Choice of Projects delivery method

7/27/2019 Choice of Projects delivery method

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SASKA CONSTRUCTION

Projects Analysis Report

For Nissan Company

2/5/2014

ANALYSTS

1. EVARIST RUHAZWE2.


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MEMOTO: NISSAN COMPANY

FROM: EVARIST RUHAZWE & .. ,ANALYSTS

DATE: Feb 6, 2014

SUBJECT: CONSTRUCTION PROJECT ANALYSIS REPORT

INTRODUCTIONThe program involves two projects with differences in (among many other differences)size,

complexity, technology involvementand urgency. With that a technical guide to project delivery

system, financial contract type and procurement methods is essential to meet the companys

goals on the projects specified. The projects have to be analyzed separately and for each methoda decision has to be obtained.

Project CharacteristicsThe following are the consideration of the project characteristics (for each project type) which

are expected to affect the choices in the project.

A. The Production facilityThis project includes the following characteristics

a) Time constraint/UrgencyThe project involves the time constraints which will influence on the choice of the Project

delivery method.b) Money constraint

Following the nature of the project, there is no limitation of funding to the project. Hence,

Funding resources has little or no influence to the delivery of the project.

c) Technology involvement.The Project involves high and modern Technology. Improper selection of delivery

process might cause the presence of changes in design and construction during execution

of the project which may lead to late delivery and Compromise of qualityd) Complexity

The project involves many sub-systems and processes which might be dependent or

independent. Lack of proper project management from the design process might lead tothe later completion and excessive increase in costs.

e) Quality controlDuring the execution of the project several tests are expected to be done to ensure quality

B. The Office buildingThis project includes the following characteristics

a) Time constraint/UrgencyThe project involves the time constraints which will influence on the choice of the Projectdelivery method.

b) Money constraintFollowing the nature of the project, there is no limitation of funding to the project. Hence,Funding resources has little or no influence to the delivery of the project.

c) Technology involvement.


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The Project involves high and modern Technology. Improper selection of delivery

process might cause the presence of changes in design and construction during execution

of the project which may lead to late delivery and Compromise of qualityd) Complexity

The project involves many sub-systems and processes which might be dependent or

independent. Lack of proper project management from the design process might lead tothe later completion and excessive increase in costs.e) Quality control

During the execution of the project several tests are expected to be done to ensure quality

The Owner characteristicsThe owner seems to be unfamiliar with such kinds of projects, and therefore needs to involve

some expertise for such project. The president of the company needs to have control even to

smallest matters of the company and hence there is a need to have a systematic way of avoiding

disputes.

Market characteristics

There is an existence of experienced contractors but they are unfamiliar with the location atwhich the project will be located. Only one of them has worked at the area around Nashville.

EXECUTIVE SUMMARYOur team has then used an evaluation matrix as a tool to professionally arrive at a best approach

of the project execution. Each project was analyzed differently and the decision for each part wasarrived at.

For the Production facility, a design build approach, appeared to be the best delivery method,

Cost-Plus as the best financial contract term and Negotiated Typeas the best procurement

approach. The involvement of design build approach will help the owner who doesnt have thein-house experti seto involve a team which

For the Office building, a Pure Construction Managerapproach was chosen as the bestdelivery method, Stipulated Lump Sumas the best financial contract type and the Competitive

bid as the best procurement approach. The involvement of the construction Manager in this will

help the owner to give an account to the funding agency and help to solve any arising conflict.


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Contents

MEMO ............................................................................................................................................ 1

INTRODUCTION ...................................................................................................................... 1

Project Characteristics ................................................................................................................ 1

The Owner characteristics........................................................................................................... 2

Market characteristics ................................................................................................................. 2

EXECUTIVE SUMMARY ........................................................................................................ 2

1 PRODUCTION FACILITY CONSTRUCTION .................................................................... 5

1.1 PROJECT DELIVERY SYSTEMS ................................................................................. 5

1.1.1 Time constraint/Urgency .......................................................................................... 5

1.1.2 Financial Constraint .................................................................................................. 6

