CM1.ppt

7/28/2019 CM1.ppt

1/61

Construction Industry

Construction Industry is very important for

the economy of any country as it

contribute a considerable amount to the

GDP.

Generally, we can categorize construction

work in to two types;

(i) Building Construction

(ii) Infrastructure Development

7/28/2019 CM1.ppt

2/61

Construction Industry Cont.

Building Construction

Building construction is the process of addingstructure to real property. Building construction

projects may be small renovations, such asaddition of a room, renovation of a bathroom etc.or large construction work like skycrapers.

Infrastructure

Infrastructure development involves constructionof Highways, Railways, Ports, Dams, massiveearth work projects etc.

7/28/2019 CM1.ppt

3/61

Construction Industry Cont.

At the end of any type of construction

work, there will be end product that

enhance the living conditions of people.

All of the construction works that are

carrying out will be projects.

All the employees working in construction

industry will have to work in project

environment.

7/28/2019 CM1.ppt

4/61

Project

What is a pro ject ?

A Guide to the Project Management

Body of Knowledge (simply referred to as the

PMBOK), defines a project as a temporaryendeavor undertaken to create a unique

product or service. Temporarymeans that

the project, has an end date. Unique meansthat the projects end result is different than the

results of other functions of the organization.

7/28/2019 CM1.ppt

5/61

Project cont.

The most obvious characteristic of a project isthat it has to achieve some particular purpose.

For achieving this aim, project has a beginningand end.

Every project you ever do is different than all theother projects you have done in the past.

When the project is successfully completed it willhave an impact on peoples lives, by changing

their working patterns or by changing theirenvironment.

Projects can vary hugely both in their subjectand in their size.

7/28/2019 CM1.ppt

6/61

Project cont.

Main Characteristics of a Project;

Has a specific aim

Is an instrument of change Has a definite start and finish

Results in something being delivered

Is unique Involves cost, resources and time.

7/28/2019 CM1.ppt

7/61

Typical Project phases

Initiation - Setting objectives, Agreeingbudgets, Gaining project approval

Specification Detailed requirements are

determined Design Final deliverable will begin to

shape, Technical experts will create a

solution Build Something tangible is created.

Implementation Final acceptance

7/28/2019 CM1.ppt

8/61

Project Stakeholders

Stakeholders are those people andorganizations who are actively involved in theproject, or will be affected by its outcome.

Stakeholders may like, love or hate the project.

Identification and alignment of stakeholders andtheir expectations is very important in projectmanagement.

Stakeholders can go by many different names;Clients, Consultants, Contractors, Sub

Contractors, Financers, Manufacturers andSuppliers, Regulatory Agencies, InsuranceOrganizations, Plant and Equipment hirers,Communities, Citizens and more.

7/28/2019 CM1.ppt

9/61

Key Project Stakeholders

Client/Employer

Consultant/Engineer/Architect

Contractor

7/28/2019 CM1.ppt

10/61

Key Project Stakeholders Cont. Client

Client authorizes the project. Client should ensure thatthe necessary funds are available for the project work.

Public sector client organizations-

Government Departments ( Irrigation Department,Building Department etc.)

Authorities and statutory Boards (NWSDB,RDA,UDA,CEB etc.)

Private sector Organizations- Individuals

Organizations ( Sole proprietors, Partnerships, LimitedLiability Companies )

7/28/2019 CM1.ppt

11/61

Key Project Stakeholders Cont.-

Client

Non Government Organizations

UN UNDP

UNOPS

Sarvodaya

7/28/2019 CM1.ppt

12/61

Key Project Stakeholders Cont.

Consultant / Engineer

The person appointed by the client as theconsultant for the purpose of contract;

Consultant may be a Person or an Organizationdepending on the type and size of the project.Professionals involved may be

- Architectures

- Quantity Surveyors

- Engineers

- Planners

7/28/2019 CM1.ppt

13/61

Key Project Stakeholders Cont.

Contractor

Contractor is the person who provide the service

under the contract. Contractor may be public or

private and international or national. Contractormay be civil, mechanical, electrical or any other

specialist services. The contractor should design

( to the extent specified in the contract), execute

and complete the works in accordance with thecontract and with the instructions of the Engineer

and should remedy any defects.

