Principles of Construction Management - Lecture Notes
Addis Ababa University - Principles of Construction Management
Course Description
Construction Industry: Management Requirements, Why CM?, CM in Ethiopia.
Principles of Management: Management Development, Functions of Management, Roles of Managers, Levels of Management.
Construction Project Management: Projects and Project Management, Process Management, Stakeholders Management, Resources Management, Performance Management, Procurement and Contractual Management.
Organization Management and Its Development: Organization Theory, Strategic Management, Organization Structures, Project and Site Organization.
Change, Uncertainty and Risk Management.
The Way Forward (Discussions): Where are We?, National and International Challenges, Now and the Future
Course Outline
Introduction
Construction Industry and Its Management Requirements
Why is CM important to CoTM?
CM in Ethiopia (Discussion Forum)
Major Principles of CPM
Management Development
Functions of Management
Roles of Managers
Levels of Management
Construction Project Management
Project & Project Management
Process Management
Project Cycle & Project Processes
Construction Projects Process System
Project Scope Management
Stakeholders Management
Project Owners, Providers, Regulators and Other Interest Groups
Contractual, Regulatory and Collateral Stakeholders
Project Stakeholders and Communication Management
Resources Management
Financial, Human, Physical and Information Resources
Project Resources Management
Performance Management
Relevance (Demand, Need)
Efficiency (Time, Cost, Quality)
Effectiveness (Outcome)
Impact
Procurement and Contractual Management
Tendering
Contract and its Administration
Project Integration Management
Facility Management
Organization Management and Its Development
Organization Theory
Strategic Management
Organization Structure
Project and Site Organizations
The Way Forward (Project)
Where are we?
National and International Challenges
Now and The Future
Grading
Assignments (10%)
Time (Network)
Cost Estimation
Project (40%)
Construction Project Management in Ethiopia (Contextual Development)
Organization Structure for Construction companies (Consultants, Contractors, Regulatory Bodies, Client Representatives, etc)
Construction Project Management in Ethiopia: Problems, Challenges and the Way Forward
Groups Performances – Presentations and Discussions (10%)
Exam (40%)
Total (100%)
Course Objective
By the end of the course, students should be able to efficiently and effectively manage construction projects.
1. Introduction
Construction Industry Sectors:
Transport and Communication (Road, Railway, Airway, Telecommunication).
Water Works and Energy.
Buildings and Other Physical Infrastructures.
Capital Budget Distribution (Ethiopia):
Transport & Communication: >= 70% of capital budget.
Buildings: About 13%.
About 58.2% of Ethiopia's federal capital budget is channeled to physical infrastructure development.
Construction is vital for Politico-Legal, Economical, Socio-Cultural, and Technological development in Ethiopia.
WB, 1984: Construction is among four multi-sectoral components crucial for developing countries.
Construction drives capital improvements and future benefits for nations.
Construction represents investment, so activities drop during recessions.
Construction slowed post-Ethiopian Birr devaluation in 1992 until price escalation compensation (price index) was regulated.
Construction relies on teamwork; individual outputs are important, and workers need motivation and skills.
Workers in construction can become prosperous professionals.
Construction is second to agriculture in Ethiopia, considering allocated budget & workforce.
Construction Industry
Definition: All civil works (buildings, roads, water works, hydro-power, etc.).
Firms: Designers, Contract Administrators (Consultants), Contractors, Material Producers.
Legal Business Ownership: Required to operate.
Forms of Business Proprietorship:
Individual proprietorship.
Partnership.
Limited partnership.
Corporation.
Individual Proprietorship: Most common in the third world, including Ethiopia. Limited to small firms due to capital constraints. Owner directly responsible for debts and income is personal.
Partnership: Two or more individual proprietors combine resources. Requires legal agreement. Successful when partners are closely related with mutual trust. Promotes construction industry advancement in Ethiopia.
Limited Partnership: Partners limit liability for business debts. Often use "private limited company" in their business name. Berta construction is an example in Ethiopia.
Corporation: Common in developed countries. Can be owned by an individual or require multiple persons for incorporation. Advantages:
* Partial or avoidance of Income tax releases partially or avoidance by offering health, life insurance.
* Separate corporations for each development.
* Owners are responsible for dept within their investment.
* The death of the owner need not terminate the operation of the firm.
Construction Industry and Its Management Requirements
Construction evolved from ancient human skills to modern industrialization and information age.
Primary age focused on shelters and basic needs.
