Course Presentations 5 Project Delivery Methods

8/12/2019 Course Presentations 5 Project Delivery Methods

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PROJECT DELIVERY METHODS

ARE 413

CONSTRUCTION MANAGEMENT

CLASS- 5

ByBy

ZulfikarZulfikarAliyuAliyuAdamuAdamu


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Presentation OutlinePresentation Outline

Project Delivery Methods

Definition

Types of Project Delivery Methods

Traditional

Design- Build

Professional Construction Management (PCM)

BOT ( Build Operate Transfer)

Advantages & Disadvantages of various PDM

Summary


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Objectives of Class :Objectives of Class :

To introduce various types of project delivery methods.

To distinguish between the common project delivery methods.

To introduce different types of contract and to differentiate

between the different contracting methods.


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Project Delivery Methods : What is it ?

The term delivery method means the approachThe term delivery method means the approachused to organize the project team so as toused to organize the project team so as to

manage the entire designing and buildingmanage the entire designing and building

(design(design--build) process.build) process.

The owner needs to decide whichThe owner needs to decide whichdesigners to hire, when to hire them,designers to hire, when to hire them,

and under what type of contract ?and under what type of contract ?

The owner also needs to decide whenThe owner also needs to decide when

to hire the construction professionalto hire the construction professional

and under what type of contract ?and under what type of contract ?

Which organization gets hired first?Which organization gets hired first?

Do both organizations report to theDo both organizations report to the

owner, or does one report to the other?owner, or does one report to the other?

Project Delivery method is anProject Delivery method is anorganizational concept which assigns specificorganizational concept which assigns specific

responsibilities and authorities to people and organizationsresponsibilities and authorities to people and organizations and which definesand which defines

relationship of the various elements in construction of a projecrelationship of the various elements in construction of a project.t.


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Definitions: Project Delivery systems

A project delivery system is the method by which a constructionA project delivery system is the method by which a construction project isproject is

executed.executed.

It is the first allocation of base responsibilities between theIt is the first allocation of base responsibilities between the owner, designowner, design

professional and contractor. Thus, the project delivery system iprofessional and contractor. Thus, the project delivery system is the foundations the foundation

on which all subsequent negotiations will be based.on which all subsequent negotiations will be based.


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Types of PDM

Types of Project Delivery Methods:

Traditional

Design- Build (Turnkey)Professional Construction Management

(PCM)BOT ( Build Operate Transfer)


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The Four Phases(every project goes through)

DesignPlanning Bid Construction Occupancy

NEED

TraditionalLinear Process

Design

Planning

Occupancy

Construction

Fast-Tracking

Process


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Traditional

The owner hires a design professional who prepares a complete seThe owner hires a design professional who prepares a complete set oft ofcontract documents for the owner for a design fee.contract documents for the owner for a design fee.

The owner either negotiates a price with a general contractor orThe owner either negotiates a price with a general contractor or bids out thebids out thework.work.

The general contractor is totally responsible for delivering theThe general contractor is totally responsible for delivering the completedcompletedproject as spelled out in the contract documents.project as spelled out in the contract documents.

The general contractor may subcontract out parts of the projectThe general contractor may subcontract out parts of the project, with each, with eachsubcontractor reporting directly to the general contractor.subcontractor reporting directly to the general contractor.

The designer may be involved in overseeing the construction workThe designer may be involved in overseeing the construction workin thein thefield.field.

In this delivery method no direct, formal relationship exists beIn this delivery method no direct, formal relationship exists between thetween the

designer and the builder. They communicate only through the ownedesigner and the builder. They communicate only through the ownerr


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Traditional


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Typical Design-Bid-Build

Process(The Four Phases)

DesignPlanning Bid Construction Occupancy

NEED

Typical

Design-Bid-Build

Process

Design Team Contractor


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Advantages- Traditional PDM

Familiarity:Familiarity: Most owners, designers, and builders have workedMost owners, designers, and builders have workedunder this framework on many projects and therefore are familiarunder this framework on many projects and therefore are familiar

with the system.with the system.