7/28/2019 CM1.ppt

14/61

Role of the Quantity Surveyor in

construction Industry Quantity surveyors are the cost managers of

construction. They are initially involved with thecapital expenditure phase of a building or facility,which is the feasibility, design and constructionphases, but they can also be involved with the

extension, refurbishment, maintenance anddemolition of a facility.

The construction industry is global and extendsacross all real estate and infrastructure markets.

Quantity surveyors work in all sectors of theconstruction industry worldwide. In real estatethis covers residential, commercial, industrial,leisure, agricultural and retail facilities.

7/28/2019 CM1.ppt

15/61


construction Industry Cont.

In infrastructure it covers roads, railways,waterways, airports, sea ports, coastaldefenses, power generation and utilities.Quantity surveyors may also work in processengineering, such as chemical engineeringplants or oil rigs.

They must understand all aspects ofconstruction over the whole life of a building orfacility. They must have the ability to managecost effectively, equating quality and value withindividual client needs.

7/28/2019 CM1.ppt

16/61



As a quantity surveyor you may be working as a

consultant in private practice, for a developer or

in the development arm of a major organisation

(eg retailer, manufacturer, utility company orairport), for a public sector body or for a loss

adjuster. On the contracting side you could be

working for a major national or international

contractor, a local or regional general contractor,for a specialist contractor or sub-contractor, or

for a management style contractor.

7/28/2019 CM1.ppt

17/61



Quantity Surveyors work may include the

following:

preparing feasibility studies or developmentappraisals

assessing capital and revenue expenditure overthe whole life of a facility

advising clients on ways of procuring the project

advising on the setting of budgets

monitoring design development against plannedexpenditure

conducting value management and engineeringexercises

managing and analyzing risk

7/28/2019 CM1.ppt

18/61



managing the tendering process

preparing contractual documentation

controlling cost during the construction process.

managing the commercial success of a projectfor a contractor.

valuing construction work for interim payments,valuing change, assessing or compiling claimsfor loss and expense and agreeing final

accounts. negotiating with interested parties

giving advice on the avoidance and settlement ofdisputes.

7/28/2019 CM1.ppt

19/61

Pre-contract duties of the Quantity

Surveyor

7/28/2019 CM1.ppt

20/61


Surveyor Cont.

Pre-contract Cost Planning and Cost Management

Pre-contract cost planning is the technique by which thebudget is allocated to the various elements of an

intended building project to provide the design team witha balanced cost framework within which to produce asuccessful design. It allows for the redistribution of thebudget between elements as the design develops.

Cost management is the total process which ensuresthat the contract sum is within the clients approvedbudget or cost limit. It is the process of helping thedesign team design to a cost rather than the quantitysurveyor costing a design.

7/28/2019 CM1.ppt

21/61


Surveyor Cont.

Design Stages Quantity Surveyor Stage B: Feasibility Prepare feasibility studies and

determine the budget

Stage C: Outline Proposals Consider with client and design team

alternative strategies and prepare cost

plan Stage D: Scheme Design Carry out cost checks and update cost

plan if necessary

Stage E: Detail Design

Stage F: Production

Information Carry out cost checks

Stage H: Tender Action Prepare reconciliation statement

7/28/2019 CM1.ppt

22/61

Procurement

What is procurement ?

Procurement is a process by which the Goods,

Works, Other Services, and Consultant Services

are acquired appropriately. Goods-

means commodities, raw materials, products,

equipment and other physical objects of everydescription, whether in solid, liquid or gaseous

form.

7/28/2019 CM1.ppt

23/61

Procurement

Works -means all activities associated with theconstruction, reconstruction, demolition, repairor renovation of a building, structure orassociated activities, such as site preparation,excavation, erection, building, installation ofequipment or materials, decoration and finishing.

Services

means services other than consultancyservices. Eg-Services for building maintenance

7/28/2019 CM1.ppt

24/61

Objectives of ProcurementThe Procurement process should ensure:

(a) maximizing economy, timeliness and quality inProcurement resulting in least cost together with the highquality;

(b) adhering to prescribed standards, specifications, rules,regulations and good governance;

(c) providing fair, equal and maximum opportunity foreligible interested parties to participate in Procurement;

(d) expeditious execution of Works and delivery of Goodsand Services;

(e) compliance with local laws and regulations andinternational obligations;

(f) ensuring transparency and consistency in the evaluationand selection procedure; and

(g) retaining confidentiality of information provided bybidders.