1.1.3 High and New technology involvement ................................................................... 6

1.1.4 Complexity of the project ......................................................................................... 6

1.1.5 Summary ................................................................................................................... 7

1.2 FINANCIAL CONTRACT TYPE ................................................................................... 7

1.2.1 Time constraint/Urgency .......................................................................................... 7


1.2.3 High and New technology involvement ................................................................... 8

1.2.4 Complexity of the project ......................................................................................... 8

1.2.5 Summary results of the Analysis .............................................................................. 9

1.3 PROCUREMENT METHODS ........................................................................................ 91.3.1 Time constraint/Urgency .......................................................................................... 9


1.3.3 High and New technology involvement ................................................................. 10

1.3.4 Complexity of the project ....................................................................................... 10

1.3.5 Summary and recommendation .............................................................................. 10

2 OFFICE BUILDING ............................................................................................................ 11

2.1 PROJECT DELIVERY SYSTEMS ............................................................................... 11

2.1.1

Technically-Phased Construction ........................................................................... 12

2.1.2 Financial Constraint ................................................................................................ 12

2.1.3 Disputes possibility ................................................................................................. 12

2.1.4 Public Interest-Government funded ........................................................................ 12

2.1.5 Local minority workers involvement ...................................................................... 13

2.1.6 Summary ................................................................................................................. 13


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2.2 FINANCIAL CONTRACT TYPE ................................................................................. 14

2.2.1 Technically-Phased Construction ........................................................................... 14

2.2.2 Money/Financial Constraint.................................................................................... 14

2.2.3 Disputes Possibility ................................................................................................. 14


2.2.5 Local minority workers ........................................................................................... 15

2.2.6 Summary of Analysis .............................................................................................. 15

2.3 PROCUREMENT METHODS ...................................................................................... 16

2.3.1 Technically-Phased Construction ........................................................................... 16

2.3.2 Financial Constraint ................................................................................................ 16

2.3.3 Disputes Possibility ................................................................................................. 16


2.3.5 Local minority workers ........................................................................................... 17

2.3.6 Summary ................................................................................................................. 17


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1 PRODUCTION FACILITY CONSTRUCTIONOur team has then used an evaluation matrix as a tool to professionally arrive at a best approachof the project execution. The above characteristics are then used as criteria for use during

selection of the best approach. Different steps were used in this method

Determination of the weighting factors for each cri teri aUsing a range of 1 to 100(percentage), the different criteria were assigned differentweights depending on the importance of each criteria over the other.Below is a table showing the different weights used for each criteria.

Criteria Weight Details

Time

Constraint/urgency 35The project needs to be delivered within six months despite its

complexity and involvement in high technology. In that case it

is urgent and given weight of

Money Constraint10

There is no funding limitation, hence the weight for finances

limitation is low

High& New

Technologyinvolvement

30

The involvement of high and new technology makes it deserve

a weight of 25%. This is because the company gives the newtechnology a priority so as toits competitors

Complexity of

project 25The project involves a lot of different sections and units to be

built as a whole. 20% weight is therefore given to reflect thiscomplexity of project

Determination of the scores of each cr iteri a per each deli very method, f inancial contracttype or procurement method

Using a score range of 1 through 10, each criteria was assigned a score for each

procurement alternative. The analysis was done separately for delivery system, financial

contract type and procurement method as shown in the next section.

1.1 PROJECT DELIVERY SYSTEMSConsidering the present project delivery systems which are Design-Bid-Build (DBB), Design-Build(DB), CM at risk(CM@R) and Pure CM(PCM), the scores were given per each criteria

depending on the strength and weakness of each system. The description of each criterion per

delivery method given is as follows

1.1.1 Time constraint/UrgencyAs far as time serving is concerned, DB and CM@R shows greater time serving than

DBB approach. The following accounts for that

Method Score DetailsDBB 2 Is a slow process so, wont be a good choice for this type ofproject. Given a score of 2

DB 8 It is good for the urgent process as both design and build can go

simultaneously. A little bit faster than CMAR

CM

CM@Risk 7 Faster than DBB due to presence of management team andinvolvement of the contractor from the beginning


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1.1.2 Financial ConstraintAs far as cost serving is concerned, DBB shows greater success than the rest of the

methods. This is because it allows competition between different companies in which thelowest bid is selected. Following is a summary of the Methods and scores assigned.

