if pricing couldn’t be calc any other way and its urgent 

• No financial insurance

• Permits collab at early stages

Cost + Fixed Fee

• Cost vary but fee is same 

• Fee is independent of duration 

• Used only if $ cldn’t be det 

• No financial insurance of final cost 

• High incentive to finish early (same fee regardless of when C finish) 

• Promotes collab

GMP

• Cap/GMP 

• Contractor assumes additional cost

• GMP is defined price for an undefined product 

• Sim to cost-reimbursable but quality may be sacrificed to avoid going over 

• Var - usually GM shared savings - below GMP savings r shared between owner and C

competitive bid contracts

• Lowest bidder award contract 

• Traditional method 

• Time-consuming, involving bidding, bid eval, and review period 

• Proj constructed w specific quality at lowest price 

• Formal procedure for public agencies 

• Two main types 

  • Open: bid open and ready publicly 

  • Closed: no public opening 

• Contractor est cost along with profit: lump sum, unit price 

• Loss is absorbed by C if actual cost exceeds contracted amnt

negotiated contracts

• Pre selected contractor based on rep and qualifications 

• Common for priv owners 

• For fast processes

best value

• Used by fed gov and states

• Provide uniform set of procurement regulation 

• RFP (request for proposal) 

  • Price, technical merit, timeliness, budget, eval crit and weights

public private partnership

• Allows gov to build facilities that wouldn’t be able to build 

• Private consortium D/B facility and rents it to public agency till cost + profit r recovered

Labor Cost

• Direct cost: costs that actually paid to field workers

• Indirect: costs that are additional (pay roll tax, insurance, fringe benefits) 

• Commonly used approach: calc direct labor cost first add indirect as percent total

Material Cost

• Include cost for delivery, storage, and inspection 

• Contractor may: produce its own materials; use own estimate, purchase the mats from manufacturer and get written quotes including tax, price, etc. 

• Contractor doesn’t include material cost for: owner-supplied material, owner designated material (allowance), must include the cost for storage handling and installation

Equipment Cost

• Diff types of cost rates for diff equip 

  • cost/hour for heavy stuff tractor graders

  • Cost/unit installed for concrete mixing plants

  • cost/week or months scaffolds etc 

• Accuracy of cost estimate depends upon the importance of equipment 

  • Major equipment (cranes) 

    • Very detailed analysis is required how many days and hours needed

  • Minor equip (power tools, concrete vibrators) 

    • Standard cost allowanced included in est 

  • Minor equipment (hand tools, water hose) 

    • Lump sum allowances as the % of direct labor cost in project overhead

SubC

• GC subC some portion of work to subC: includes all quotes from subC, subC and cost det before final bid, but can be det while proj proceeding (up to 3 months in) 

• GC needs to review the quotations and select SC in time 

• Owner ←> GC == GC ←>

Project Overhead

• All costs that do not pertain directly to any given construction works

  • Generally 5-10%, GC may have no checklist (cleaning up of site, purchase set up of on site offices, salaries supervisors, consumables )

Markup

• Corporate overhead, contingency, and profit 

• 5-20% of total proj cost 

• Reflects the contractor appraisal between being the lowest bidder vs highest chance of having profit 

• Factors influencing markup size: need for work, competition, mark conditions, mag of risk and opportunities, relationship with lcient, strat values of project 

Methods to assess risk

• Put price on uncertainties or risk factors 

• Based on experience add leeway 

• Opportunity factors should be leverage as well to get best price possible