7/28/2019 CM1.ppt

25/61

Procurement systems

Traditional Methods

Bill of Approximate

Quantities

Bill of firm quantities

Schedule of rates

Cost Reimbursement

Drawings &Specifications

Alternative Methods

Design and Build

Turnkey Contract

Management

Contracts

Construction

Management Project Management

Private Investment

7/28/2019 CM1.ppt

26/61

Traditional Methods

Bill of approximate Quantities

Most common in the public sector forconstruction works

Bidders are invited to quote unit rates forestimated quantities of different classes of workto be performed.

The bid price comprises the summation ofestimated quantities multiply by the respective

unit rate for all the items of work. During the contract execution, quantities of work

completed are measured as the basis ofpayment.

7/28/2019 CM1.ppt

27/61

Traditional Methods-

Bill of Approximate Quantities

Advantages

Construction work

may begin earlier

The extra expense ofpreparing bills of firm

quantities is avoided.

Disadvantages

Re-measurement

should be carried out

at every valuationwhich may prove

more costly

Does not give a

realistic total cost at

tender stage

T diti l M th d

7/28/2019 CM1.ppt

28/61


Lump Sum contracts or contracts based on

firm quantities

Main characteristics are:

Both the quantities and the unit rates in the BOQform part of the contract.

The design should be completed before signingthe contract

Being the quantities are firm, no need of re-measuring the work completed.

The contractor is paid for the quantities given inthe bills of quantities, unless there is a variationorder, which will be dealt separately undervariations.

7/28/2019 CM1.ppt

29/61

Traditional Methods -Lump Sum contracts orcontracts based on firm quantities Cont.

Advantages

Both parties to the contracthave a clear picture of theextent of their respective

commitments.

The unit area in the billsprovide a sound basis forvaluations of variation to the

design.

Detailed breakdown of thetender sum is readily available.

Disadvantages

The length of time taken in thedesign of the projects and inthe preparation of bills of

quantities is greater.

Problems may arise due tochange in character of thebalance work or the conditions

as a result of the variationsordered by architect/Engineer.

7/28/2019 CM1.ppt

30/61


Schedule of rates

All items which likely to arise in anyconstruction project are listed under eachtrade with unit rates.

Bidders are asked to tender percentageadditions or deductions to the listed rates.

Often usage of a particular standard

schedule allow contractors to familiar withboth item descriptions and the rates.

Tender evaluation is somewhat difficult.

7/28/2019 CM1.ppt

31/61

Traditional MethodsCost Reimbursement Method

Commonly termed as Cost Plus Provide for the reimbursement of the

contractors prime costs for measurable inputs,such as labour, materials, equipment, insurance,

spare parts, tools, fuel etc. together with a fee tocover his associated overheads and profits.

Good for circumstances where time is morecritical than cost.

Payments based on invoices and resourcesconsumed are checked with the invoicesfurnished by the contractor.

Traditional Methods

7/28/2019 CM1.ppt

32/61


Cost Reimbursement Method

The Fee may be

Cost + fixed fee Cost + Percentage fee

Cost + a variable fee, based on targets

Advantages Construction work can start quickly

No measurements of work

Some times may be profitable due to time value ofmoney

Disadvantages Vast amount of investigation is needed over invoices.

Cost of construction for client is normally greater than ofother methods

Computation and verification of total cost is a tediousprocess.

7/28/2019 CM1.ppt

33/61


Contracts based on Drawings and Specifications

Tenderers are supplied only with a complete set

of drawings and full specification.

This is also a Lump Sum contract and in

calculation of the tender sum , the contractorsquantity surveyor has to prepare approximate

bills of quantities from the drawings provided.

This type of contracts are normally used for

small contracts such as renovations and for sub

contract works.


7/28/2019 CM1.ppt

34/61


Contracts based on Drawings and

Specifications

Advantages Both parties have a clear picture of the extent oftheir respective commitments.

Lesser time to prepare tender documents as thetime consuming for preparing bills of quantitiesis eliminated.

Disadvantages

No detailed breakdown of the tender sum isreadily available.

Problems arise when valuing variations as nounit rates are available.

Every bidder has to prepare a tender andtendering takes more time.