Increased human population demands led to technology development and Industrialization age.
Industrialization led to mass production, quality enhancement, and productivity improvements.
Competition emerged, emphasizing time, quality, and cost values.
Management functions (planning, implementing, controlling) gained importance.
The information age simplified calculations and revealed complex factors in construction.
Management functions became critical for competitiveness.
Management is the art of arranging activities, equipment, and people to achieve a common goal.
Management Definitions
Management also is the use of people and other resources to accomplish objectives by creating environments where people can use resources to reach stated goals.
* Planning.
* Organizing.
* Implementing.
* Controlling.Construction Project Management: Management towards coordinating workmen, machinery & material, executing the project economically, and controlling quality, time, and sequence in a planned manner.
Construction management differs from steady-state organization management due to a distinct beginning and end.
Construction resources are scarce making construction management and professionalism significant to insure:
* Proper planning & organization.
* Effective use of resources.
* Completion within budget & time.
* In-time delivery & utilization of materials.
* Necessary quality.
* Proper equipment usage & methods.
* Evolving a reputation for workmanship.
* Controlling contracts & specifications.
* Motivating people & creating teamwork.
* Sound decisions at lowest levels.
* Proper communication & reporting.
* Safe & satisfactory working conditions.
* Monitoring execution against planning.
* Proper flow of construction.
* Proper resource coordination.
Why CPM is Important to CoTM Professionals
CoTM Professionals: Construction Technology and Management experts.
* Technology (Methods/Procedures/Techniques).
* Management (Coordination & Administration of Stakeholders, Resources, Processes).
Construction Project Management therefore is the coordination and administration of all components of project to successfully accomplish with the five criteria of performance.
Relevance: Response to Needs and Priorities.
Efficiency: Delivery in terms of Cost, Time, and Quality as per specification.
Effectiveness: Achievement of the common goal.
Sustainability: Continuation of its relevance.
Impact: Various effects of the project.
Critical Success and Failure Factors are tied to management principles.
CoTM Professionals oversee construction projects from inception to disposal, ensuring relevance, efficiency, effectiveness, utility, sustainability and impact.
They are vital in the development construction industry technologically, including policy development and regulation.
CPM in Ethiopia
Discussion Forum + First Assignment
2. Major Principles of Construction Management
No worldwide accepted principles exist, but can be discussed under:
* General Management Theoretical and Practical Developments.
* Functions/Elements of Management Theories and Practice.
* Project Management and Organization Management and their developments.
General Management Theoretical and Practical Development
Deals with managing ongoing organizations.
* Property Management.
* Production & Distribution Management.
* Organization Management.
* Resources Management.
* Project Management.
* Strategic Management.
* Stakeholders (Relationships) Management.
* Process / Result Management.
* Information Management.
* Research & Development (Knowledge).
* Performance Management.
* Network Management.Management is the process of administering and coordinating resources effectively and efficiently.
Efficiency and Effectiveness depends on resource utilization.
Management becomes increasingly complex with technological and behavioral advancements.
Management Theory and Its Development
Management theories have both theoretical and applied contributors.
Classifications of Management Theories:
Early contributions.
Industrial era contributions.
Classical contributions.
Behavioral contributions.
Quantitative contributions.
Systems Perspectives.
Contingency Perspectives.
Recent Contributions.
Early Contributions: Considered applicable to business and industry. Emphasized Organizations such as the state, church, military and household, etc.
* Record keeping in 5000 BC.
* Importance of planning, organizing, and controlling in 4000 BC.
* Universality of management by 2000 BC.
* Specialization in 350 BC.
* Staff organization in military campaign in 330 BC.
* Traits of a leader and/or a manager in 900 and 1100 AD.Industrial Era Contributions (mid 1700’s): Significant contributions to management theories.
Human Resources Management: Robert Owen (1771-1858) advocated improved human resources management results in higher returns.
Scientific Management: Charles Babbage (1792-1871) produced calculator, difference machine and rudimentary analytical machine; division of labor concept, observation procedures for studying manufacturing operations, management and employee interests are closely linked.
Management Training: Andrew Ure and Charles Duprin educated managers facing factory system problems.
Classical Contributions: Administrative Theories and Scientific Management concepts.
Henri Fayol (1841-1925) developed first general administrative theory with six separate activities or functions:
Technical (production, adaptation).
Commercial (exchange).
Financial (search for & optimal use).