Overall Job coordination:Overall Job coordination:Their control systems, documentation,Their control systems, documentation,and organizations are all set up to manage this process. Theand organizations are all set up to manage this process. The

workers, subcontractors, and vendors also understand the system,workers, subcontractors, and vendors also understand the system,

improving overall job coordination.improving overall job coordination.

Owner can get aOwner can get a firm fixed pricefirm fixed price for the project before any workfor the project before any workbegins. The owner knows before construction begins what the costbegins. The owner knows before construction begins what the costof the project will be.of the project will be.

Opportunity to get goodOpportunity to get goodprice competitionprice competition from the open market.from the open market.


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Pros and Cons of the Traditional Approach

AdvantagesAdvantages DisadvantagesDisadvantages

Price competitionPrice competition The approach takes a long time .The approach takes a long time .

Total cost is known beforeTotal cost is known before

construction startsconstruction startsDesign does not benefit fromDesign does not benefit from

construction experienceconstruction experience

WellWell--documented approach useddocumented approach used

in most government projects donein most government projects done

for public worksfor public works

Conflicts between owner & G.C.Conflicts between owner & G.C.

and betweenand betweenAlEAlE & G.C.& G.C.

Changes may lead to disputes andChanges may lead to disputes and

claimsclaims


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Design-Build

In this approach, a single organization is responsible for perfoIn this approach, a single organization is responsible for performingrmingboth design and construction .both design and construction .

Within the designWithin the design--build organization, parts of the design may bebuild organization, parts of the design may besubcontracted to specialist consultants.subcontracted to specialist consultants.

Being responsible for both design and construction, the designBeing responsible for both design and construction, the design--buildbuild

contractor carries most of the project risks, and this can meancontractor carries most of the project risks, and this can meanadditional cost to owner.additional cost to owner.

The owner's role in this approach is minimal and is only to exprThe owner's role in this approach is minimal and is only to express hisess hisor her objectives and specifications precisely before detailed dor her objectives and specifications precisely before detailed design isesign isstarted.started.

Historically, the designHistorically, the design--build approach has been used on large,build approach has been used on large,privately funded, industrialprivately funded, industrial--sector projects. Recently, however, thissector projects. Recently, however, this

approach has begun to be used on commercial building projects, sapproach has begun to be used on commercial building projects, someomepublicly funded.publicly funded.


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Design-Build

Design-Build

Firm

Owner

Subcontractors and SuppliersDesigners and Consultants


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Design-Build

OWNEROWNER

DESIGNDESIGN--BUILDBUILD

FIRMFIRM

design

subcontractors

suppliers

construction

subcontractorsdesign

subconsultants


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Typical Design/Build Process

(The Four Phases)

NEED

Design

Planning

Occupancy

Construction

Typical

Design/Build

Process

Design/Build

Team


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Design-Build Advantages Good communication occurs between the design team and theGood communication occurs between the design team and the

construction team. Allows for constructability analyses and valuconstruction team. Allows for constructability analyses and valueeengineering.engineering.

This collaboration allows the project to be easily fastThis collaboration allows the project to be easily fast--tracked,tracked,

cutting down on the designcutting down on the design--build time for the project.build time for the project.

Good cost estimating and scheduling should occur throughout theGood cost estimating and scheduling should occur throughout theentire project.entire project.

LongLong--lead item identification and ordering should also be able tolead item identification and ordering should also be able to

proceed smoothly.proceed smoothly.

In general, this arrangement allows easier incorporation of chanIn general, this arrangement allows easier incorporation of changesges

due to changed scope or unforeseen conditions than in the otherdue to changed scope or unforeseen conditions than in the other

arrangements, since the coordination is to occur within the samearrangements, since the coordination is to occur within the same

company.company.


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Pros and Cons of the Design-Build ApproachAdvantagesAdvantages DisadvantagesDisadvantages

Single point of responsibility forSingle point of responsibility for

ownerowner

New learning curve for ownersNew learning curve for owners

Reduced conflict. Less adversaryReduced conflict. Less adversary

relationshipsrelationshipsA/E doesnA/E doesnt work directly fort work directly for

OwnerOwner

Time can be reduced if the designTime can be reduced if the design--

build company overlaps design andbuild company overlaps design and

constructionconstruction

Cost may not be known until the endCost may not be known until the end

of designof design

Coordination between design andCoordination between design andconstructionconstruction

New learning curve for ownersNew learning curve for owners

Easier implementation of changesEasier implementation of changes DesignDesign--build company may reducebuild company may reducequality to save cost Constraints with publicquality to save cost Constraints with public

lawslaws


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How Are Design-Builders

Organized?