7/28/2019 CM1.ppt

35/61

Alternative Methods-Design and Build Cont.

The contractor is responsible for the design,planning, organization and control of theconstruction and generally satisfying the clientsrequirements and offers his services for an

inclusive sum. The procedure is initiated by the client (or anarchitect on his behalf ) preparing hisrequirements in as much or as little detail as hethinks fit.

The contractor prepares his proposals ondesign, time and cost, and submits together withan analysis of tender sum.

7/28/2019 CM1.ppt

36/61


The client after having satisfied on a particularproposal, accept the same and enter in to acontract with the successful tenderer.

The contractor then develop design proposal,carry out and complete the work.

The client may use the services of anindependent architect and quantity surveyor toadvice on the contractors proposals as to thedesign and construction methods and the

financial aspects as well. The client may also appoint an agent to

supervise the works and to act generally on hisbehalf to ensure that the contractors proposalsare compiled with.

7/28/2019 CM1.ppt

37/61


Client - Briefing:

Terms of user requirements as to space and facilities.

Acceptability criteria as to standard of confort and quality(or outline performance specifications).

Contractor - Proposal - to satisfy clients requirements:

Drawings.

Specification of material and workmanship standard.

Price and payment schedule.

7/28/2019 CM1.ppt

38/61

Alternative Methods-Design and Build Cont

Client

ArchitectQuantity

Surveyor

Contractor

Engineering

ConsultantIn-house

Design

Engineers

In-house

architects

In-house

Quantity

surveyor

Sub Contractors

Indicates lines of communication

Indicates possible lines of communication

7/28/2019 CM1.ppt

39/61


Advantages

Single point responsibility is provided, i.e. thecontractor is solely responsible for failure in thedesign and/or the construction.

The client has only one person to deal with, thecontractor

The client is aware of the total commitment

Close intercommunication between thecontractors design and construction teamspromotes cooperation in achieving smootherrunning of the contract and prompt resolution of

site problems.

7/28/2019 CM1.ppt

40/61


Disadvantages Variations from the original design are

discouraged by the contractor whenever it isexpensive.

The client has no means of knowing whether heis getting value for money unless he employs hisown independent advisors, which adds to hiscost.

If the contractors organization is relatively small,he is unlikely to be as expert on design as he ison construction, and the resulting building maybe aesthetically less acceptable.

7/28/2019 CM1.ppt

41/61

Alternative Methods-Package/TurnkeyContract

Both "design-build" and turnkey" contracts

involve the Contractor's total liability for design.

In turnkey contracts, the Employer's

requirements usually include provision of a fully -equipped facility, ready for operation (at the turn

of the "key"). Turnkey contracts typically include

design, construction, fixtures, fittings and

equipment, the scope of which would bedefined.

7/28/2019 CM1.ppt

42/61

Alternative Methods-Management contracting

A method where overall design is the responsibility of theclients consultants, and the contractor is responsibleboth for defining packages of work and then formanaging the carrying out of this work through separatetrades or works contracts.

The management contractor does none of theconstruction work himself but divided up in to workingpackages which are sublet to sub contractors.

The management contractor is normally eithernominated by the client on the basis of previous

experience of management contracting or selected bycompetition based up on tenders for

( a) The management fees and

( b) prices for any additional services to be provided beforeor during construction period.

7/28/2019 CM1.ppt

43/61

Alternative Methods-Management contracting Cont.

Each sub contractor will enter in to an agreement withmanagement contractor.

Role of the management contractor is to provide contractmanagement service on a fee basis as part of the clientsmanagement team.

His main duties are organizing, coordinating, supervisingand managing the construction works in co-operationwith the clients other professional consultants.

As part of his service, he may provide and maintains allthe necessary site facilities such as offices, storage and

mess huts, power supplies and other services etc. With management contracts, administrative matters

relating to valuations and payments are in the hands ofthe clients consultants.

7/28/2019 CM1.ppt

44/61


Client

Architect

Quantity

SurveyorManagement Contractor

Engineering

Consultant

WC 1 WC 2 WC 3

Indicates lines of communication

WC Works Contractor

7/28/2019 CM1.ppt

45/61


Advantages

Work can begin on site as soon as the first one or twoworks packages have been designed.

Overlapping of design and construction can significantlyreduce the time requirement, resulting in an earlier returnon the clients investment.