Accounting (stocktaking, balance sheets).
Security (protection of property & persons).
Managerial (planning, organizing, command, coordination, control).
Fayol’s fourteen basic principles:
Division of work or labor.
Authority and Responsibility.
Discipline.
Unity of Command.
Unity of Direction.
Subordination of individual interest to the general interest.
Remuneration.
Centralization.
Scalar chain or line of authority.
Order.
Equity.
Stability of tenure of personnel.
Initiative.
Esprit De Corps or Union is Strength.
Frederick W. Taylor (1856 - 1915) developed scientific management with four principles:
Develop a science for each element of work, replacing the old rule of thumb.
Scientifically select and train workers
Cooperate with the workers to ensure work is carried out scientifically
Equal division of work and responsibility between management and workers.
Taylor’s five basic features of scientific management:
Organizational and technical improvements.
Provision of planning department.
Use of experienced foremen.
Time study to determine rate at which a job should be done.
Incentive wage system.
Max Weber: bureaucrat Management in addition to Administrative Management
Behavioral Contributions: Base theory on human behavior in management - Believe that those involved in the organization are the prime determinants of the organizational and managerial effectiveness.
Abraham H. Maslow (1908-1970) developed a hierarchy of human needs:
Physical and physiological needs.
Safety and security needs.
Love or social needs.
Ego or status needs.
Self-actualization, realizations & fulfillment.
Douglas McGregor (1906-1964) developed Theory X and Theory Y:
Theory X: Managers view subordinates as uninspired, avoiding responsibility, supervision and evaluation.
Theory Y: Managers believe subordinates view work as rewarding, encourage communication, improved communications and greater employee participation for effectiveness.
Quantitative contributions: Decision theory and management science. Characterized by systematizing the decision making process using mathematics, statistics and quantitative techniques, or operational research or management science. Quantitative approach possesses:
* Decision – Making focus.
* Measurable Criteria.
* Quantitative Model.
* Use of Computers.Systems Perspectives: assemblage of interrelated parts that work together by way of some driving process. Systems are often visualized or modeled as component blocks that have connections drawn between them. common characteristics: 1. Systems have a structure defined by parts and processes. 2. Systems are generalizations of reality. 3. Systems tend to function the same: inputs/outputs of material/energy. 4. Various parts have functional and structural relationships. 5. Functional relationships require energy/matter flow. 6. Systems exchange energy/matter with environment through inputs/outputs. 7. Functional relationships require a driving force. 8. System parts show integration.
Within a system's boundary: Elements, attributes, Relationships in defining the state of the system.
System Types: Isolated, Closed, Open, Morphological, Cascading, Process-Response, Control, Ecosystem.
Contingency Theory: Situational management adjusting managerial actions and styles to circumstances. Environmental factors like public opinion impact decision-making.
Recent Contributions: Project management adopted by various organizations. Construction industry faces challenges due to complexity, risk, and uncertainty: * Construction industry involves almost all industries and sectors in realizing their infra structural needs * Construction use wide variety of resources and their scarcity * Construction exhibit fierce competition nationally and globally * Construction decrease their profit margins to its lowest bottom * The human, cultural and ecological aspects makes their management very complex, risk undertaking, and working in an uncertain environment. Therefore Professional Construction Management (PCM) is Necessary. Five new project management principles are described: * Total Quality Management (TQM). * Management by Projects (MBP). * Business Process Re-engineering (BPR). * Value Engineering/ Management (VE/ VM). * Concurrent Engineering (CE).
Total Quality Management (TQM): Cooperative business form improves quality, economy, and productivity. It has three basic ingridients:
* Participative Management & Teamwork.
* Continuous process improvement.
* Customer satisfaction and delight.Management by Projects (MBP): Way, outlook and an attitude to treat any trade of work, undertaking, scheme, assignment or a set of activities, as a project. Essential elements;
* Identified Scope.
* Required completion time.
* Estimate of cost and the other resources inclusive of manpower.
* Economic quality performance.
* Review of the work done with follow-up of some kind.Business process re-engineering (BPR):
It is defined as:
* An organizational improvement methodology that focuses on redesigning organizational processes
* Advocates 'radical improvement', rather than 'continuous improvement', of processes for better ultimate performance. Key features are:
Rapid thinking, creating new scenario, simplify processes
Information technology to reintegrate works, fewer skilled employees, and flatter organization.