DBB 8 The process is good is cost saving as the lowest bid wins the

contract: score

DB 4 Lack of competition among different contractors and high

contractor risk can cause high initial costs

CM

CM@Risk 6 More costs is associated here due to reduced competition oncontractor pricing. However, good management by CM can save a

great deal of costs.

1.1.3 High and New technology involvementThis is best done using the method of DB because a contractor input is done from the beginning.DBB 4 Not good for high and new tech project, there can be unforeseen

circumstances which doesnt

DB 9 The Contractor involvement from beginning, consideration of

contractor quality and capability makes it a good fit for this projecttype.

CM

CM@Risk 6 This is good method for project of this type. CM involvement in

the whole process helps in ensuring a successful execution of aproject.

1.1.4 Complexity of the projectCM at risk and PCM are good at projects of this type. There is high need of planning, organizing

and co-ordinating different entities to ensure good end-result

DBB 4 Difficult for complex project since it needs a clearly defined

project from the beginning, proper planning and organizing andrequires involved parties to work together from the beginning.

DB 6 It is better than DBB, since it involves the capable contractors.

CM

CM@Risk 7 Multiple phases and large technical complexity is possible due to

high level of management


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Stipulated

LS

7 Presence of fixed amount tends to reduce the cost growth.

However, variation occurring can affect the overall price

Unit

Price

6 Its good in cost saving since it allows prior knowledge of the costs

Cost-Plus 2 Unlimited growth in cost since it gives no limit for cost

implicationGMP 4 It prevents cost growth by setting a maximum value, hence better

than Cost-Plus. However high initial cost can be set due to high

risk to a contractor or CM

1.2.3 High and New technology involvementSuch projects involve a lot of inputs and are subjected to introduction of new ideas through the

execution of project. Cost plus and GMP are good to be applied here.

Method Score Details

Stipulated

LS

5 Requires everything to be defined prior construction hence not the

best alternativeUnit

Price

6 Not suitable because it is difficult to know all the costs units and

resources to be involved. It can be applied though under situationwhere the resources to be involved are known

Cost-Plus 8 Good for this kind of project, its hard to get all costs to beassociated at the beginning

GMP 8 Good for this project since actual costs cannot be found

1.2.4 Complexity of the projectCost plus and GMP are good at projects of this type. It is very difficult to get the actual cost of

construction from the beginning of the project


StipulatedLS

3 Very hard to find the total price under lump sum project type.

Unit

Price

5 Involvement of many units

Cost-Plus 7 Its good for this kind of projects as costs need not be determined at

the beginning.

GMP 9 GMP can be applied in complex projects especially when a


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1.2.5 Summary results of the AnalysisPROJECT NO. 1

Goals/Criteria Criteria

WeightProject Deliverly Systems

Stipulated LS Unit Price Cost Plus GMP

Score Weighted

Score=Criteria

Weight x

Score

Score Weighted

Score=Criteria

Weight x

Score

Score Weighted

Score=Criteria

Weight x

Score

Score Weighted

Score=Crite

Weight x

Score

Time

Constraint

35 3 105 4 140 9 315 7 2

Money

Constraint

10 7 70 6 60 2 20 4

High& New

Technology

involvement

30 5 150 6 180 8 240 8 2

Complexityof project 25 3 75 5 125 8 200 9 2

Total 100 400 505 775 7

As far as the financial contract is concerned, Cost-Plus Methodis a best choice

1.3 PROCUREMENT METHODSProcurement can be done through, Competitive bidding, Negotiation, or best value. The use of

each method depends upon the characteristics involved in a particular project. Again a detailed

analysis to determine the appropriate method is done below.

1.3.1 Time constraint/UrgencyAs far as time serving is concerned, negotiated bid


Competitive

bid

5 Takes time till the execution of the project. Evaluation of

contractors has to be done.

Negotiated 9 Negotiated contracts are faster since they dont involve the

traditional bidding process.