The contractors practical knowledge and managementexpertise are available to assist the design team.

Where the nature and extent of the work may beuncertain, the design of later work packages may bedelayed until more information becomes available as thework progresses, without extending the contract period.

7/28/2019 CM1.ppt

46/61


Disadvantages

Uncertainty as to the final cost of the project until

the last works contract has been signed.

The number of variations and the amount of re-measurement required may be greater than on

traditional contracts because of the greater

opportunity to make changes in design during

the construction period, because of problemsconnected with the interface between packages.

7/28/2019 CM1.ppt

47/61

Construction Management Construction management is a type of management

procurement where the client appoints a design team and

enters into an agreement with the construction manageror appoints an in-house manager.

The construction manager does not directly undertakeany of the construction work, which is broken down intopackages and carried out by trade contractors.

These trade contractors are appointed by the client,and are directly and contractually responsible to him.

The client therefore assumes a major role in directing theproject, whilst leaving the management of it to theconstruction manager.

The construction management appointment will be for theservices as defined in that document. Although the

trades contracts are arranged and administered by theconstruction manager, contractually they are the clientsrisk.

7/28/2019 CM1.ppt

48/61

Alternative Methods-Project Management

Project Management is not a procurement

system in itself, in that it does not include the

site construction process but only its general

supervision. It has been defined as the overall planning,

control and coordination of a project from

inception to completion aimed at meeting a

clients requirements and ensuring completionon time, within cost and to required quality

standards.

7/28/2019 CM1.ppt

49/61

Alternative Methods-Project Management

The Project Manager, becomes the clientsrepresentative, with authority to supervise andcontrol the entire planning and buildingoperation from acquisition of the site to

completion of the project and settlement of theaccounts.

Quantity Surveyors, by their training andexperience in financial and contractual matters,

coupled with a detailed knowledge ofconstruction processes, are well qualified to offera project management service.

7/28/2019 CM1.ppt

50/61

Alternative Methods -Private Investments

Infrastructure projects which are not identified to

be financed under the Consolidated Fund, may

be identified to be financed/developed by private

investors. Projects financed by the private sectorwill be considered on a Build, Own and Operate,

Build, Own and Transfer, Build, Own, Operate

and Transfer (BOO/BOT/BOOT) and other

variants would be built, owned and operated bythe investor or transferred or leased to the public

sector after a concession period.

7/28/2019 CM1.ppt

51/61

Alternative Methods -Private Investments

Infrastructure ProjectsInfrastructure Development Projects managed by the Private Sector onBuild- Own-Operate (BOO), Build-Own-Transfer (BOT) or other variantbasis, which will be wholly or partly implemented by the private sectorinclude, but are not limited to:

- power plants

- highways- ports

- airports

- telecommunications

- railways

- transport systems

- industrial parks- solid waste management

- water supply and drainage

- warehouses, housing, markets etc.

- Land reclamation

- Other economic infrastructure

7/28/2019 CM1.ppt

52/61

Procurement Procedure- Related Institutions

Institutions related to procurement and their functions:

Secretaries to the Line MinistriesThe responsibility of Procurement Actions shall bevested with the Secretaries of the respective LineMinistries, who are deemed to be the Chief AccountingOfficers of such Ministries.

Procurement Entity

means a Government ministry, provincial council,Government department, statutory authority, governmentcorporation, government owned company, local authority

or any subdivision thereof or any other body wholly orpartly owned by the Government of Sri Lanka or wherethe Government of Sri Lanka has effective control ofsuch body, that engages in Procurement.

7/28/2019 CM1.ppt

53/61

Procurement Procedure- Related Institutions Cont.

Responsibilities of PE

The officer-in-charge of a Procurement Action, such as Heads ofDepartment and Project Directors, together with the assistance ofthe Procurement Specialists, Consultants and other staff shall beresponsible for the following:

(a) Maintenance of necessary communication with all stake holders ofthe Procurement process;

(b) preparation of invitation for pre-qualification and its submission tothe Technical Evaluation Committees (TEC) for review andapproval;

(c) preparation of the draft bidding documents including thespecifications and the submission of same to the TECs for reviewand approval;

(d) preparation of data and information prior to the evaluation report;

(e) issuance of invitations and facilitating the meetings of TECs andPCs;

(f) circulation of the minutes of the meetings of TECs and PCs; and

(g) provision of any requisite assistance to TECs and PCs on anyrequest made by them to facilitate the Procurement process and all

other matters incidental thereto.

