PROJECTMANAGEMENTINSTITUTE

CONSTRUCTIONEXTENSIONTOTHEPMBOK®GUIDE

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PREFACE

In2002,PMIbeganpublishingindustry-specificapplication-areaextensionstoAGuide tothe Project Management Body of Knowledge (PMBOK® Guide). The ConstructionExtensiontothePMBOK®Guidewasfirstpublishedin2003andhasbeenupdatedwitheachsubsequenteditionofthePMBOK®Guide.

The industryextensionswereupdatedperiodically tomaintainconsistencywitheachnewversion of the PMBOK® Guide. This edition of the Construction Extension eliminatesspecific processes and references that become obsolete with each new edition of thePMBOK® Guide. This new format, generally described as principle-based rather thanprocess-based, ensures the industry-specific extensions remain aligned with subsequenteditions of the PMBOK® Guide. Generally accepted project management terms,interpretations,andpracticesarenotincludedinthisextensiontothePMBOK®Guide,andthepractitionerisstronglyencouragedtousebothdocumentstogether.ThiseditionsupersedestheConstructionExtension—SecondEditionandalignswith,andservesasasupplementto,thecurrentandfutureeditionsofthePMBOK®Guide.

ThePMBOK®Guidedescribesspecificknowledgeandpracticesgenerallyrecognizedasgood practices on most projects most of the time. The Construction Extension describessupplemental knowledge and practices that are generally accepted as good practices onconstructionprojectsmostofthetime.TheConstructionExtensionincludesKnowledgeAreasspecific to the construction industry, which do not appear in thePMBOK®Guide: ProjectHealth,Safety,Security,andEnvironmentalManagement;andProjectFinancialManagement.AsdescribedinSection3,theseKnowledgeAreasarealignedwiththeKnowledgeAreasandProcessGroups in thePMBOK®Guide.Processes, tools, and techniquesarenot replicatedandonlyconstruction-specificpracticesarespecificallydescribed.

TABLEOFCONTENTS

1.INTRODUCTION

1.1 ProjectsinConstruction1.2 PurposeandAudiencefortheConstructionExtension1.3 ContextandStructureoftheConstructionExtension1.4 RelationshipswithProject,Program,andPortfolioManagementandOther

OrganizationalConsiderationsforConstructionProjects1.5 TheRoleoftheProjectManagerinConstructionandSpecialAreasofExpertise

1.5.1 TheRoleoftheProjectManagerinConstruction1.5.2 SpecialAreasofExpertise

1.6 PublicStakeholders1.7 ExplanationfortheUseofandReferencetothePMBOK®GuideProcesses,Inputs,

ToolsandTechniques,andOutputs1.8 OtherStandards

2.THECONSTRUCTIONPROJECTENVIRONMENT

2.1 OrganizationalInfluencesonConstructionProjectManagement2.1.1 TypesofConstructionProjects2.1.2 ProjectDeliveryMethods2.1.3 OrganizationalStructures2.1.4 EnterpriseEnvironmentalFactors

2.1.4.1 EconomicFactors2.1.4.2 FinancialFactors2.1.4.3 SiteLocationFactors

2.2 ProjectStakeholdersandGovernance2.2.1 ProjectStakeholders2.2.2 ProjectGovernance2.2.3 SocialResponsibilityandSustainability

2.3 ProjectLifeCycles2.3.1 FrontEndLoading2.3.2 AdaptiveLifeCycles

3.PROJECTMANAGEMENTINTHECONSTRUCTIONINDUSTRY:OVERVIEWANDADVANCEMENTS

3.1 ProjectManagementKnowledgeAreas,ProcessGroups,andProcesses3.1.1 ProjectIntegrationManagement3.1.2 ProjectScopeManagement3.1.3 ProjectScheduleManagement3.1.4 ProjectCostManagement3.1.5 ProjectQualityManagement3.1.6 ProjectResourcesManagement3.1.7 ProjectCommunicationsManagement3.1.8 ProjectRiskManagement3.1.9 ProjectProcurementManagement3.1.10 ProjectStakeholderManagement3.1.11 ProjectHealth,Safety,Security,andEnvironmentalManagement(HSSE)3.1.12 ProjectFinancialManagement

3.2 AdvancesandSocietalInfluencesinConstructionProjectManagement3.2.1 Advances

3.2.1.1 Technology3.2.1.2 BuildingInformationModeling(BIM)3.2.1.3 ModernMethodsofConstruction3.2.1.4 EmergingManagementTechniques:AlternativeProjectDelivery

Methods,IntegratedProjectDelivery(IPD),Lean,andAgile3.2.2 SocietalInfluencesinConstruction

3.2.2.1 SustainabilityandSocialResponsibility3.2.2.2 SkilledHumanResources3.2.2.3 GlobalandRegionalRecessions(GlobalEconomies)3.2.2.4 GlobalMarketsandFutureProjects3.2.2.5 Ethics

4.PROJECTINTEGRATIONMANAGEMENT

4.1 ProjectIntegrationManagementinConstruction4.2 ProjectIntegrationManagementInitiating

4.2.1 ProjectStakeholders4.2.2 EnterpriseEnvironmentalFactorConsiderations4.2.3 ProjectServiceProviderEngagement

4.3 ProjectIntegrationManagementPlanning4.3.1 PlanningInputs4.3.2 ValueEngineering4.3.3 IntermittentContractClosuresandCommissioning4.3.4 ProjectStrategy

4.4 ProjectIntegrationManagementExecuting

4.4.1 WorkPerformanceandInspection4.4.2 ValueEngineeringinExecuting4.4.3 ConstructionAdministration4.4.4 InitiateandManagePartnering4.4.5 ChangeOrderManagement

4.5 ProjectIntegrationManagementMonitoringandControl4.5.1 TechnologyIntegration4.5.2 IntegratedChangeControl4.5.3 SourcesofProblemswithProjectChanges

4.6 ProjectIntegrationManagementClosing4.6.1 DelayedProjectClosure4.6.2 CloseoutDocuments4.6.3 ProjectPunchList4.6.4 BeneficialOccupancyandSubstantialCompletion4.6.5 CloseContracts4.6.6 FinalProjectReportandLessonsLearned

4.7 IntegrationManagementAdvancements

5.PROJECTSCOPEMANAGEMENT

5.1 ProjectScopeManagementinConstruction5.2 ProjectScopeManagementPlanning

5.2.1 DefineScope5.2.2 CreateWBS

5.3 ProjectScopeMonitoringandControl5.3.1 ScopeValidation/Verification

5.3.1.1 RequestforInformation(RFI)5.3.2 ScopeCreepandChangeManagement

6.PROJECTSCHEDULEMANAGEMENT

6.1 ProjectScheduleManagementinConstruction6.2 ProjectScheduleManagementPlanning

6.2.1 DefineActivities6.2.1.1 WorkBreakdownStructure6.2.1.2 Decomposition6.2.1.3 ActivityAttributes6.2.1.4 ProgressMeasurementPlanandCriteria

6.2.2 SequenceActivities6.2.3 EstimateActivityResources6.2.4 EstimateActivityDurations

6.2.5 ActivityWeightageDefinition6.2.6 DevelopSchedule

6.2.6.1 VendororSubcontractorScheduleAnalysis6.2.6.2 Constraints6.2.6.3 ScheduleBaseline6.2.6.4 UseofMetrics6.2.6.5 ScheduleDictionary6.2.6.6 ScheduleRiskAnalysis(SRA)

6.2.7 ProgressCurvesDevelopmentandUpdate6.2.7.1 WeightsDistributionStandardCurves6.2.7.2 MathematicalAnalysis

6.3 ProjectScheduleManagementMonitoringandControl6.3.1 ProgressCurveUpdates6.3.2 ScheduleImpacts6.3.3 ProgressandPerformanceReviews

7.PROJECTCOSTMANAGEMENT

7.1 ProjectCostManagementinConstruction7.2 ProjectCostManagementPlanning

7.2.1 EstimatingCostsandTechniques7.2.1.1 Analogous(Conceptual)Estimating7.2.1.2 ParametricEstimating7.2.1.3 Bottom-Up(Detailed)Estimating7.2.1.4 Three-PointEstimating7.2.1.5 MonteCarloSimulation

7.2.2 BillofMaterials(BillofQuantities)7.2.3 Allowances,Contingency,andManagementReserve7.2.4 Escalation,Inflation,andCurrencyExchange7.2.5 Metrics7.2.6 AdditionalConsiderationsinEstimating7.2.7 DetermineBudget

7.2.7.1 ConstructionWorkPackage(CWP)7.2.7.2 CostBaseline

7.3 ProjectCostManagementMonitoringandControl7.3.1 ActualCost7.3.2 EarnedValueManagement7.3.3 ProgressandPerformanceReviews7.3.4 ForecastingorEstimateatCompletion

8.PROJECTQUALITYMANAGEMENT

8.1 ProjectQualityManagementinConstruction8.1.1 QualityRequirements8.1.2 ModernQualityManagement

8.2 ProjectQualityManagementPlanning8.2.1 ContractRequirements8.2.2 ProjectStakeholderRequirements8.2.3 QualityPolicy8.2.4 QualityAssuranceMeasurements8.2.5 QualityChecklist8.2.6 ProjectRequirementsReview8.2.7 QualityManagementPlan

8.3 ProjectQualityManagementExecuting8.3.1 QualityAudits8.3.2 QualityManagementReviews

8.4 ProjectQualityControl

9.PROJECTRESOURCEMANAGEMENT

9.1 ProjectResourceManagementinConstruction9.1.1 ResourceTypes9.1.2 ProjectLocation9.1.3 ProjectSizeandType

9.2 ProjectResourceManagementPlanning9.3 ProjectResourceManagementExecuting

9.3.1 GeneralResources9.3.2 HumanResource

9.3.2.1 Staffing9.3.2.2 TeamBuilding9.3.2.3 InterpersonalSkills

9.4 ProjectResourceManagementMonitoringandControlling9.5 ProjectResourceManagementClosing

9.5.1 GeneralResources9.5.2 HumanResource

10.PROJECTCOMMUNICATIONSMANAGEMENT

10.1 ProjectCommunicationsManagementinConstruction10.2 ProjectCommunicationsManagementPlanning

10.2.1 CommunicationsManagementPlan10.2.2 ProjectDocumentationAssessment

10.2.3 CommunicationsSkills10.2.4 CorporateCommunicationandSocialResponsibility10.2.5 CommunicationFlowforConstructionChangeOrders,Requestsfor

Information(RFIs),Instructions,andVariationRequests10.2.6 DailyReport10.2.7 InformationandCommunicationTechnology(ICT),ProjectManagement

InformationSystem(PMIS)10.3 ProjectCommunicationsManagementExecuting

10.3.1 ManagingConflict10.3.2 ManagingMeetings10.3.3 ProjectDocumentationandInformationDistribution

10.4 ProjectCommunicationsManagementMonitoringandControl10.4.1 PerformanceandProgressReports10.4.2 OtherReportingSystems10.4.3 ContractorPerformanceEvaluation(CPE)

11.PROJECTRISKMANAGEMENT

11.1 ProjectRiskManagementinConstruction11.2 ProjectRiskManagementPlanning

11.2.1 BiddingandContractDocuments11.2.2 OrganizationalMethods11.2.3 Budgeting11.2.4 ScoringandInterpretation11.2.5 ProjectRiskManagementPlanningUnderCollaborativeConstruction