Integrated DesignIntegrated Design--Build FirmBuild Firm

Contractor as leadContractor as lead

A/E as leadA/E as lead

Joint VentureJoint Venture

Developer as leadDeveloper as lead


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BOT (Build Operate Transfer)

The term BuildThe term Build--OperateOperate--Transfer (BOT) was first coined by ExTransfer (BOT) was first coined by Ex--

Prime Minister of Turkey,Prime Minister of Turkey,TurgutTurgut OzalOzal in 1984in 1984

Essentially in a BOT project delivery method, a private entity,Essentially in a BOT project delivery method, a private entity,

usually a consortium is responsible for financing, construction,usually a consortium is responsible for financing, construction,

operation and maintenance of the facility for agreed durationoperation and maintenance of the facility for agreed duration

known as Concession period and at the end of the period, transfeknown as Concession period and at the end of the period, transfersrsthe ownership of the facility to the government.the ownership of the facility to the government.

A BOT mechanism is a complex structure comprising multiple,A BOT mechanism is a complex structure comprising multiple,

interinter--dependent agreements among various participants.dependent agreements among various participants.

The concession agreement is between the government and theThe concession agreement is between the government and the

concessionaire. The concession agreement is regarded as theconcessionaire. The concession agreement is regarded as the

heartheart of a BOT projectof a BOT project

Examples of BOT ProjectsExamples of BOT Projects


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Examples of BOT ProjectsExamples of BOT Projects

BOT Contractual StructureBOT Contractual Structure


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BOT Contractual Structure


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BOT (Build Operate Transfer)


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BOT Advantages The private sector invests directly in the development of infrasThe private sector invests directly in the development of infrastructure,tructure,

thereby reducing public debt, balancing the budget deficit, anthereby reducing public debt, balancing the budget deficit, andd

reduced role of public sector. Financing mechanism for infrastrreduced role of public sector. Financing mechanism for infrastructureucture

The private firms are more efficient, hence project or service cThe private firms are more efficient, hence project or service can bean be

delivered at lower costdelivered at lower cost

BOT projects create business opportunities for the local privatBOT projects create business opportunities for the local privatee

sector, create employment avenues as well as attract substantiasector, create employment avenues as well as attract substantiall

foreign direct investmentforeign direct investment

BOT projects help in facilitating transfer of technology by intBOT projects help in facilitating transfer of technology by introducingroducing

international contractors in the host countriesinternational contractors in the host countries


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BOT Disadvantages

BOT is not a easy method and requires high capability ofBOT is not a easy method and requires high capability of

promoters.promoters.

Not suitable for smaller projects. Victorian Government ofNot suitable for smaller projects. Victorian Government of

Australia has suggested that projects with a value of less thanAustralia has suggested that projects with a value of less than

Australian dollar $15m are unlikely to gain benefits from BOTAustralian dollar $15m are unlikely to gain benefits from BOTdelivery method.delivery method.

The success of BOT project depends upon successful raising ofThe success of BOT project depends upon successful raising of

necessary finance.necessary finance.

Transaction costs are high, they amount to 5Transaction costs are high, they amount to 5--10% of total project10% of total project

costcost

BOT projects are successful only when substantial revenues areBOT projects are successful only when substantial revenues aregenerated during the operation phase.generated during the operation phase.


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Professional Construction Management

In this approach, the owner appoints a PCM organization (also knIn this approach, the owner appoints a PCM organization (also known asown as

construction management organization) to manage and coordinate tconstruction management organization) to manage and coordinate thehe

design and construction phases of a project using a teamwork appdesign and construction phases of a project using a teamwork approach.roach.

The design may be provided by specialist design firms and in soThe design may be provided by specialist design firms and in some casesme cases

by the PCM organization.by the PCM organization.

With a high level of coordination between the participants, innoWith a high level of coordination between the participants, innovativevativeapproaches of overlapping design and construction (i.e., fastapproaches of overlapping design and construction (i.e., fast-- tracking)tracking)

can be adopted.can be adopted.