Best value 4 It also takes time in the execution of it since, evaluation ofcontractors has to be done

1.3.2 Financial ConstraintCompetitive bid is always good for obtaining the least cost among alternatives.


Competitive

bid

8 The method is good to get the lowest bid

Negotiated 5 The costs can go high in negotiated bids since the contractor takesbigger risk

Best value 6 The costs can be higher than Competitive bid since the quality ofthe contractor is involved


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1.3.3 High and New technology involvementInvolvement of new technology serves the best on negotiated type of contract.


Competitive

bid

3 This type doesnt allow innovations since the contractors dont

participate from the beginning

Negotiated 8 Best for this type of project as it brings both parties together from

the beginning. It also can involve incentives and bonuses

depending on the quality of the product.

Best value 6 Best value also works well since it involves the quality of the

contractor into consideration.

1.3.4 Complexity of the projectNegotiated bid is also good for the complex projects. Both parties work together from the

planning stage to organize the whole project.

Method Score DetailsCompetitivebid

4 For complex projects this approach may not be good.

Negotiated 9 Works good for this type of project. Contractors andsubcontractors all working for the project from the beginning.

Best value 6 It is also good for the complex project.

1.3.5 Summary and recommendationPROJECT NO. 1

Goals/Criteria

Criteri

a

Weight

Project Delivery Systems

Competitive Negotiated Best value

Score

Weighted

Score=Criteria Weight x

Score

Score

Weighted


Score

Score

Weighted


Score

Time Constraint 35 5 175 9 315 4 140

Money Constraint 10 8 80 5 50 6 60

High& New

Technology

involvement

30 3 90 8 240 6 180

Complexity of

project25 4 100 9 225 6 150

Total 100 445 830 530

As far as the Procurement type is concerned, Negotiatedis a best choice


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2 OFFICE BUILDINGUsing the characteristics described in section 2 above, criteria were selected and several steps

used to arrive at the desired decision. The following are the steps followed to arrive at the desired

decision.

Determination of the weighting factors for each cr iteri aUsing a range of 1 to 100(percentage), the different criteria were assigned differentweights depending on the importance of each criteria over the other.

Below is a table showing the different weights used for each criterion.

Criteria Weight Details

Technically-

Phased

Construction 15

The construction has to have good organization as the space

availability is time dependent.

Moneyconstraint 30

The project has limited funding so more weight is given to thiscriteria

Disputes

Possibility10

Involvement of government representative with bad reputationplaces a company in a position of high risk of involvement in

disputes.

Public Interest-

Government

funded 30

The project has a public interest as the government has got a hand

in it. Therefore documenting and proper execution of project isrequired

Local minority

workers15

There should be an involvement of local minority workers in the

project. Hence this criterion can influence the choice of appropriate

method.

Determination of the scores of each cr iteri a per each deli very method, financial contracttype or procurement method

Using a score range of 1 through 10, each criteria was assigned a score for eachprocurement alternative. The analysis was done separately for delivery system, financial

contract type and procurement method as shown in the next section.

2.1 PROJECT DELIVERY SYSTEMSConsidering the present project delivery systems which are Design-Bid-Build (DBB), Design-

Build(DB), CM at risk(CM@R) and Pure CM(PCM), the scores were given per each criteria

depending on the strength and weakness of each system. The description of each criterion perdelivery method given is as follows


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2.1.1 Technically-Phased ConstructionAs far as phased construction is concerned, CM@R shows greater possibility of dealingwith such projects.


DBB 2 Having a phased construction needs to consider a lot of factors

DB 8 It is not a good approach since there is a limitation of space andPCM 7

CM@Risk 6 It is very good

2.1.2 Financial ConstraintAs far as cost serving is concerned, DBB shows greater success than the rest of the

methods. This is because it allows competition between different companies in which the

lowest bid is selected. Following is a summary of the Methods and scores assigned.

DBB 8 The process is good is cost saving as the lowest bid wins the

contract: score

DB 4 Lack of competition among different contractors and highcontractor risk can cause high initial costs

PCM 7 It is good since the CM is responsible to see the projects, deadline

and budgets are met.