ProjectArrangements11.2.6 ProjectRiskManagementPlanninginPublic-PrivatePartnership(PPP)11.2.7 ProjectRiskManagementPlanninginInternationalProjects11.2.8 RiskIdentificationinConstructionProjects

11.2.8.1 ResourcePlan11.2.8.2 DocumentationReviews11.2.8.3 ChecklistAnalysis11.2.8.4 AssumptionAnalysis11.2.8.5 LessonsLearnedandLearningfromOthers’Experiences11.2.8.6 LocalExpertJudgment11.2.8.7 ConceptHazardAnalysis11.2.8.8 PreliminaryHazardAnalysis(PHA)11.2.8.9 HazardandOperationalStudies(HAZOP)11.2.8.10 ConstructabilityReviewandChecklist11.2.8.11 ValueAnalysisStudy11.2.8.12 FaultTreeAnalysis(FTA)/FailureModesandEffectsAnalysis

(FMEA)11.2.9 QualitativeRiskAnalysisinConstructionProjects11.2.10 QuantitativeRiskAnalysisinConstructionProjects11.2.11 PlanRiskResponsesinConstructionProjects

11.2.11.1 StrategiesforNegativeRisksorThreatsandPositiveRisksorOpportunities

11.2.12 InsuranceinConstructionProjects11.2.12.1 TypesofInsurance

11.3 ProjectRiskManagementMonitoringandControlling

12.PROJECTPROCUREMENTMANAGEMENT

12.1 ProjectProcurementManagementinConstruction12.1.1 Contractor'sPerspective12.1.2 Owner'sPerspective

12.2 ProjectProcurementManagementPlanning12.2.1 ProcurementManagementPlan12.2.2 EnterpriseEnvironmentalFactors12.2.3 SupplyChainManagement12.2.4 OrganizationalProcessAssets12.2.5 ProjectScopeStatement12.2.6 TheWBSinProcurement12.2.7 OtherServiceProviderProcurements12.2.8 Make-or-BuyAnalyses12.2.9 ProjectDeliveryMethods

12.2.9.1 TraditionalApproach12.2.9.2 IntegratedProjectDeliveryandTurnkeyApproaches

12.2.10 ConstructionContracts12.2.11 ContractRiskAllocation12.2.12 ProcurementPlanningOutputs

12.3 ProjectProcurementManagementExecuting12.3.1 ProcurementSolicitation12.3.2 ContractStatementofWork12.3.3 ProcurementDocuments12.3.4 PrequalificationofServiceProviders12.3.5 NongovernmentOrganizations(NGO)SolicitationofSellerResponses12.3.6 PublicandGovernmentSolicitations12.3.7 EvaluationandSelectionofSellers12.3.8 Single-SourceProcurement

12.4 ProjectProcurementManagementMonitoringandControlling

12.4.1 ContractManagementandContractAdministration12.4.2 WorkPerformanceReporting12.4.3 ApprovedChangeRequests12.4.4 Buyer-ConductedPerformanceReview12.4.5 InspectionsandAudits12.4.6 ProgressPaymentSystem12.4.7 ClaimsAdministration12.4.8 RecordsManagementSystems12.4.9 ProjectandContractDocumentation12.4.10 ProjectManagementPlanUpdates

12.5 ProjectProcurementManagementClosing12.5.1 PunchList12.5.2 AdministrativeCloseout

13.PROJECTSTAKEHOLDERMANAGEMENT

13.1 StakeholderManagementinConstruction13.1.1 Community13.1.2 LaborUnions13.1.3 InsuranceProviders13.1.4 FinancialInstitutions13.1.5 RegulatoryAgencies

13.2 ProjectStakeholderManagementInitiating13.3 ProjectStakeholderManagementPlanning13.4 ProjectStakeholderManagementExecuting13.5 ProjectStakeholderManagementMonitoringandControlling

14.PROJECTHEALTH,SAFETY,SECURITY,ANDENVIRONMENTAL(HSSE)MANAGEMENT

14.1 ProjectHealth,Safety,Security,andEnvironmentManagementinConstruction14.1.1 Health14.1.2 Safety14.1.3 Security14.1.4 Environment

14.2 ProjectHSSEManagementPlanning14.2.1 ContractRequirements14.2.2 SafetyandEnvironmentalPolicy14.2.3 SafetyMetrics14.2.4 SiteNeighborhoodSafetyandEnvironmentalCharacteristicsand

Constraints

14.2.5 TrialsandSimulations14.2.6 CostofSafety(COS)andCostofEnvironment(COE)14.2.7 ProcessMapping14.2.8 Flowcharting14.2.9 ProjectSafetyandEnvironmentalRequirementsReview14.2.10 HSSEManagementPlan14.2.11 SafetyandEnvironmentalZoningandSignage14.2.12 SafetyandEnvironmentalTrainingandInductionRequirements14.2.13 TrafficManagementPlan14.2.14 EmergencyResponsePlan14.2.15 PermittoWorkManagementPlan14.2.16 WasteManagementPlan14.2.17 SafetyandEnvironmentalPrograms

14.3 ProjectHSSEManagementExecuting14.3.1 ProjectHSSEAssurance

14.3.1.1 SafetyandEnvironmentalAudits14.3.1.2 SafetyandEnvironmentalHazardRiskAnalyses14.3.1.3 SafetyandEnvironmentalAssuranceMeasurements

14.4 ProjectHSSEManagementMonitoringandControlling14.4.1 KeyPerformanceIndicators14.4.2 Heinrich'sAccidentTriangle14.4.3 AccidentInvestigation14.4.4 DefectRepairReview

15.PROJECTFINANCIALMANAGEMENT

15.1 ProjectFinancialManagementinConstruction15.2 ProjectFinancialManagementPlanning

15.2.1 SourcesofFundsforConstructionProjects15.2.2 Short-TermFinancialFluctuations15.2.3 EconomicEnvironment15.2.4 AnalyticalTechniques,FeasibilityStudy,andSensitivityAnalysis15.2.5 ConstructionProjectFinanceandCorporateFinance15.2.6 LegalEntity15.2.7 ContractRequirements15.2.8 FinancialImpactRiskFactors15.2.9 TaxPlanningasaFinancialFactor

15.3 ProjectFinancialManagementMonitoringandControl15.3.1 ProjectAccountingSystems15.3.2 FinancialInternalandExternalAudits

15.3.3 CashFlowAnalysis15.3.4 FinancialReports15.3.5 ProfessionalExpertise:ProjectMonitor,Lender'sEngineer,Investor's

Engineer,orTechnicalAdvisor15.3.6 Ex-PostEvaluations

ANNEXA1

APPENDIXX1

APPENDIXX2

APPENDIXX3

APPENDIXX4

REFERENCES

GLOSSARY

1INTRODUCTIONProject management and many of its practices originate from construction projects and

formed the foundation of the original 1987 document, The Project Management Body ofKnowledge. As such,many of the processes and practiceswithin theGuide to the ProjectManagement Body of Knowledge (PMBOK® Guide) [1]1 are directly applicable toconstructionprojects.Theawareness,growth,andrecognizedvalueofprojectmanagementtoallkindsofprojectsandindustrieshasledtoabroadeningofconceptsandaninclusivenessthatdoesnot, insomeaspects,fullycovercurrentprojectmanagementpracticesfoundintheworldwideconstructionindustry.Whilethechangesmaynotbesubstantial,therearesufficientdifferencesfromotherindustriesandapplicationstowarrantanextension.

ThisConstructionExtension describes the generally accepted principles for constructionprojects that are not common to all general project types. The general organization schemefollows the Knowledge Areas from the PMBOK® Guide with the exception of specificprocesses.While thePMBOK®Guideprovidesageneral foundation formanagingprojects,thisConstructionExtension addresses the specific practices found in construction projects.Project management professionals working in the construction industry (architecture,engineering, and construction [AEC]) and other closely related industries should use bothdocumentsconcurrentlyintheexecutionoftheirresponsibilities.

1.1ProjectsinConstructionConstruction projects should simultaneously address the geography, site conditions,

communities, physical environments, existing infrastructure, as well as a wide range ofstakeholder requirements. Adding to the complexity is the mix of team specialists andcontractors. Construction projects often result in a one-of-a-kind product rather than mass-produced products. While there is generally no opportunity to produce a prototype, aconstructionprojectmaysometimesbeperformedinphasesinordertoprovideanopportunityto reviewand refine theproject design and implementation strategy, aswell asvalidate theinvestmentintention.

Inherently,constructionprojectsoccurinanever-changing,complexenvironment,andoftenwithahighdegreeofrisk.Buildings,highways,residentialunits,healthcarefacilities,utilityinfrastructures,oilandgas,andotherindustrialfacilitiesmayappeartypical,buteachprojectpresentsitsownchallengesandrisks.Constructionprojectsarenotalwaysconstructedintheperforming organization's principal place of business, but may be constructed in remote,

sometimes hostile environments on the open seas, beneath the surface of the earth, andtoweringhighintothesky.

Construction projects often require the integration of engineering disciplines (civil,structural,electrical,mechanical,geotechnical,etc.)aswellasinteractionwithtechnologyandsophisticated equipment that demand unique construction techniques and methods. This cancontribute to unique subcontracting arrangements, special financing, risk insurance,compressed schedule timelines, sustainable infrastructure, complex logistics, adaptation tochanging governmental regulations, and internal/external constraints, all of which have thepotential for significant increases to project and capital costs. The construction industry isalmost entirely based on a competitive market environment for project cost, schedule, andperformancedelivery.Constructionprojectsarebecomingincreasinglylarger,morecomplex,and more globally competitive, each bearing the potential for an adversarial relationshipbetweenthebuyersandsellers.

Construction projects typically carry large penalties or damages for projects that arecompleted late. The risks inherent in construction projects, coupledwith these time-relateddamages,havegeneratedtheneedforseveraloftheKnowledgeAreastobeimplementedwithenhancedvisibilityasspecialtyservices.Thissubsetofconstructionmanagement,referredtoasprojectcontrols,includestechnicallyadvanceddisciplinesofplanningandscheduling,costmanagement, risk management, document controls, and forensic analysis. Strong projectcontrolsserviceshaveproventobeastrongcomponentinthesuccessofaproject.Generallyspeaking,constructionprojectsarecarriedoutinsideanoperationalfacility,constructedasanewfacility(a“greenfield”project),orconstructedinapreviouslydevelopedorabandonedsite(a“brownfield”project).Constructionprojectsproducedeliverablessuchas:

Facilitiesthatmakeorhousethemeanstomakeproducts,suchasmanufacturingorassemblycomplexes;Publicfacilities,suchasdams,highways,bridges,wastewaterandwatersupplysystems,airports,railways,entertainmentfacilities,museums,andcityparks;Servicefacilities,suchasmedicalcenters,educationalcampusesforschoolsandcolleges,seaports,andrailstations;High-riseofficetowers,urbandevelopments,andresidentialunits,communitiesandtheirassociatedinfrastructure,includingroads,sidewalks,andutilities;Specificinfrastructuresknownasutilitiesthatdeliverwater,electricity,fuel,andtelecommunications;andMegaprojectssuchasevent-basedconstructionfortheOlympicsorothersuperstructuresandmegacities.

In order to produce these deliverables, construction projects adhere to regulations andjurisdictional (local, global, or industry-specific) requirements where the product will beconstructed,forexample,civiclawsandbuildingcodes.Inaddition,theconstructionindustryisconcernedwithimprovingthesocial,economic,andenvironmentalfactorsofsustainability,reliability,andthewelfareoftheaffectedcommunities.Amultidisciplinaryteamoffinancial,

insurance, legal, design, safety and engineering specialists; construction teams of varioustrades;andanefficientsupplychainformaterialsandequipmentareneededinordertodelivertheproject.