The PCM organization aims at holding a friendly position similarThe PCM organization aims at holding a friendly position similar to thatto thatof the consultants in the traditional approach.of the consultants in the traditional approach.

The services offered by the PCM organization overlap those tradiThe services offered by the PCM organization overlap those traditionallytionally

performed by the architect, the engineer, and the contractor.performed by the architect, the engineer, and the contractor.


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Professional Construction Management

This may include:This may include:

management and programming of design;management and programming of design;

cost forecasting and financial arrangements;cost forecasting and financial arrangements;

preparation of tender documents; tender analysispreparation of tender documents; tender analysis

and selection of contractors;and selection of contractors;

selection of methods of construction;selection of methods of construction;

planning and scheduling construction works;planning and scheduling construction works;

materials procurement and deliverymaterials procurement and delivery expeitionexpeition

Although this approach is likely to prove marginally more expensAlthough this approach is likely to prove marginally more expensive thanive than

the traditional approach, it offers greater guarantee of performthe traditional approach, it offers greater guarantee of performance andance andthe potential to avoid time overruns and to reduce the cost of cthe potential to avoid time overruns and to reduce the cost of claims.laims.

The payment to the PCM organization is usually a fixed fee or aThe payment to the PCM organization is usually a fixed fee or a

percentage of the total project cost.percentage of the total project cost.

Use of PCM approach, should be considered when there is a need fUse of PCM approach, should be considered when there is a need for timeor timesaving and flexibility for design changes, and the owner has inssaving and flexibility for design changes, and the owner has insufficientufficient

management resourcesmanagement resources


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Professional Construction ManagementPCM Agency with GC

Owner

A/E

AgencyCM

Designers and Consultants

GC

Subcontractors and Suppliers

OWNEROWNER


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Construction Management: Agency Form

ARCHITECTARCHITECT

OWNEROWNER

Architects

design

consultants

subcontractors

LIMITED

CONSTRUCTION

ADMINISTRATION

CMaCMa

DETAILED

CONSTRUCTION

COORDINATION

FEASIBILITY

+COST DATA

materials suppliers

GENERALGENERAL

CONTRACTORCONTRACTOR

DESIGN

DATA

Source: Modified AL( 1998)


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4141PCM Advantages & Disadvantages

Advantages over traditional A/E construction administration:Advantages over traditional A/E construction administration:

CM with a construction background may be BETTERCM with a construction background may be BETTER

QUALIFIEDQUALIFIED

CM provides greater QUANTITY of construction phaseCM provides greater QUANTITY of construction phaseservicesservices

CM often assumes greater DEGREE of control overCM often assumes greater DEGREE of control over

contractorscontractors

limitations: thelimitations: the professionalprofessional oror agentagent CM:CM:

DOES NOT guarantee construction cost or timeDOES NOT guarantee construction cost or time

DOES NOT perform any work or contract with the tradeDOES NOT perform any work or contract with the trade

contractorscontractors

IS NOT RESPONSIBLE for their performanceIS NOT RESPONSIBLE for their performance usually DOES NOT assume responsibility for safetyusually DOES NOT assume responsibility for safety


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Pros and Cons of the PCM ApproachAdvantagesAdvantages DisadvantagesDisadvantages

Utilization of construction skills at allUtilization of construction skills at all

stages with no conflict among participantsstages with no conflict among participants

Higher owner involvement andHigher owner involvement and

responsibilitiesresponsibilities

Independent evaluation of cost andIndependent evaluation of cost and

schedule to the best owner interestschedule to the best owner interest

Need skilled construction managersNeed skilled construction managers

Time could be much lessTime could be much less PCM fees (up to 4%)PCM fees (up to 4%)

Principals such as "value engineeringPrincipals such as "value engineering

could be applied in all phasescould be applied in all phases


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CONCLUSION

Types of Project Delivery Methods

Traditional

Design- Build

Professional Construction Management (PCM)

BOT ( Build Operate Transfer)

Advantages & Disadvantages of various PDM

Course Presentations 5 Project Delivery Methods

Documents

Transcript of Course Presentations 5 Project Delivery Methods