7/28/2019 CM1.ppt

54/61

Procurement Procedure- Related Institutions Cont.

A Procurement Committee (PC) and Technical

Evaluation Committee ( TEC ) will be appointed

in order to carry out entire procurement process.

TEC will help PC to carryout procurement

process by handling technical matters. PC may be Cabinet appointed ( CAPC), Ministry

Procurement Committee (MPC), Department

Procurement Committee (DPC), Project

Procurement Committee (PPC ) or Regional

Procurement Committee (RPC )

7/28/2019 CM1.ppt

55/61

Procurement Procedure- International

Competitive Bidding

International Competitive Bidding (ICB) The purpose of ICB is to give all prospective and

qualified bidders adequate and timelynotifications of PEs requirements and to give

them equal access and a fair opportunity tocompete for contracts for required goods andservices. Bidding opportunities must thereforebe advertised internationally and all eligiblebidders given reasonable possibilities to

participate. These notification requirementsdistinguish ICB from other methods ofprocurement.

7/28/2019 CM1.ppt

56/61


Competitive Bidding Cont.

International Competitive Bidding

ICB may be the most suited method of Procurement, forlarge contracts, under following circumstances:

(a) when the capacity of the domestic contractors,suppliers and service providers are limited;

(b) for Foreign Funded Projects, when the Foreign FundingAgency agreement requires the PE to resort to ICBprocedures;

However, in the case of Works contracts in view of thedevelopment of domestic construction industry, thepossibility of slicing the contract and following slice andpackage approach to suit domestic contractors may beconsidered.

P t P d I t ti l

7/28/2019 CM1.ppt

57/61



The PE is required to give worldwide publicity to thetender notice in various media to ensure maximumcompetition. PE is required to:

Advertise at least in one widely circulated nationalnewspaper.

Relevant websites Internationally such as in UNDB

Transmit such invitations to embassies and traderepresentatives of countries from where suppliers andcontractors are likely to participate, and post them inrelevant websites.ICB for Works contract with prequalification may needs16-20 months procurement lead time and Workscontracts without prequalification may needs: 8-12months

P t P d I t ti l

7/28/2019 CM1.ppt

58/61



When ICB is used, domestic preference criteria

shall be used.

For contracts for works to be awarded on the

basis of ICB, a margin of preference of 7.5percent can be granted to domestic contractors.

The bidding documents shall clearly indicate the

preference and the method that will be followed

in the evaluation and comparison of bids to giveeffect to such preference.

Procurement Procedure- National Competitive

7/28/2019 CM1.ppt

59/61

Procurement Procedure- National Competitive

Bidding

National Competitive Bidding ( NCB )

NCB is the competitive Bidding procedure that shall beapplicable for most GOSL funded projects when theGoods or Works are available within Sri Lanka at pricessignificantly below those in the international markets.

When NCB is used:

The invitation to bid should be advertised at least in onewidely circulated national newspaper and in relevantwebsites where possible;

Any supplier, service provider or contractor who desiresto obtain the Bidding document should be allowed to

purchase same, provided the Bidder is prepared to payany specified fees;

The contractors/suppliers/service providers should beallowed to purchase the Bidding document up to a dayprior to the Bid closing date;

P t P d N ti l

7/28/2019 CM1.ppt

60/61

Procurement Procedure- National


NCB in Foreign Funded Project may be used:

With the agreement of the Foreign Funding

Agency; and

By allowing foreign contractors or suppliers to Bidon same terms with the domestic contractors or

suppliers;

By not giving preference to domestic bidders

NCB contract may needs: 6 months of lead time.

7/28/2019 CM1.ppt

61/61

Contract Documents

As per the FIDIC (1999 ); The documents forming the Contract are to be taken as mutually

explanatory of one another. For the purposes of interpretation, thepriority of the documents shall be in accordance with the followingsequence:

(a) the Contract Agreement (if any),

(b) the Letter of Acceptance,

(c) the Letter of Tender,

(d) the Particular Conditions,

(e) these General Conditions,

(f) the Specification,

(g) the Drawings, and(h) the Schedules and any other documents forming part of the

Contract.