A number of factors contribute to the complexity of the construction environment. Theseincludetechnologicaladvancementsandtheirimpactontheapplicationofprojectmanagement,changes to thebuildingenvironment through thedevelopmentofnewconstructionequipmentandmaterials,andthemagnitudeofstakeholderswithvaryingprojectexpectations(e.g.,publictaxpayers, regulatory agencies, governments, and environmental or community groups).Complexity may not be immediately apparent when a construction project begins. Thedevelopment team should carefully analyze the project to determine the complexities ofstakeholderimpactandpotentialprojectambiguity(e.g.,thepossibilityofemergentissuesorsituations due to feedback and characteristics of stakeholder interrelationships) beforeconfirmingcommitmentsforscope,time,quality,safety,andcost.Theanalysisshouldintegraterisk management to minimize impacts and improve opportunities for success. Otherwise, aproject may result in an uncertain scope of work, an inappropriate methodology forconstructionexecution,andanambiguousenvironment,andmayfailintimelycompletionandbudgetexpectation.

Navigatingtheworkflowsofaprojectteamwithinasingleorganizationischallenginginitsown right. Navigating workflows across multiple project stakeholders (e.g., owners,developers, designers, engineers, contractors, product vendors, and government agencies)expands the complexity of this challenge. In addition, different organizational systems;interfaces between components; large pieces of equipment in confined work spaces withmultiple work crews in close proximity; extensive detail and intricacies of elements; andefficient coordination, control, and monitoring make construction infinitely more complex.Strongevidencefromresearchintheconstructionindustryrevealsthatoneofthefactorsthatcauseconstructionprojectstofailstemsfromdecisionsmadeinthefrontendoftheprojectinthe engineering and design phase. Despite their importance, front-end management issues,responsibilities,roles,andactionsmaynottypicallygarnertherequiredattention.Publicandenvironmental pressures are changing this perspective as more attention is being sought inconstructability, sustainability, and reliability of not only the finished product but also themeansandmethodstogetthere.

1.2PurposeandAudiencefortheConstructionExtensionAccordingtothePMBOK®Guide,“Applicationareaextensionsarenecessarywhenthere

aregenerallyacceptedknowledgeandpracticesforacategoryofprojectsinoneapplicationareathatarenotgenerallyacceptedacrossthefullrangeofprojecttypesinmostapplicationareas.”Applicationareaextensionsreflect:

Uniqueorindefiniteaspectsoftheprojectenvironmentandcomplexityforwhichtheprojectmanagementteamshouldbeawareinordertomanagetheprojectefficientlyandeffectively;Commonknowledgeandpractices,which,iffollowed,willimprovetheefficiency

andeffectivenessoftheproject(e.g.,stakeholderanalysis,riskregisters,standardworkbreakdownstructures,orcostaggregationforbudgets);andFamiliaritywithindustry-specificknowledgedomainstoenabletheprojectmanagertomanagetheprojectsuccessfully.

This Construction Extension seeks to improve the efficiency and effectiveness of themanagement of construction projects and includes tools, techniques, procedures, processes,andlessonslearnedapplicabletotheconstructionindustry.

TheaudienceforthisConstructionExtensionincludes,butisnotlimitedto:

Constructionmanagersandprojectmanagers;Contractors;Subcontractors;Constructionspecialists,suchasestimators,schedulers,costengineers,projectcontrolanalysts,andquantitysurveyors;Architects,designers,andengineers;Regulatoryagenciesandgovernments;Nongovernmentorganizations(NGO)andprivateenterprises;Environmentalgroups;Communitygroups;Prospectivehomeowners;Riskmanagementspecialists;Geotechnicalandhazardousmaterialexperts;Realestatedevelopers;Constructionmaterialandequipmentvendorsandsuppliers,andlogisticsandtransportationspecialists;Constructionconsultantsandattorneys;Insurance,banking,andfinancialinstitutions;Constructionindustrytradesandprofessionals;andOtherstakeholdersintheconstructionprocess,fromlandacquisitionthroughdesign,construction,andoccupancy.

1.3ContextandStructureoftheConstructionExtensionSections1through3ofthisextensiondescribetheframeworkandspecificfeaturesthatare

uniquetoconstructionprojectsandtheirprojectlifecycles.Sections4through13correspondtothe10KnowledgeAreasoutlinedinthePMBOK®Guidewithadditionsormodificationsdescribingattributesspecifictotheconstructionindustryandemphasizingthoseactivitiesand

practicesthatareuniquelyimportantinconstruction.

TheConstructionExtension introduces twoadditionalKnowledgeAreas thatarespecificto construction projects: Project Health, Safety, Security, and Environmental (HSSE)Management(Section14)andProjectFinancialManagement(Section15).Inaddition,AnnexA1 onManaging Claims in Construction provides supplemental information to Section 12,ProjectProcurementManagement.

1.4RelationshipswithProject,Program,andPortfolioManagementandOtherOrganizationalConsiderationsforConstructionProjects

Anorganization'sroleandsizeoftendetermineswhetheritwillmanageitsprojectswithinportfolios or programs. Further, each organization will have different criteria to classifyprojects as small,medium, or large.Many large construction development projects (>US$1billion) are in fact programs and are sometimes referred to as megaprojects because ofsubstantial impacts on communities, the environment, and investment budgets. Constructionprojectsmaybeindependentfromotherprojectsundertakenbytheorganization.Anexamplewouldbeasmallconstructioncontractorthatbuildsaresidentialhouseforoneowner,whilesimultaneously building other houses or structures for other unrelated owners in variousgeographic locations. Some organizations deliver projects in alignment with programs orportfolios, for example, a public agency that executes portions of a major waste watertreatmentplantexpansiononeprojectatatimeovera5-or10-yeartimeperiod(seeFigure1-1). These situational environments are often restricted by the funding budget generated bytaxpayer revenueora specific taxassessment forpublic improvements.Further, tax revenuemay fund the budget for governmental departments or a special tax assessment for nutrientremovalorenergyrecoveryforacity'smunicipalservicesforitspopulationandresidents.

From an AEC perspective, entities may describe their portfolios as a specific division,basedonexpertise,disciplineofservice,andgeographicallocation.Thesearrangementscanvary widely and are often influenced by the different manner in which an organizationgenerates financialvalue, supportspublicwelfare,oroperates inageographical locationorindustrial segment environment. The balancing or prioritization of the projects within thesecriteria could be a major driver and most likely apply when organizational resources aresharedacrosstheorganizationalstructure.

Other organizational considerations involve the strategic planning and projectedorganizational growth of the performing organization. It is common for an organization toexplore growth opportunities by expanding its geographical reach or broadening itsconstructionordesignservices.Onetacticwouldbethebuy-outofsubsidiariesthatpossesssimilardisciplinesorhaveexperienceinacertainmarketorgeographicregion.Thisgrowthmayleadtheorganizationtorestructureitsresourcesandrevenuebucketstomoreaccuratelyreflectitsgrowthandrevenuesourcesandutilization.

The project management office (PMO) in the construction industry is mainly focused onmaintaining internal consistency in the management and execution of projects. Sometimesreferredtoasmaintainingbestpractices,thefollowingpracticessupplementthecommonPMOpracticesthatareespeciallyimportantinconstruction:

Historicalprojectrecordsforcostestimatingandbidding;Occupationalhealth,safety,security,andenvironmentalmanagement;Qualityassuranceandthird-partyinspectionforqualitycontrol;Contractadministration;Subcontractor,vendor,andsuppliermanagement;andChangeorderandclaimsmanagement.

Technology continues to influence the construction industry. With integrated systems forproject communications and real-time design and constructability, the construction industryrecognizestheneedtodevelopcontinualgrowthinthemarketplace,striveformanagementandexecutionefficiencies,controlandmanagebigprojects,anddevelopcompetitivestrategies.

1.5TheRoleoftheProjectManagerinConstructionandSpecialAreasofExpertise

Understandingandapplying theknowledge, skills, tools,and techniques thataregenerallyrecognizedasgoodpractices isnot sufficient for effectiveconstructionprojectmanagement.The roleof theprojectmanager in construction requires specialized expertise, asdescribedbelow.

1.5.1 TheRoleoftheProjectManagerinConstructionWhether this position resides with the contractor (seller) or owner (buyer), the project

managershouldhavetheknowledge,experience,andcompetencetounderstandanddefinetheinterrelationshipsamongtheprojectmanagementcomponentsoftheproject.Understandingtheevolvingcontractualandhumaninterdependenciesinexecuting,alongwithteambuildingandstakeholderengagement,aresignificantskillsthataddresstheexpectationsandneedsofeachstakeholder.Thisunderstandingenhancestheconstructionprojectmanager'sabilitytomonitorandnavigatetheissuesraisedbystakeholders.

Lack of planning, poor preconstruction preparation, poor communication and teamworkskills, and weak contract administration are leading causes of problems on a constructionproject.Whencoupledwiththespeedwithwhichinformationisdistributedanddecisionsaremade, a project environment of high complexity and demand is created. To support thisenvironment,theconstructionprojectmanagerisexpectedtobeadaptiveand,insomecases,possess a wide knowledge base in construction advancements, such as technology andalternative contracting delivery methods. These changes are shifting the industry to a moreholistic and comprehensive approach, which further expands the necessary skills forconstructionprojectmanagers.Theurgencyandtransparencyofinformationoftendemandedbytheownerisnowtheruleandnottheexception.Organizationsselectprojectmanagersbasedontheirexperiencewithsimilarprojects.Thisgivestheorganizationconfidenceintheprojectmanager'sunderstandingofconstructionoperationsandbestpractices,andgivesthesellertheabilitytogenerateexpectedrevenues.

Generalmanagementskillsprovidemuchofthefoundationforlearningprojectmanagementand are essential for the project manager, as well as the associated roles in construction.However, these skills go beyond internal organizational skills; they extend to otherconsiderations that influenceand interactwith theconstructionproject.TheseconsiderationsaredescribedwithintheKnowledgeAreasandarebasedonthefollowinginterpersonalskills:

Leading. The construction project manager and the project superintendent aregenerally expected to be the project leaders. The superintendent is frequentlyviewed as the site manager responsible for building the project. The projectmanagermostlyinterfaceswithexecutivemanagementandassumescommonprojectmanagementresponsibilities.Leadershipisnotlimitedtotheseindividualsandmaybedemonstratedbyothersatdifferenttimesthroughouttheproject.Communicating.Managing the communications and the corresponding documentsrequires a consistent effort and a communications plan that covers stakeholders’needsand their levelsofunderstanding.Forexample, theRequest for Information(RFI)seeksclarityanddirectionregardingconstructiondrawings,specifications,orconstructability issues. The flow of information will have different levels andcontentdependingontherecipientsandtheirprojectresponsibility,makingthisanalmostuniversaltoolwithinconstruction.Negotiating.Inconstruction,negotiatingoccursaroundmanyissuesandmostofteninvolves the exchange of money for the performance of services. Estimating thescopeandcostofmodifications to thecontractandnegotiating theproposedcostsarejustafewexamplesofwherethisexpertiseisneeded.