It pays great dividends when successful like:
Simpler and shorter processes, fewer but highly skilled employees, flatter and more efficient organization, and lower structural costs..
Value Engineering / Management (VE / VM): Systematic study of project requirements using a multi-disciplined team to identify and eliminate unnecessary costs and poor performance by using functions
Concurrent Engineering (CE): Systematic approach to integrate design and processes including manufacturing and support, consider all life-cycle elements including quality, cost, schedule, and user requirements
Functions of Management
Can be described in four major elements:
* Planning.
* Organizing.
* Implementing.
* Monitoring.These functions are seldom well established in the construction industries in Ethiopia.
Planning: Setting visions, missions and goals of organizations or projects or programmes together with the activities to achieve them. * Requires operational plan aimed at administration and coordination of Stakeholders, Processes and Resources,
* Makes better coordination.
* Focuses on forward thinking.
* Creates participatory work environment and creates good environment for feedback.
Organizing: the arrangement of people and physical resources to carryout plans and accomplishes organizational objectives.
* Responsibilities of individuals who are required to execute the works are defined.
* Ensure the flow of information resources and tasks logically and efficiently and facilitates the organization of sites, specifically to construction.
Implementing: process where by the actual work is executed and includes defining the task in the planning stage with proper organization. * Inspection and supervision.
* Recording data of executed works, availing all necessary resources at the right place and at the right time and can cause people to certain tasks intended to achieve certain specific objectives.
Monitoring: Process by which executives and legislatives determine or evaluate whether organizational objectives are being achieved and operations are in consistent with plans or not.
* Checking mechanism against planned data with the help of feed back.
* Future planning are carried out successfully and a feed back is necessary.
Managerial Roles
Henry Mintzberg brought forward three primarily managerial roles: Interpersonal, Informational and Decision Making Roles.
Interpersonal Roles: Figurehead, Leadership, Liaison.
Informational Roles: Monitor, Disseminator, Spokesperson.
Decision Roles: Entrepreneur, Disturbance Handler, Resources Allocator, Negotiator. Furthermore, recent trends enlarged managerial roles due to:
Globalization of markets
Increasing predominance of Entrepreneurial Firms
Growth in Service - based organizations
Increasing Diversity
New organizational Model, and
Increasing customer focus. Brought New Competencies: Communicator, Team Player, Technology Master, Problem Solver, Diplomat, Change Maker and Promoter.
Management Scopes and Levels
*Classified into different categories depending upon the scopes and levels of management they are involved in.
*Dependent on the nature and scope of the job managers are performing:
*Functional: responsible for a work group segmented according to functions
*General: manage several different functions or departments that are responsible for different tasks.
*Three Levels of Managers - small organizations may have only one, big ones several layers. Generally speaking:
*Top
*Middle
*First – line or Lower managers and could resemble pyramidal in shape
*Level – specific skills which are more important to their respective levels:
*Technical skills - lower mgmt levels
*human skills - middle mgmt levels
*Conceptual skills - top mgmt levels
3. Construction Project Management
*Most organizations often inclined to use projects as their main handling mechanism of their businesses: Management by Projects.
** identifying characteristics:
* Unique, involving innovative characteristics
* Temporary, for it has a definite ending
* A component of a certain business, requiring predetermined goals and courses of actions
* Complex
*Three broad categories of projects:
*Manufacturing projects
*Projects requiring external organizations
*Management projects
Project Management
*Defined as achieving successful project completion with the resources and time constraints.
*Traditional Project Management
*New Project Management
The Traditional Project Management Approach:
*In attention to the importance of customer satisfaction:
*satisfying the famous triple constraints: Time, Budget, and Specification or Performance:
*single minded focus on a fixed set of tools for dealing with scheduling, budgeting, and resource allocation
*problems in the traditional project management system (Davidsen Frame, J., 1994):
*Its in attention to the importance of customer satisfaction,
*Its single minded focus on a fixed set of tools for dealing with scheduling, budgeting, and resource allocation
*Its narrow definition what it should be concerned with.
The New Project Management Approach:
*The new project management recognizes must of the traditional approaches are still relevant to today’s changing environment. Therefore the new approaches rather than establishing its own total frame of assumptions, it aims to enhance the traditional approach
*Become more customer basis
*Explore the use of new management tools
*Redefine the role of the project manager.
Projects (including construction projects) are carried out using identified project phases - Processes Management
Processes Management
*Process management in Construction Projects can be understood using concepts developed in Project Cycle for Construction Management Process System for Project Scope Management.