CM@Risk 6 More costs is associated here due to reduced competition on

contractor pricing. However, good management by CM can save agreat deal of costs.

2.1.3 Disputes possibilityThis is best done using the method of PCM a CM working hand in hand with the owner creates

good environment.DBB 4 Not good for handling the disputes since the involved entities

dont work as a team from the beginning.

DB 6 It is good for handling disputes and but still it needs careful

application

PCM 9 It is good as a CM works hand in hand with the Owner to makesure nothing goes wrong

CM@Risk 7 The project needs to involve the

2.1.4 Public Interest-Government fundedFor the government funded project where accountability is important either PCM or the DBB isgood alternative

DBB 8 It is good for this type of project since there is linear execution of the

project and the level of accountability is high

DB 4 It is not a good option for this kind of the project since there is lower

level of accountability of Contractor and risk involvement is high

PCM 8 It is a good option since the CM will work hand in hand with the

owner to ensure that there is enough transparency and accountability


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CM@

Risk

6 It is also good for the public funded project

2.1.5 Local minority workers involvementInvolvement of the local minority workers, is best suited by PCM and DBB methods.DBB 7 It is highly feasible with this type since contractor risk is low

DB 4 Hard to apply here since the contractors tend to minimize risk byemploying the experienced personnel

PCM 6 It is good since the CM will make certain control to ensure properutilization of resources

CM@Risk

8 It is good since CM will be in-charge for the project.

2.1.6 SummaryIn Summary, the scores are as shown in the table below

PROJECT NO. 1

Goals/Criteria Criteri

a

Weigh

t

Project Deliverly Systems

Design-Bid-Build Design Build PCM CM at Risk

Score Weighted

Score=Crit

eria

Weight x

Score

Score Weighted

Score=Crit

eria

Weight x

Score

Score Weighted

Score=Crit

eria

Weight x

Score

Score Weighted

Score=Crit

eria

Weight x

Score

Technically-

Phased

Construction

15 2 30 8 120 7 105 6 90

Money

constraint30 8 240 4 120 7 210 6 180

Disputes

Possibility10 4 40 6 60 9 90 7 70

Public

Interest-

Government

funded

30 8 240 4 120 8 240 6 180

Local

minorityworkers

15 7 105 4 60 6 90 8 120

Total 100 655 480 735 640

According to thi s PCMseems to be the best way for the execution of this proj ect


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2.2 FINANCIAL CONTRACT TYPEFinancial contract types existing are Stipulated Lump Sum (Stipulated LS), Unit Price, Cost-

Plus, and Guaranteed Maximum Price (GMP). Each of the criteria was then analyzed against the

said Financial contract types existing, to achieve

2.2.1

Technically-Phased ConstructionFor phased constructions unit price can be the best alternative. This is because it allows obtainingof the total costs


Stipulated

LS

5 It is a not a good approach since the whole project costs need to be

determined

Unit

Price

8 Very good for the phased construction, cost at any phase can be

obtained after getting amount of resources used

Cost-Plus 6 Good for this kind of projects. Costs can be determined after theproject phase is completed.

GMP 4 Is not good for this kind of projects, some costs growth cannot be

traced.

2.2.2 Money/Financial ConstraintStipulated Lump sum shows great deal in saving the cost. It tends to reduce the cost growth sincea fixed amount is defined from the beginning


Stipulated

LS

7 Presence of fixed amount tends to reduce the cost growth.

However, variation occurring can affect the overall price

Unit

Price

6 Its good in cost saving since it allows prior knowledge of the costs

Cost-Plus 2 Unlimited growth in cost since it gives no limit for costimplication

GMP 4 It prevents cost growth by setting a maximum value, hence better

than Cost-Plus. However high initial cost can be set due to highrisk to a contractor or CM

2.2.3 Disputes PossibilityDisputes can arise due to variations leading schedule and cost change. Hence Stipulated LS

seems to be the best.


StipulatedLS

8 Requires everything to be defined prior construction hence seemsthe best alternative.

Unit

Price

8 It is good for dispute avoidance since the unit cost is defined from

the beginning.