ProblemSolving.Thereisanendlessrangeofsituationswherethisskillisuseful.For example, in construction scheduling the proper sequencing of constructionactivities would also provide a safe and economically controlled series of siteoperations.Amorecomplexproblemmaybealabordisputebetweentradeunionswhere the distinction between causes and symptoms is integrated and both thecorrectiveandpreventiveactionneedresolutioninordertosolvetheproblem.

1.5.2 SpecialAreasofExpertiseIn construction, expertise is woven throughout the entire project. For example, design

developmentiscorrelatedwithvalueplanning,budgeting,scheduling,andrisk;procurementofcontractor services; job site labor disciplines; constructability techniques; and disputeresolutionthroughfinalcloseout.Otherknowledgegenerallyconsideredessentialincludestheuse of construction industry standards; health, safety, and environmental policies; laws andregulationsofthejurisdictionalauthorityandcontractadministration;andpublicrelations.

Unique socioeconomic influences are found in construction; therefore, it is important tomaintainasensitivityandresponsivenesstoenvironmentalandcommunityconcernsaswellasgovernment-mandatedregulationsandgovernment-sponsoredbusinessdevelopmentprograms.Understanding international and local rules and codes, customs, and cultural differences isparticularly important forproject stakeholders. Internationalcodebooks forconstructionareavailableandshouldbeincorporatedinorganizationsoperatingoutsideoftheirhomecountry.

1.6PublicStakeholdersTheconstructionindustryoftenworksunderthescrutinyofthepubliceyeandisessentially

spending revenue from taxpayers. A public project is subjected to open disclosure, publiccriticism, and interference from stakeholderswhomay ormay not be directly or indirectlyaffectedbytheproject.Theperceivedbusinessvalueofthegeneralpublicshouldbebalancedwiththepublicowner'sriskalongwiththeprojectdeliverablesandexpectedoutcomes.Thereare also rules and ordinances that govern public projects that, by law, are required to becompliant.Manypublicownersmanagethefunding,serveasthesponsorfortheproject,andtakeanactiveroleintheplanningandexecution.

1.7ExplanationfortheUseofandReferencetothePMBOK®GuideProcesses,Inputs,ToolsandTechniques,andOutputs

ThisConstruction Extension reflects the general structure of the PMBOK®Guide. Thesections and frameworks for the Knowledge Areas are similar, which enables cross-referencingbetweenthetwopublications.

Whereas thePMBOK®Guide describes the inputs, tools and techniques, and outputs ofeach project management process, the Construction Extension only describes the primaryKnowledgeAreaanditsalignmentwiththeProcessGroups.Thisalignmentisdescribedandillustrated in Section 3. The formatting and arrangement of theConstruction Extension is

basedonprinciplesthatgenerallydescribetheprojectmanagementapplicationrequirementstodelivertheconstructionproject.

1.8OtherStandardsThere are thousands of industry consensus standards and model codes propagated by

industryassociations,justastherearelocalandgovernmentalcodesthatmanagementshouldconsider for construction projects.Whether specified or not, many of these documents arerequired for compliance with building codes and contracts. Only applicable standards asdefined by enduser/regulatory authorities should be applied. The enduser (owner) shoulddefine and provide a list applicable standards based on the construction project. Projectmanagers in construction should ensure that each trade is sufficiently knowledgeable in itsspecifictradestandards.

Manystakeholders,includingthosewhoundertakeconstructionprojects,frequentlyspecifystandardsintheircontracts,becausethesystemsdevelopedtocomplywiththesestandardscanbeindependentlyverifiedandprovidestakeholderswithadditionalassurancethattheprojectdeliverablesarecompliant.Theprimaryvaluesofthestandardsarethattheycanbeusedforoptimizationofdesignsandusedforcontractualrequirements.Itiscommonforstakeholderstorequirethatthemanagementsystemsofperformingorganizationsalsobestandardcompliant.

ThisConstructionExtensiondoesnotattempttoaddressallfeaturesoftheentirerangeofstandards. Rather, it focuses on those that aremost commonly associated with constructionprojects. The International Organization for Standardization (ISO) has developed numerousstandards, including those for systems on riskmanagement and communicationmanagement.ISO standards also address environmental management, occupational health and safetymanagement,socialresponsibility,construction,andconstructionprocurement.TheReferencessectionprovidesadditionalsourcesofinformationforstandardsandresourcestosupplementthevariousKnowledgeAreas.

1ThenumbersinbracketsrefertothelistofreferencesattheendofthisConstructionExtension.

2THECONSTRUCTIONPROJECTENVIRONMENTConstructionprojectsvarywidelyintermsoftype,size,duration,andcost,whichleadsto

multiple alternatives for project life cycle modeling and project delivery methods. Theresultingprojectenvironmentisofparamountimportanceaswellasthecontextinwhichtheconstruction project is initiated, developed, and completed. Its effects (usually causes ofprojectcomplexity)shouldbecloselymonitored,controlledwheneverpossible,andaccountedfor as a risk source.Theproject is best treated as a subsystemwithin a larger system—theprojectenvironment.

Thissectiondescribesthemostcommonconstructionprojectlifecyclestrategicapproachesanddeliverymethodsandhowtheyaffectotheraspectsoftheproject.Inlightofthoseprojectdeliverymethods, this sectiondiscusses the relative influenceof stakeholderson theprojectanditsgovernance.

Projects and projectmanagement occur in an environment that is broader than that of theprojectitself.Inconstructionprojects,thisincludesthegeographicalenvironmentinwhichthefacility is to be installed or intervened. A distinction should be made between enterpriseenvironmental factors (EEFs), which are covered in the PMBOK® Guide and thisConstructionExtension,andenvironmentalmanagement,whichisapartoftheProjectHealth,Safety, Security, and Environmental (HSSE) Management Knowledge Area presented inSection14ofthisConstructionExtension.EEFs,suchasorganizationalcultureandstructure,politics (internalandcontextual to theorganization),andavailable resources,mayaffect theproject and its outcome. Environmental management manages the project's impact on thegeographical(naturalandsociocultural)environment.

2.1OrganizationalInfluencesonConstructionProjectManagement

Whileconstructionprojects fit thegeneric life cycle structuredescribed in thePMBOK®Guide from initiating to closing, the details of the construction project life cycle fromconceptualizationtoclosingmayvarywidelydependingonfactorssuchasthetypeoffacilitybeingbuilt, theprojectdeliverymethod,andthetypeofcontractbetweenowner(buyer)andcontractor (seller). These decisions are usually made by the executive management of theowner'sorganization,basedonthebalanceamongthestrategy,value,andriskoftheproject.

The rightchoicesarebasedon themanagement strength, required riskdistribution, financialcapability,andneedofdeliverables.Thesechoicesaffectawiderangeofconsiderations,suchas:

Projectscopeandphases;Number of stakeholders and interfaces—including cross-border interests—to bemanageddirectlybytheowner;Overallrisk,riskdistribution,andbalancingamongkeystakeholders;Timeandcostrangesforprojectimplementation;Alternativesforfunding,partnership,andcollaborationforproject implementationandlevelofbankability;Contractingstrategy,numberofcontracts,andalternativesforcontracttypes;andRegulatoryrequirementsassociatedwiththeprojectanditsproduct.

2.1.1 TypesofConstructionProjectsConstructionprojectsencompassavarietyoftypes,goals,andsolutions.Dependingonthe

projectgoal,manysolutionsmaybeavailable.Forexample,inthecaseofaprojecttoconnectcities that are separated by a body ofwater (a river, lake, or bay), the solutionmay be toestablishaferryboatline,whichrequiresconstructionofaportandparkingfacilitiesonbothsides,ortobuildabridge.Thesolutiondependsonlegalduediligence,financialassessment,and environmental impact assessments.The site locationmaybedifferent for each solution,andgeologicalandhydraulicaspectsmayplayamajor role in thedecision-makingprocess.Thenewinfrastructureisintendedtoaltertheflowoftrafficwithinbothcities.Thevalueofrealestate in thesurroundingareasmaybepositivelyornegatively impactedby theproject;therefore, each solution involves adifferent set of stakeholders, and their approaches to theprojectmaybeproactiveorresistant.

Constructionprojectscanbeclassifiedusingdifferentapproaches,forexample,bytypeoffacility(buildings,infrastructure,industrialprojects)orbyspecialty(oilandgas,realestate).

2.1.2 ProjectDeliveryMethodsThe project delivery method selected for a construction project is dependent upon the

project environment.The choice is influencedbymany factors, such as type and sizeof thefacility to be built, federal and statemandates, the core business of the owner, the level ofconstruction knowledge, and the time that can be dedicated to the project. For example, apropertyownerwhoisbuildingafamilyhousemay:

Useado-it-yourselfapproach;Hireacrewtoperformthework;Contractaconstructioncompany;Contractanarchitecttodirecttheconstructioncompany,withthearchitectactingas

aninspectororadvisor;orUseotherarrangements.

The project delivery method will have a direct impact on the contracting strategy. Thissectionbrieflycoverssomedeliverymethods.Section12onProjectProcurementManagementdiscussescontracttypes.

Someofthemostcommonprojectdeliverymethodsinclude:

Design-bid-build. The owner purchases the design of a facility, and uses thisproducttopurchasetheconstructionofthedesignedfacility.Thedesigncontractormaybedifferentfromtheconstructioncontractor.Design-build. The owner purchases the design and building of the facilitywith asingle contractoror contracted teambasedonconceptdesignandorperformancespecificationprovidedbytheowner.EPC(engineering,procurement,andconstruction).EPCisaprominentdeliverymethod in the construction industry. The engineering and construction contractorcarries out the detailed engineering design of the project, procures all requiredequipmentandmaterials,anddeliversafunctioningfacilityorassettotheclient(s).CompaniesthatdeliverEPCprojectsarecommonlyreferredtoasEPCcontractors.Self-performance.Theownerdoesnothireacontractor,butinsteadperformstheproject directly.This deliverymethod is commonly applied in smallmaintenanceprojects.IPD(integratedprojectdelivery).IPDcanbeconsideredamultipartycontractinwhich owner, architect, contractor, and eventually other key stakeholders sign asingleagreement.Inthisagreement,risksandcompensationsarenotassignedtoanindividualstakeholder,butrathertotheteamasawholeonthebasisoftheoverallprojectperformance.PPP (public-private partnership). Governments have been developing a set ofprojectdeliverymethodsgenerallyknownasPPPs.Within the realmofPPPs, thetypical project delivery methods include concessions, BOT (build, operate, andtransfer),andDBOM(design,build,operate,andmaintain).

2.1.3 OrganizationalStructuresThe PMBOK® Guide establishes the most common types of organizational structures,

ranging from functional to projectized organizations. In the context of construction projects,mostowners (includingownersupportorganizationssuchasprojectmanagementconsultantsorinsurers,forexample)workinmatrixedorcompositearrangements,withdesignatedprojectmanagementrolesandteamsforconstructionprojects.Teamsizesandteammembers’levelofexclusive dedication to the project are dependent on project size, complexity, and strategicimportance for the owner. Contractors usually work with strong matrixed or projectizedstructuresduetothenatureoftheconstructionbusiness,asdiscussedinthissection.