*Project cycle:The processes at which projects are formulated, implemented and completed.
*Construction Management Process System Project (defined SIB 3010 Compendium)
Project Processes: Core, Administrative, and Public regulatory processes
*Relationship Main project processes and the phases of the project cycle.
*Diverging and converging with overlaps to each other
*Cyclic within phases
*Integrated within phases
*Project management process includes two separate elements:
***Well known traditional management functions:
***Planning, Executing and Controlling ->At the same time these processes are made cyclic.
*Project Definition, Project Implementation and Project Completion Processes are modified using three by two matrix: basic versus administrative
Project Scope Management: insure that the project includes all the work required, only the work required to complete the project successfully. It is primarily concerned with defining and monitoring what is or is not included in the project.
2 major processes:
*Project Scope Definition:
Written scope statement as a basis for future project decisions; subdividing the major project deliverables into smaller and more manageable components; formalizing the acceptance of the project scope.
*Change Monitoring:
Scanning the major deliverables or outputs of the project and carryout change management. Organizations initiate projects as a result of: a social and/or a market and/or a business need; a regulatory and/or a legal requirement; a technological advance; etc.
Project Scope Definition involves inputs such as Product Description, Strategic Plan, Project Selection criteria and Contextual information; Tools and Techniques like Demand / Need Analysis, Project Selection Method, Alternatives analyses, Work Breakdown Structure; Outputs such as Project Manager Identified, Scope Statement including Project Charter / Plan, Formal Acceptance & Assumptions
Monitoring Scope Changes Involves inputs such as Scope Statement including Project Charter / Plan, Performance Reports, Change Requests; Tools and Techniques like Scope Change Monitoring System, Performance Management, Scope Redefinition; Outputs such as Revised Scope Statement, Lessons Learned, Corrective Actions & Assumptions*
Stakeholders Management
*Stakeholders: individuals or units or the organization itself for which they claim a stake in the project such that they get benefit from or affected by the whole processes of the project and its deliverables. They can generally be classified under Internal and External stakeholders.
*Budgetary
Contractual
Regulatory
Collateral
Stakeholders Relationships Management
*It is meant that attitudes, objectives and self serving interests of individuals, groups or organizations who have stakes in the project are reflected in their relationships to affect the success of the project.
*Relationship management is needed for successful completion by
*Stakeholders’ Identification
*Stakeholders’ Information
*Stakeholders’ SWOT Analysis
*Stakeholders’ predicted / expected Behavior, and Stakeholders’ Relationships Management Strategy.
New Skills: Communication, Negotiation, Alliance, Socializations, Organization Culture and value building skills
*Recent study reveals: weak and untrustworthy relationships among stakeholders have been one of the major factors for low project performances (Wubishet, 2004).
*This chained and low level of trust and commitment was formed along the three categories of stakeholders’:
foreign financiers do possess low level of trust on Governments of developing countries specifically on most assistance financed projects. Developing countries also perceive these foreign financiers as too bureaucratic, stringent, self-interest serving and involved in project administration beyond necessary. As a result, most projects exhibited protracted time delays between their design and construction implementation phases
Project Owners do perceive Project Doers as too claim oriented and too-profit oriented: Project Doers perceive Project owners as too-risk averse, too-cost conscious and incompetent to deal with contract administrations during implementations. The important thing considered here is that the perception of reality these stakeholders possess matters a lot. Because, perceptions influence and dictate decisions which resulted in an unwanted spiral effects that is difficult to break. As a result, they develop an adversarial relationship which is detrimental to the project objectives.
Implementing Agencies and Beneficiaries have also revealed very low pre-participation and consultations during the project formulation stage - top-down approach prevailed.
These and other situations made stakeholders’ relationships problems:
*Complex due to their being many at the same time
*Complex due to weak, unfavorable and less trustworthy relationships and therefore recommends the Management of Public Construction Projects shall provide more focus to Stakeholders relationships and their Management functions.
Resources Management
*For any Construction Industry to be efficiently operating and be successful the elements or the resources should be well known, planned and made available. For most of the construction projects:
*Human Resources / Labor or Workmen (Capacity and Capability)
*Financial Resources / Fund
*Information Resources
*Physical Resources such as Materials, Equipment and Other Assets
*Services and Management
*Physical Infrastructures and Owned Land are assets
Project Resources Management possess major processes Project: Resources Definition and Its Change Monitoring