Cost-Plus 4 Not good for this kind since unexpected high costs might be

intolerable.

GMP 6 Not good since it requires still a friendly working environment.

However it is better compared to cost-plus approach


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2.2.4 Public Interest-Government fundedStipulated Lump sum and Unit price serves the best option for this kind. When the anticipated

cost is known, it is easy to appeal to the Public/Government

Method ScoreStipulated LS 8

Unit Price 7

Cost-Plus 4

GMP 6

2.2.5 Local minority workersInvolvement of local minority workers is best suited to go with lump sum or Unit price kind ofproject. Everything is defined the expected costs of local workers involvement is included during

the overall cost estimation.

Method Score

Stipulated LS 8

Unit Price 7

Cost-Plus 5

GMP 5

2.2.6 Summary of AnalysisPROJECT NO. 1

Goals/Criteria Criteria

Weight

Project Deliverly Systems

Stipulated LS Unit Price Cost Plus GMP

Score

WeightedScore=Criteria

Weight x Score

Score

WeightedScore=Criter

ia Weight x

Score

Score WeightedScore=Criteria

Weight x

Score

Score WeightedScore=Cri

Weight x

Score

Technically-

Phased

Construction

15 5 75 8 120 6 90 4

Money

constraint30 7 210 6 180 2 60 4

Disputes

Possibility10 8 80 8 80 4 40 6

Public Interest-

Government

funded

30 8 240 7 210 4 120 6

Local minority

workers15 8 120 7 105 5 75 5

Total 100 725 695 385

As far as the financial contract is concerned, Stipu lated Lump Sumis a best choice


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2.3 PROCUREMENT METHODSProcurement can be done through, Competitive bidding, Negotiation, or best value. The use of

each method depends upon the characteristics involved in a particular project. Again a detailed

analysis to determine the appropriate method is done below.

2.3.1

Technically-Phased ConstructionFor this type of construction, Negotiated Type seems to be the good approach. This helpsbecause, the overall construction process can be discussed by the involved parties at the

beginning and decide on how to sequentially execute the project. This is followed by the Bestvalue while the least is competitive bid

Method Score

Competitive bid 5

Negotiated 8

Best value 6

2.3.2

Financial ConstraintCompetitive bid is always good for obtaining the least cost among alternatives. This isfollowed by best value while the least to be negotiated type

Method Score

Competitive bid 8

Negotiated 4

Best value 6

2.3.3 Disputes PossibilityHaving a competitive bid seems to be the best alternative since each process is defined, largebody of case law. The following can be Best value while negotiated comes the last

Method Score

Competitive bid 8

Negotiated 5

Best value 7

2.3.4 Public Interest-Government fundedCompetitive type also is good for the government funded project as it is act of fairness and

openness whereby each contractor is brought under the same evaluation criteria to whether or nothe can qualify. It is followed by Best value while the last can be negotiated type.

Method Score DetailsCompetitive bid 9 For complex projects this approach may not be good.

Negotiated 5 Works good for this type of project. Contractors and

subcontractors all working for the project from the beginning.

Best value 8 It is also good for the complex project.


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2.3.5 Local minority workersInvolvement of local minority workers is best suited to go with Negotiated or Competitive kind

of project. Everything is defined the expected costs of local workers involvement is includedduring the overall cost estimation.

Method Score

Competitive bid 7Negotiated 6

Best value 5

2.3.6 Summary

PROJECT NO. 2

Goals/CriteriaCriteria

Weight

Project Delivery Systems

Competitive Negotiated Best value

Scor

e

Weighted

Score=Criteri

a Weight xScore

Scor

e

Weighted

Score=Criteri

a Weight xScore

Scor

e

Weighted

Score=Criteri

a Weight xScore

Technically-

Phased

Construction 15 5 75 8 120 6 90

Money constraint 30 8 240 4 120 6 180Disputes

Possibility 10 8 80 5 50 7 70

Public Interest-Government

funded 30 9 270 5 150 8 240

Local minority

workers 15 7 105 6 90 5 75

Total 100 770 530 655

Documents

Choice of Projects delivery method