Bothownerandcontractororganizationsmayincludeprojectmanagementoffices(PMOs).WhiletheformertendtohavecontrollingordirectivePMOs,thelatterhavestrongmatrixedorfullyprojectizedorganizationalstructuresandmayusemultiplePMOsofthesupportivetypeasanaturalcomplementtotheirorganizationalstructures.Somecontractors’PMOsmayhaveapool of project managers and require compliance with some information and processstandards,whileothershavedirectivePMOsactingasknowledgerepositoriesfor theentireprojectportfolioof theconstructioncompany.SomePMOsforcapitalprojectsmaybemoredirective, as the owner's business is usually not directly related to the performance ofconstructionprojects,thusmakingitmoreeffectivetoconcentrateknowledgeandexpertiseforconstructionprojectmanagementinaspecificgroup(thedirectivePMO).Otherorganizations(particularly government andpublic entities) usually operate as functional organizations andtend to have a supportive PMO. Figure 2-1 illustrates the correlation between type oforganizationalstructureandtypeofPMOtohelpunderstandtheorganizationalenvironmentinwhichconstructionprojectsareperformed.

In the planning or bidding phase of a construction project, contractors will benefit fromstudying the owner's organization, both under normal operations and when undertaking aproject. Contractors should analyze the organization and design a project organizationalbreakdown structure that matches or resembles the owner's breakdown structure for theproject.Theowner'sstructureusuallyreflectsaprojectmanagementandexecutionstrategy,sobymatchingit,thecontractormayhaveaneasiertimealigningwiththeowner'sstrategy.Thismay improve communications because any role in a given structure should have amatchingpeer.

2.1.4 EnterpriseEnvironmentalFactorsEnterpriseenvironmentalfactors(EEFs)aredefinedanddiscussedinthePMBOK®Guide.

As in other projects, EEFs influence construction project outcomes, for example, economicaspects,financialaspects,andsitelocation.

2.1.4.1 EconomicFactorsConstruction projects involve the application of rawmaterials (e.g., cement, stone, clay,

aggregates,steelproducts,oil,andothers)andfinishedgoods(e.g.,pumps,pipes,doors,andelectricalcables).Theprojectexecutionteamcollaboratesandusesvariouscombinationsofthosematerialsandgoodsaccording todesigndrawingsandspecifications inorder tobuildthe facility.Mostof thecostofaconstructionproject is related tohumanresourceexpensesand the purchase of goods and materials. Costs of machinery (e.g., cranes, tunnel-boringmachines (TBMs), and other heavy equipment) may be significant depending on themachinery'suseontheproject.

The behavior of the local and national economy at the project location, as well as thebehavior of the global economy, may impact project costs. For example, a governmentaldecisiontofacilitatecreditforfamilyhousesmayleadtoanincreaseinrealestateprojects,causingpricesofcementandsandtorise.Anincreaseinoilpricesmaypositivelychangethebenefit-to-costratiosofoilandgasprojects,leadingtoanincreaseinthedemandforpipingand equipment, with a subsequent increase in prices. Labor unions tend to have greaterinfluence in regions experiencing a heated economy, which leads to negotiations that favorworkers.Ownersandcontractorsthatestimatetimeandcostforconstructionprojectsshouldbeawareoftheeconomicforecastinordertooffermoreaccurateestimates.

Inflationmayalsobeanissue,especiallyinfixed-pricecontracts.Omittinginflationinthecontract or addressing it by means of poorly established escalation formulas are commonsourcesforclaimsanddisputesandmayaffecttheproject's totalcost.RefertoSection7onProjectCostManagementfordetailsoninflationandescalation.Thesameappliesforchangesinforeignexchangerates.Thecontractshouldincludeprovisionsfortheseissues,whichoftenariseincontractscoveringexpensesinforeigncurrencies.

2.1.4.2 FinancialFactorsSome construction projects may also be called capital projects because, among other

characteristics,theyarelargescaleandrequiresignificantfundingandresourceinvestmentsbythe organization. Infrastructure projects such as roads, railways, and dams are commonexamplesofcapitalprojectsinthepublicsphere.Capitalprojectsarecommoninthecorporateworld as well, as firms will allocate large sums of resources in order to build upon ormaintain capital assets. Construction projects usually require some form of financing;therefore,amajoraspectofaconstructionprojectisitsbankabilityandthedegreetowhichtheproject(anditsowner)iseligibleforfundingfromfinancial institutions.Obtainingfinancingfor the project is usually amajormilestone and, inmost cases, a go/no-go factor. It affectsmanyoftheprojectdecisionsandoccursearlyintheprojectlifecycle.FinancialmanagementisdiscussedinSection15.

Financial institutions are important stakeholders, and the financing contract may limit

optionsorintroduceconstraintstotheproject.Forexample,somecountrieshavegovernment-owned banks that will finance the project for an amount equivalent to goods and servicespurchased from their country,whichmay limit the options for suppliers of those goods andservices.

Financingusuallyoccursinthecurrencyusedbythefinancialinstitution.Whentheprojectisundertaken in a foreign currency, the associated exchange rate should be taken intoconsiderationasariskfactor.

2.1.4.3 SiteLocationFactorsAmajor decision in a construction project is choosing where the facility will be built.

Factorsmayvarywiththeprojectlocation,evenwhenthelocationischangedbyafewmeters.Someexamplesofthosefactorsare:

Brownfield(constructinginanexistingfacility)orgreenfield(constructingatanewlocation);Geographical aspects such as site topography, soil conditions, presence of faultlines,amplitudeof100-yearwaves,weatherpatterns,andothers;Siteaccess, includinglogisticsforbringingoversizeand/oroverweightmachineryand equipment onto the site, as well as manpower and materials (especially in“movingsites”asinthecaseofpipelines,roads,etc.);Lawsandregulations,includinglocaltaxesandimportduties;Attitudeoflocalstakeholderstowardtheproject;andLaboravailabilityandtheirlevelofqualification.

Someoftheseconsiderationsmayhaveadirectimpactontheprojectcostormayrequireachange in the project location.The choice of the site is important because construction andenvironmentalpermitsmaybecostlyandtime-consuming,andenvironmentalissuesmayaffecttheproject'sbankabilityaswellasitsstartdate.

Contractors bidding for a construction project usually investigate the weather patterns,whichare included in thecontractasaprice-and time-relatedassumption.Weatherpatternsworse than the ones foreseen in the contract may lead to consequences and possible aconstructionclaim.

2.2ProjectStakeholdersandGovernanceAcontractor executes construction projects on behalf of an owner, but other stakeholders

may have active roles. While stakeholder management and project governance are projectresponsibilities for both the owner and contractor, many of the issues associated withconstructionprojects(particularlytheirfrontend)areaddressedbystakeholderswhoarenotpart of the project team, for example, business strategists, policymakers, financiers, civilservants in their regulatory role, planners, etc. Each stakeholder has views and performsactions(sometimesinoppositedirections)thatmaycriticallyshapetheproject.

2.2.1 ProjectStakeholdersThecharacteristicsof someconstructionprojectsmayaffect stakeholdermanagement.For

example,constructionprojects:

Occurinwell-definedgeographicallocations;Requiretransportingimportantquantitiesofpeople,equipment,andmaterialsinandoutofthatlocationonadailybasis;Producenoiseanddust;Alterthelocaleconomy;Createasituationwherepeoplefromvariouslocationsmoveintotheneighborhood;Mayalterthelocalnaturalenvironment;May require relocatingpeople from theneighborhood,with the economic, social,andculturalimpactsthatthisinvolves;andMayintroducesocialproblems,suchasviolenceandotherissues.

2.2.2 ProjectGovernanceProject governance is the framework, functions, and processes that guide project

management activities to create a unique product, service, or result to meet organizationalstrategic and operational goals. In construction, project governance establishes an overallintegratedviewofhowtheprojectshouldbeexecuted in lightof the relationshipamong theowner,thecontractor,andotherstakeholders.

When there is an association of two or more companies, such as a consortium or jointventure,theremaybetwolayersofgovernance:withintheassociationandwithintheproject.In any case, the entity responsible for the overall project should ensure that requirementselicitationisproperlyperformed.

When the contractor is a consortium, it is necessary to reach an agreement on how theprojectwillbemanagedduringthebiddingstage,suchastheroles,responsibilities,andlevelsofauthorityofeachparty.

When thepublicsector is involvedas theowner inaproject, suchas inPPPsandcross-jurisdictional interagency or intergovernmental agreements or contracts, project governanceassumes an even greater importance, because those projects are subject to judgment by thegeneralpublic.

The organizational process assets of the owner and the contractor are often combined inconstructionprojects.Theseprovidethestructurethroughwhichtheobjectivesoftheendeavorareset,aswellasthemeansforattainingthoseobjectivesandmonitoringperformance.

2.2.3 SocialResponsibilityandSustainabilitySocialresponsibilityandsustainabilityarebroadconceptsandareusuallyapproachedwith

policiesthatareestablishedatastrategiclevelwithintheorganization.Inconstructionprojectmanagement,sustainabilityistheabilitytouseanddisposeofnaturalelements,suchaswater,rawmaterials,andresources,inawaythatensuresfuturegenerationswillhaveaccesstothosesameelements.Socialresponsibilitymeanstakingresponsibilityfortheimpactoftheprojecton society and stakeholders, including aspects of diversity, opportunities forminorities, andsustainability.

Adopting lean construction principles and good practices is important for sustainability.Lean construction is an operational development in design and construction, which appliesleanmanufacturingprinciplesandpracticestothedesignandconstructionprocess.Designingandapplyingaproductionsystemonsitethatminimizeswasteofmaterials,time,andeffortinordertogeneratethemaximumvaluefortheprojectstakeholdersandthenaturalenvironmentis amajor consideration throughout the project life cycle. There are industry standards andcertifications for best practices in sustainability. Owners should strive to incorporatesustainabilityinthedesignconcept,withsupportfromotherstakeholdersasneeded.

Social responsibility and sustainability in construction require a clear strategy and aproactiveapproach.Communities and the society at largeexpect constructionprojects tobebeneficialandtobeexecutedwithassmallanenvironmentalfootprintaspossible.Inprojectsinvolving government institutions, society expects the project to be planned and executedwithinprinciplesofhonesty, fair competition, and responsibleusageofpublic resources. Insomecountriesseekingtheseprinciples,ithasbeenestablishedthatallinformationrelatingtopublicprocurementtendersarefreelyaccessibletothepublic.

2.3ProjectLifeCyclesMostconstructionprojectshavealifecycleconsistingofconception,design,construction,

commissioning, and closeout, although the industrypractice is tobreakdown someof thosephases.Themostcommontypeofconstructionprojectisonethatisperformedoutsideoftheowner's organization by a contractor company.Using an established set of obligations frombothsides,mostconstructionprojectlifecyclesarepredictiveorplan-driven,althoughsomeadaptiveapproaches,suchasagileandleanconstruction,maybeappliedincertaincases.

The project life cycle varies depending on the perspective taken. Figure 2-2 shows anexampleofdifferentperspectivesinaprojectwithapredictivelifecycle.Fromtheowner'spointofview, theproject lifecyclestartswhentheownerformallydecides toundertaketheproject; from the contractor's perspective, the life cycle startswhen theydecide to bid, andmovingfromthebidphasetothedesign,procurement,and/orconstructionphaseoccursifthecontractisawarded.

While construction projects are usually performed under a contract, many aspects areestablishedearlyintheprojectlifecyclewhenuncertaintyisgreatest,andadditionalchangesmaybedifficulttoimplementwhencontractualprovisionsareaffected.Contracts,whicharedraftedandagreeduponduringtheperiodofgreatestuncertainty,shouldincludeprovisionsforfair and appropriate distributions of risk associated with emergent issues. Division ofresponsibilitiesandownershipof risksareexamplesof suchaspects,andprojectcostsmayvarydependingontheamountofrisktransferredtothecontractor.

Bringing in contractors early in the project life cycle may prove time-effective, but thedegreeofdevelopmentofdesigninformationwillaffectcostandalternativesforcontracting.For example, a contractor bidding on a project in which the quantities of concrete, steelstructure,piping,tunnelingworks,andothersareuncertainorunavailablemayleadtoacost-plus-feecontractastheonlyalternativetobalancerisksandcost.Theconceptphaseandthepreparationforbringingcontractorsintotheprojectareessentialtoensurethatconstructabilityis factored in, which is essential to project success. This kind of situation, which is verycommonintheconstructionindustry,istherootfromwhichIPDisgrowing.Itisalsocommonfortheownertoengageanexperiencedconstructionmanagertoprovideintegratedscheduling,cost budgeting, and risk management. These specialty services help in developing theconstructioncontract,thecontractualterms,andtherisktransfermethodologies.

2.3.1 Front-EndLoadingInsomeindustrieswithmajorcapitalprojects,processesthathavepredictivelifecyclesare

used in order to reduce risk and maximize the probability of success. These time-boundprocesses are known as front-end loading (FEL) or pre-project planning, which refers toperformingsolidplanninganddesigninearlystages(thefrontendoftheproject).

TheFELprocessincludesdecisiongates(usuallythree)atwell-definedmilestones,whereago/no-godecision ismade.Theprocess isbasedon thepremise that theability to influencechangesindesignishigherinearlystages,whilethecostofchangesissignificantlylower.Itadds some time and cost in the initial project phases, but those additions are minor whencomparedwiththeimpactof timeandcostrequiredtomakechangeslater in theproject life

cycle. Overall project risk is reduced and owners have a greater amount of strategicinformation, leading to better project-related business decisions. The application of FELenables teammembers to thinkaboutallprojectsubsystemsandcomponents; tobeawareofvarious scenarios involving complexity, ambiguity, and risk; and to anticipate the processimplementationframework.Table2-1providesanoverviewoftheinformationthatisusuallydevelopedbeforeeachstagegate.

Table2-1.FELStageGateDeliverables

FEL1 FEL2 FEL3

PerformanceobjectivesAssessmentoftechnologyalternativesFeasibilitystudiesMilestonescheduleEstimatedcapitalexpense(±50%),operatingexpense(±100%)

ConceptualandbasicengineeringTechnicalassessmentsConceptualscheduleBudgetestimates(±30%)Identificationoflong-leaditems

Front-endengineeringdesign(FEED)(P&,datasheets,etc.)PreliminaryprocurementplanScopeofworkResource-loadedscheduleDefiniteestimate(±10%)

2.3.2 AdaptiveLifeCyclesAdaptive life cycles (also known as change-driven or agile methods) are intended to

facilitate change and require a high degree of ongoing stakeholder involvement. Adaptivemethodsaregenerallypreferredwhendealingwitharapidlychangingenvironment,whentherequirements and scopearedifficult todefine in advance, andwhen it is possible todefinesmallincrementalimprovementsthatwilldelivervaluetostakeholders.

Architecturalandengineeringdesignisiterativebynature.Forexample,anequipmentdatasheet is first issued in an as-designed or basis-of-design version, then in an as-purchasedversion;differencesbetweenthetwoversionsmayimpactdownstreamactivitiessuchasearlyprocurement,supplychainplanning,andfoundationdesign.Construction,ontheotherhand,isanactivityofadeterministicnature.Changesinconstructionprojectsaredirectlyaffectedbythe degree of overlap between project phases. Depending on the project's objectives andaspects,suchasambiguityandcomplexity,thetraditionalpredictivelifecyclemodelmaybereplaced by a more concurrent one where phases may overlap, giving way to iterative,incremental, and adaptive life cycles. Under iterative and incremental life cycles, detaileddesignandplanningmaybedoneiterativelythroughaseriesofrepeatedcyclesastheprojectprogresses.

3PROJECTMANAGEMENTINTHECONSTRUCTIONINDUSTRY:OVERVIEWANDADVANCEMENTSAsdefinedinthePMBOK®Guide,“projectmanagement is theapplicationofknowledge,

skills,tools,andtechniquestoprojectactivitiestomeettheprojectrequirements.”Thesesamecomponentsandprocessesapply inconstruction,withadditionalpractices todeliveranendproductthatisfunctionalandmeetsstakeholderneeds.ItusesthesameProcessGroupsandischaracterizedbysimilarinteractionsamongthegroupsandprocesses.Section3introducesthepractitioner to theKnowledgeAreas and ProcessGroups, and offers an overview of someadvances in technology andmanagement techniques thatmakeprojectmanagementunique intheconstructionenvironment.

3.1ProjectManagementKnowledgeAreas,ProcessGroups,andProcesses

Themostcommonlyappliedprojectmanagementmethodsandprocessesintheconstructionindustryusegenerallyrecognizedgoodpracticesthatareapplicabletomostprojectsmostofthetime.Itistheapplicationofthesepractices,however,thatmakesthisindustryunique.

The Knowledge Areas in the PMBOK®Guide are applicable to construction projects,albeitwithmodifications toaddress theuniqueattributes,practices, andapplicationsacrosstheProcessGroupsandKnowledgeAreas.ActionsderivedfromtheseKnowledgeAreasareappliedtotheconstructionprojectateachdistinctprojectphase.

This Construction Extension introduces two additional Knowledge Areas that areapplicabletoconstructionprojects:

ProjectHealth,Safety,Security,andEnvironmental(HSSE)Management;andProjectFinancialManagement.

Itisimportanttonotethattheprojectmanagerinconstructionisresponsibleforrecognizingnot only what the project owner needs, but also how common practices and specificconstructionapplications shouldbeapplied.Table3-1maps theProcessGroupsagainst theKnowledgeAreastoassistthepractitionerwiththisresponsibility.

Sections 3.1.1 to 3.1.12 introduce the Knowledge Areas as they relate to construction

projects.

3.1.1 ProjectIntegrationManagementProjectIntegrationManagementinconstructionisuniquelypositionedtoaddressfast-paced,

time-sensitive, and cost-sensitive projects. The project complexity, stakeholder challenges,and geographically and culturally imposed constraintswhen combinedwith project funding,intricateprocurementprocesses,andthemanagementofrisk,contributetotheimperativeneedof integrating these efforts. This Knowledge Area is most suited to incorporate a holisticapproach for the construction project. Construction project management's core function isintegration, that is, avoiding discrepancies between the various technical and supportdisciplines.ProjectIntegrationManagementbeginsat theproject'sfrontend,whenanownermakes a business decision to renovate an existing facility or build a new one.Many of theprocessesthatwouldtypicallybeginwhentheprojectischarterednowplayamuchlargerrolefor the owner. The procurement and engagement of performing organizations beginsimmediatelywith theowner'sneed toacquire thespecialexpertise toplan,develop,design,andconstructtheproject.

The planning and executing activities, along with processes of all Knowledge Areasincludingprojectfinancing,mayutilizedifferentdesignandconstructionlifecycles,whichaddcomplexity to thedeliveryofconstructionprojects.Contractclausesmaydescribeextensiveprogressandperformancereportingrequirementsthatenhancethelevelofdetailandaccuracyneededformonitoringandcontrollingduringprojectexecution.Changesareoftenconsideredinevitable in construction; thus, the focus on integrated change control is a significant

contractualprocess.Inadequatemanagementofthisactivityoftenleadstocontractdisputes.

3.1.2 ProjectScopeManagementProjectScopeManagement for construction is an interestingbut complex topicwhere the

prioritiesvarydependinguponwhichstakeholdersaremanagingtheproject.

Project ScopeManagement begins early in the project life cycle and evolves constantlyduring theearlystages.ThePlanningProcessGroupisofgreatsignificanceas theability toinfluencecostisgreatestintheearlystagesoftheproject,whichmakesearlyscopedefinitioncritical. Stakeholder requirements aswell as documents such as the contract, drawings, andspecificationsshouldbereviewedthoroughlyinscopeplanning.Ascopebaselineshouldbecreatedtoaidintrackingandmanagingchangesonaconstructionproject.

TheMonitoringandControllingProcessGroupplaysapivotalroleduetothepotentialforextensive changes on a construction project. These changes can quickly and easily derail aproject inwayssuchasscheduleslippageorcostoverruns.Scopevalidation isaneffectiveprocessintegratedwithscopecontrol.

3.1.3 ProjectScheduleManagementProject Schedule Management is critical for a successful project. Since construction is

heavilydependentontimerestrictionswithincontracts,thereisanaddedemphasisonfinishingthe project within the allotted time frame. Schedulemanagement plays a large role since atypicalconstructionprojectofteninvolvesalargenumberofindividualcontracts(sellers)thataresequencedandcoordinatedovertheprojectlifecycle.

Sincemost construction projects emphasize finishing the project on time, andmay instillmonetarydamagesforlatecompletion,ProjectScheduleManagementhasevolvedintoaverytechnicalschedulingprocess.Carefuldetailisdevelopedintotheprojectscheduletoidentifydelays,coupledwithanaccurateassessmentof thesourceof thedelay,so theresponsibilitycanbeassigned.

Project Schedule Management includes the processes required to manage the timelycompletion of the project. Planning is of key significance due to the inherent uncertaintiesinvolved in a construction project. In the Planning Process Group, activities are defined,activitysequencingisestablished,activitydurationandresourcesareestimated,andactivityweightsaredefined.Thelevelofdetailbecomesimportantduetothemultitudeofstakeholdersinvolved in a project.Manyprojects run the risk of not finishingon timedue to ineffectivescheduledevelopmentandcontrol.

The Monitoring and Controlling Process Group plays an important role in establishingmechanisms tosignaldeviations fromthebaselineand theneed forpreventiveorcorrectiveactionstogetbackonschedule.Integratedschedulesposeuniquechallenges,butarecriticalfor a successful project. Records, such as site diaries, are an important tool in schedulecontrol.

3.1.4 ProjectCostManagementProject CostManagement is of vital importance to a construction project's success as it

impactstheorganization'sprofitability.ProjectCostManagemententailsmanagingtheday-to-dayprojectcostsandposesuniquechallengesduetothemultitudeofstakeholders.EstimatingandbudgetingoccurwithinthePlanningProcessGroup.Estimatesareveryimportant,becausedecisionstoproceedwithaprojectarebasedoncostestimates.Costestimatesvarydependingon the size of construction projects, from a single-page high-level estimate to a detailedestimate containing thousands of line items. Risk analysis should be performed to developprojectcontingency.Mostdiagnosedrisksinconstructionhaveafinancialorcostimpact.

The Monitoring and Controlling Process Group plays a pivotal role in improving costpredictabilityandcontainingcosts.Theconstructionindustryisfragmentedandmanycomplexand ambitious megaprojects run the risk of project cost overruns due to ineffective costcontrol. Effective cost control techniques may differ on projects, depending on the projectcontracting strategy. A critical success factor (CSF) in cost control is having an integratedchange management plan. Actual costs provide a snapshot of the current expenditure of aproject,whileforecastingprovidesanindicationofwhethertheprojectisonbudgetornot.

3.1.5 ProjectQualityManagementProjectQualityManagement seeks to satisfy theowner'sneedsasoutlined in thecontract

requirementsandspecifications. It is integral to risk, safety,andenvironmentalmanagement,andappliestoallattributesofprojectmanagement.Forconstructionprojects,ProjectQualityManagementmanagesboththeprocessandtheproduct.ProjectQualityManagementiscriticaltoallprojects,withcriticalimpactstoconstructionprojects.

The Planning ProcessGroup reviews construction-specific documents that outline qualitystandards that are required to be met for the project to be successful, including contracts,constructiondocuments,andspecifications.

The Executing Process Group discusses quality compliance audits and quality technicalauditsthatmayrequirelicensedorcertifiedprofessionalstoachieveprojectrequirementsandobjectives.

The Monitoring and Controlling Process Group for construction projects may includeconformance reports to validate quality or require rework. Rework can have a significantimpact on a project's cost and schedule. The sooner nonconforming work is identified, thelesser the impact, and the sooner preventive actions can be established to eliminatenonconformance.Preventivemeasuresshouldbeestablishedintheplanningphasetoaddressknownriskspertainingtononconformance.

3.1.6 ProjectResourcesManagementConstructionprojectsutilizeavarietyofresources,suchashumanresources,machineryand

tools,equipmentandbulkmaterials,andothers.Factorssuchasprojectsitelocation,type,andsizeshouldbetakenintoaccountwhenmobilizing,utilizing,anddemobilizingresources.

ProjectResourcesManagement includes aspects such as acquiring, handling, storing, andmonitoringvalidity termsforparticulargoods,aswellasstaffing, teambuilding,andhoninginterpersonalskills.

Thehumanresourceswhomanageandexecuteprojectactivitiesmanipulateotherresourcesin order to build the product of the project.The volumeof resources required and the timerequired for theirmanipulationarekey factors forachieving timeandcostobjectives.Thus,productivity rates and resource consumption rates are planned and actively monitored andcontrolled.

When theproject reaches theendphase,all remainingresources—people,equipment,andmaterials—aredemobilized.Thedemobilizationphasecanbeexpensiveandtime-consuming.When not taken into account during the early stages of project time and cost planning,demobilization can turn a project result from success into failure from a business point ofview.

3.1.7 ProjectCommunicationsManagementThe efficiency and effectiveness of the construction process strongly depend on the

opportunity for, and quality of, communications. Section 10 on Project CommunicationsManagement highlights the complexity and diversity of communications in constructionenvironments;describesthedifferentlevelsofcommunicationsthatusuallyoperatewithintheconstruction environment; distinguishes the different types and channels of communications,communication networks, and media; identifies communication challenges and corporateconcerns; and provides additional industry-specific guidelines for managing constructionprojectcommunications.

FormingpartofthePlanningProcessGroupactivities,planningprojectcommunicationsisimportant to the successof theproject.Communicationplanning shouldbeperformed in theearliest project phases in design and construction projects. This section complements thePMBOK® Guide with additional considerations on the contract documents and projectdocumentation assessment. Some of the major considerations in communication planninginclude determining how requests for information (RFIs) should be handled and identifyingwhatinformationshouldbeconveyedtothestakeholdersandhow.

WhenperformingProjectCommunicationsManagement, theExecutingProcessGroupandMonitoringandControllingProcessGroupactivitieshelptoensuretheeffectiveandefficientgenerationanddistributionofinformation.

3.1.8 ProjectRiskManagementProjectRiskManagementinconstructiondealswiththepossibilityofpositiveandnegative

eventsarisingbetweenothersfromthedesignandconstructionprocess,theinterestsofvariousproject stakeholders,andprojectcontext.Whenperformingriskmanagement inconstruction,conditions may involve unique situations regarding stakeholders, international law, orinternational financial institutions (e.g., projects developed under collaborative construction

projectarrangements,public-privatepartnerships,orinternationalconstructionprojects).Riskresponse planning in construction projects is a more complex process because of theinvolvement of subcontractors. One major industry-specific characteristic of constructionprojects is the intensive use of insurance products as a principal risk transfer instrument tohandlesomeoftheliabilities.Allorganizations, individuals,orpartiesdirectlyorindirectlyinvolvedwiththeprojectshouldevaluateanddecideuponappropriateinsurancepoliciesfortheir circumstances. Insurance in construction projects discussed in this section provides aglobalviewofthemajorinsuranceproductsavailableinthemarket.

RiskmonitoringandcontrolaspartoftheMonitoringandControllingProcessGroupshouldbedevelopedproactivelyandcontinuallyduring theproject lifecycle,particularly for largeconstructionprojectsorthoseindynamicenvironments.

3.1.9 ProjectProcurementManagementConstruction projects are almost entirely based on the procurement of contractual

arrangements between the multitude of sellers and buyers, and include the procurement ofcapitalandprojectequipmentandmaterials.Theconstructionofanewhomemayonlyhaveoneortwocontractsinplace;however,onlargeprojectstheremaybethousandsofcontracts.Eitherway,ProjectProcurementManagementfocusesonplanningandexecutingwell-definedcontract agreements for specific scopes of work throughout the project life cycle. Care isneeded to ensure that the proper material and equipment is delivered in a timely fashion.Planningandexecutingfortheprocurementeffortinmanysituationswilloverlapwithprojectinitiating processes in order to assist the owner with the preliminary scope definition anddevelopment activities. The results from this effort lead to all other procurement forengineering, design services, and constructionwork, for the purpose ofmoving contractors,suppliers,andconsultantstowardachievingtheowner'sobjectives.

The basic foundation that all projects are unique is especially true in construction andextendstothevariousprojectdeliverymethodsandcontractarrangements.Specialattentionisneededduringplanningandexecutingof theprocurementcontracts toensure that thecorrectexpertise and skills for the design and construction of highly integrated components aresatisfied.Whencoupledwiththelargenumberofcontractorsrequiredtoperformthework,theexpertise for contract administrationandmanagementquicklybecome thecontrolling factorsforasuccessfulproject.Interpretingandunderstandinggeneralandspecialconditionswithincontracts,procurementdocuments,andassociatedreportingrequirementsareavitalcontractadministrationfunction.

IntheClosingProcessGroup,asconstructiondrawstoanend,deliverablesinallcontractsarevalidatedandall outstandingchange requests, progresspayments, andpotential disputesaresettled.

3.1.10 ProjectStakeholderManagementTheuniquecharacteristicsofconstructionprojectsinfluencethenumber,type,androlesof

project stakeholders. Section 2.2 provides an overview of the stakeholders that could be

involvedinaconstructionproject.Section13categorizesstakeholders,whichmaybeusefulwhenmanagingthem.ThosecategorizationsareapproachedintheInitiatingProcessGroup.

The Planning Process Group discusses the relationships among the stakeholders in aconstructionproject thataredevelopedwithregardtocontractualprovisionsorotherformaldocuments. Division of responsibilities is considered, and impacts on communications areincludedintheprojectcommunicationplan.

The Executing Process Group emphasizes the relationships between project stakeholdersand the importance of the interpersonal skills of project team members when managingstakeholderengagement.

TheMonitoring and Controlling Process Group addresses the temporary nature of somestakeholders’ representatives and the resulting need to monitor the process for theirreplacement.

3.1.11 ProjectHealth,Safety,Security,andEnvironmentalManagement(HSSE)

This section emphasizes health, safety, security, and environmental management forconstruction projects. Site security and controlled access are discussed for construction jobsites.Employeehealthandwellnessareintroducedforconstructionpersonnelasthesedirectlyaffectconstructionprojectriskandsafety.Trendsincludevirtualtechnologyandenvironmentalcertifications.

While HSSE is applicable to all industries, the unique hazards in construction projectsintensifytheneedforadditionalmeasures.ThePlanningProcessGroupincludesaproactiveviewofhealth, safety, andenvironmentalpolicycompliance. In addition to employeehealthand site security, a comprehensive health, safety, and environmental management plan isdeveloped to address specialized stakeholders, reporting requirements, documentation andrecordstoragerequirements,training,andadditionalgovernmentrequirements.

The Executing Process Group involves the systematic application of the health, safety,security, and environmental plans, while the Monitoring and Controlling Process Groupfocuses on employing a method of audits, analyses, and measurements to determine theeffectivenessoftheestablishedplansformeetingregulatoryandprojectrequirements.

3.1.12 ProjectFinancialManagementProject Financial Management covers important aspects and considerations with an

explanation of industry-specific documents, tools, and techniques to better understand andnavigatethefinancialdecisionsofconstructionprojects.

Projectmanagers in construction should have a basic knowledge of project financial andaccounting systems;beable to recordand summarizeproject financial transactions; analyze,verify,andreporttheresults;andprovidefinancialcashforecastsasneeded.

InthePlanningProcessGroup,financialplanningasaconstruction-specificactivitycovers

thealternativesthatmaybeusedforthefinancialplanningofaconstructionproject.Guidelinesare offered for identifying the financial requirements for construction projects, contractrequirements,riskallocation,andtaxplanning.

FinancialcontrolintheMonitoringandControllingProcessGroupisexecutedinthemosteffectivewaytoensureallitemsarewithinbudgetandalignedwiththefinancialcashforecast.Effective financial monitoring and control is achieved when project progress reports aredistributed regularly. Financial reports, financial internal and external audits, and projectaccountingsystemsareimportanttopicsdiscussedinthissection.

3.2AdvancesandSocietalInfluencesinConstructionProjectManagement

3.2.1 AdvancesThe construction industry is evolving due to advances in technology, management

techniques,andprojectdeliverymethods.Thefollowingadvancesintheconstructionindustryarenotnecessarilynew,buttheiruseisbecomingmoreprevalent.

3.2.1.1 TechnologyThemodernjobsiteoffersatechnologicallyconnectedcollaborativeworkenvironmentin

termsofcommunicationandinformationworkflow.Thefollowingareafewexamplesofnewtechnology:

Machinesequippedwithgeospatialpositioning,sensing,andmeasurementequipmentthatofferreal-timedataformachinediagnostics,real-timeworkprogressmonitoring,andprojectsitesecurity.Sensorsmonitorembankmentstopredictlandslides,measurestructuraldeformationinnuclearfacilities,andpredictfailureintunnelsandbridges.Centralizedweb-basedandcloud-basedconstructiondocumentmanagementsystemsmonitoralldataexchangesandensuretheeffectiveflowofinformation.Constructioncollaborationtechnologies(CCT)softwarethatenablesgeographicallydispersed,fragmented,multidisciplinary,andmultiorganizationalprojectteammemberstosharedatathroughcentralrepositories.Mobiletechnology(e.g.,data-capablemobile,portable,andconnectedhardware,andwirelessnetworks)andmobileappsfacilitateprojectteamconnectivitybyprovidingtwo-wayaccesstoreal-timeprojectinformation.3-Dprintingtechnologiesthatcreatefasterandmoreaccuratethree-dimensionalcomponentsforuseintheconstructionprocess.Through3-Dprintinglaborcostsandwastecanbereduced,anddangerous—notsuitableforhumanworkforce—environmentconstructioncanbeundertaken.Unmannedaerialvehicles(UAVs)ordronetechnologyequippedwithhigh-

definitionvideocamerasusedforlandsurveys,high-resolutiongeomorphologymaps,constructionsitemonitoring,progressreporting,andinspectionwhileofferingaccesstonewperspectives,hard-to-reachspots,andhigherelevations.Streamingdigitalvideothroughextranetorinternetfacilitatesreal-timeremoteaccessviewingofconstructionsites.Sophisticatedsoftwareanimation,suchaswalk-throughorfly-throughaerialdisplayanimation,allowsownersandclientstoviewtheproductvirtually.

3.2.1.2 BuildingInformationModeling(BIM)Buildinginformationmodeling(BIM)isaninformation-basedsystemofprocessesinvolving

the generation and management of digital representations of physical and functionalcharacteristicsofconstructionprojectscreatinglong-termvalueandenhancingthepossibilityof innovation. It improves how projects are designed and built, and benefitsmany areas ofconstruction. BIMmakes possible the distribution of information to all stakeholders for thedurationoftheprojectlifecycle.Itprovidesthemeanstoconstructcompletevirtualprototypesbeforeactualconstructiontakesplace.

3.2.1.3 ModernMethodsofConstructionPrefabrication and modularization are not new activities to construction professionals;

however, they arebecomingmoreprevalent askeydrivers to improve construction industryproductivitythroughgreaterefficiencies.Moderntechnologyisusedbyownerstoreducecostsandcompressschedulesbytransferringexpensiveonsitelabortooffsitefacilitiesandbuildingin-house under a controlled environment.Quality and safety are also a big consideration intransferringonsiteactivitiestooffsitelocations.

Modularization facilities typically follow manufacturing processes under controlledconditionswhereworkerproductivityisnotimpactedbyexternalconditionssuchasweather,quality is better controlled, and workplace safety is better managed as compared to aconstructionsite.

3.2.1.4 EmergingManagementTechniques:AlternativeProjectDeliveryMethods,IntegratedProjectDelivery(IPD),Lean,andAgile

The increasing complexities of constructionwork and constructionmanagementprocesseshave resulted in the development of new management techniques with the aim to improveprojectperformance.

Integratedprojectdelivery (IPD) is acollaborativeapproach fordesignandconstruction.The vision of IPD is a project team that is not partitioned by economic self-interest orcontractual silos of responsibility, but rather is a collection of key stakeholders—primarilyowner, architect, and contractor—with a mutual responsibility to help one another meet anowner's goals of maximizing efficiency through all project phases. Most of the fragmentedpractices and adversarial relationships common in the industrymaybe appreciably reducedthroughtheuseofIPD.IPDisquicklymovingtowardthepreferredpracticeforprojectcost

efficiencyandisfurtherenhancedbytheincorporationofBIM.

Alternative project delivery methods are becoming more prevalent in the constructionindustryasaresponsetotheneedtoimproveefficiencyandprofitability,andmanyofthemuseanIPDapproach.Afewexamplesare:

Design-build,Public-privatepartnerships(PPPs),andMultinationaljointventures.

Both lean and agile management approaches are beginning to create cost and timeefficiencieswith tools andmaterials, constructionoperation sequencing, and safer job sites.The goals of lean construction are to minimize waste on site, keep work flowing so thatconstruction crews are always productive, reduce inventory of materials and fixtures, andreducecostsbyadaptive,efficientprocesses.Agilemanagementapproacheswhenappliedtoconstructionprojectsofferadditionalabilitiestodealwithchange.

3.2.2 SocietalInfluencesinConstructionTheconstructionindustryisdealingwithmanychallengesthatmayhavelong-termimpacts

onthewell-beingoftheindustry.Thefollowingareafewexamples.

3.2.2.1 SustainabilityandSocialResponsibilityThe society at large is becoming increasingly aware of, and active in, matters affecting

climate change, environmental preservation, and respect for diversity.With regard toglobalclimate,urbanandruralpopulations,andimpactsonnaturalresources,developingnewprojectinnovations and infrastructure solutions is a challenge for the construction industry.Constructionprojectsareaffectedbypoliciesthatdriveregulationsforcleanair,cleanoceans,and clean habitats but also drive funding, resource exporting, technology sharing, andeconomicsfordevelopingcountries.

3.2.2.2 SkilledHumanResourcesAn evolving concern in the construction industry is the loss of skilled resources in the

construction trades. New technologies in the industry require specialized training for theskilledworkerintheuseofequipmentandtoolsandtheassemblyofmaterials,aswellasfortheconstructionmanagement team in theplanningandmonitoringof theproject.TheProjectResourcesManagementKnowledgeAreaisacrucialareaofmanagementfortheconstructionpractitioner. The practitioner's ability to acquire resources early and retain them duringconstructionreducestheburdenandriskofnotmeetingtheprojectobjectives.

3.2.2.3 GlobalandRegionalRecessions(GlobalEconomies)Construction organizations and consequently construction practitioners have to work and

conduct a successful business through very lean economic times.Construction organizationsmay be faced with difficult decisions ranging from downsizing, selling assets, pursuing

projectsinunfamiliarcommunities,orevenchangingtheirserviceportfolioinsearchofnewmarkets in which to conduct business. Coupled with these considerations are the industrysectorsthatalsogrow,shrink,orslowlymorphtoreflectthetrendsintheglobalenvironments.

3.2.2.4 GlobalMarketsandFutureProjectsTheprevalenceofglobaltradeandemergingeconomies,technologies,innovations,andnew

discoveries are taking the construction industry to global locations and places previouslyunknowntotheconstructionpractitioner.AprojectlikethePanamaCanalexpansionisnotonlybig, but it is expected to create and influence the entire region.Regional effects due to thechanging climate and environmental conditions (e.g.,water and other natural resources) areshiftingdesignandengineeringinnovationstoattainprojectrequirementsseldomcontemplatedinrecentyears.Thecapabilitytoperformontheseprojectsisachallengetotheorganizationsnotonlyinhavingtheproperhumanresourcesforthetechnicalaspectsbutalsothelogistical,financial,ethical,andmanagementcapabilities.

3.2.2.5 EthicsThereisagrowingfocusoncompliancewithprofessionalcodesofethicsonconstruction

projects, in particularwith theCodeofEthics andProfessionalConduct [2],which is theresponsibilityoftheprojectmanagementprofessionalandpractitioner.Organizationalenablersthatcancontributetothiscomplianceareleadership,policy,andstrategy;internalprocesses;andtheemployeesoftheconstructionorganization.

Thepromotionofethics, integrity,and transparency inconstructionprojects (especially inpublic projects) through the development of an integrity management plan has been aprerequisiteinsomecountriesasapartoftheiranticorruptionstrategy.

4PROJECTINTEGRATIONMANAGEMENTThe Project Integration Management section of the PMBOK® Guide is applicable to

construction projects. This section of the Construction Extension presents additionalconsiderations for initiating, planning, executing, monitoring and controlling, and closingconstruction projects. It includes the processes and activities needed to identify, define,combine, unify, coordinate, and make compatible the various processes and activities ofprojectmanagementwithintheProjectManagementProcessGroups.

The owner, contractors, designers, engineers, and service providers associated with aconstruction project engage at different stages along the project life cycle. Integrationthroughout the project life cycle is of paramount importance, especiallywhen the project isfirst explored and the front-endwork of all otherKnowledgeAreas begins.At the conceptphase, the owner should assess a number of critical and timely components in order todeterminewhether a project becomes a reality and to create a framework for a preliminaryscopestatement.Afewbriefexamplesofassessmentquestionsinclude:

Whatisthepurposeandbusinessneedsatisfiedbytheconstructionproject?Howwilltheprojectbefinancedandwherewillitbeconstructed?Whatexpertise,ifany,cantheowner'sorganizationprovide?Whatlevelofdesignandengineeringisneeded,andwhoisgoingtobuildtheproject?Howwillconstructionofthenewprojectimpactongoingoperationsandfacilitystaff?Whatformofprojectdeliverywillbestmeettheconstraintsandrequirements?

4.1ProjectIntegrationManagementinConstructionIntheconstructionindustry,notonlydotheprocessesinteract,butthemanagementofthese

processesisgreatlyexpandedtoaddressmultipleperformingorganizationsthatareoperatingsimultaneously. There may be a need to work across borders, adhere to the jurisdictionalregulationsoflocalandinternationalgovernments,complywithenvironmentalregulations,andconform to cultural and local population constraints. The industry has unique standards anddisciplines to integrate, such as project and public safety, security, occupational health, andcompliancewithenvironmentalregulations.

The construction industry comprises many diverse and dynamic organizations, each withtechnical challenges that converge in order to satisfy the needs of the businesses andstakeholders involved.Thegrowthof people, industries, cities, countries, andbusinesses ismaterializedinaconstructionproject.Theseprojectsareinherentlyaffectedbysiteconditions,contractexecutionexpectations,technology,marketconditions,equipmentandhumanresourceavailability,economicenvironmentofthecountry,andmanyotherexternalfactors.

Construction is complex because uncertainty is present in almost all project activities.Construction uncertainty yields risks which are out of the control of the project, such asweather, geological conditions, and risks that greatly influence the final outcome (e.g.,regulatory demands and sometimes excessive government oversight). The project managershouldestablishstrategiestominimizethesepotentialimpactsandintegrateplanstoproperlyaddress them. The integrative nature of construction projects can be visualized by theconstructionofanewroadwaybetween twopointsonamap.Theroadwaywilloftencrossexisting infrastructure, pass through thenatural environment, disrupt exiting traffic flow, andmayrequiretheacquisitionofpropertyandright-of-ways,allofwhichshouldbemanagedinanintegratedmanner.

Defining the construction scope beyond the finished product is expanded to address theprojectlocation,whichmaybeataremotelocationwithresourcesunfamiliartotheowner.Itcan further be influenced by cultural, environmental, regulatory, financial, and economicsituations—allofwhichaffectthescope,cost,andtimeofperformanceoftheproject.Asworkprogresses,numerousspecializedprovidersofequipmentandservicesareengagedatdifferenttimeframes,eachwithitsownprojectlifecycleandeachofwhichshouldbeintegratedintotheprojectplan.

Allaspectsoftheconstructionscopeandsubsequentconstructionactivitiescanimpactthemove-in date and final cost to the owner. Maintaining the triple constraints, balancingstakeholderinterests,andvalidatingdecisionsinsidecontractualagreementsatapacethatwillnot cause further delays or lead to higher costs become important responsibilities of theconstructionprojectmanager.Effectivenessandefficiencywithintheprojectplanisdependentonintegrationmanagement.

Theneedforincreasedcommunicationandtransparency,coupledwithtimelyandefficientdecision making, makes collaboration a critical technique when countering the effects ofprojectcomplexity.Whenabsent, theseeffectscannegatively impact theproject'scost, time,and scope elements and adversely impact the integration of the project plan components.Moreover,akeyroleoftheprojectmanageristhatofaprojectintegrator.Thisroletakesonadded significance where the contracts form a framework of complexity for integrationinvolving interdependent design requirements; activity coordination; construction sequencingofmaterials,equipment,andspecialtyresources;andregulatorycompliance.Asthesizeoftheproject increases,sodoesthecomplexity,makingtheneedforeffectiveandefficientProjectIntegrationManagementacriticalKnowledgeAreaforconstruction.

Figure4-1givesanexampleof thephasesofaconstructionprojectacross itsproject lifecycle.Thesehigh-levelphasesconsistofspecificactivitiesanddeliverablesthatmakeupthe

integratedprojectplan.

4.2ProjectIntegrationManagementInitiatingAprojectcharterorsimilarauthorizationdocumentestablishestheprojectfortheowner.In

construction,thecontracttypicallyauthorizestheprojectforthecontractorsandotherserviceproviders to theowner.Theproject'sbusiness casecomponents andboundariesprovide theinputs that define the means and methods for construction development. From the owner,contractor,ordesignprofessionalperspective,eachentitybecomesinvolvedintheprojectatdifferentstagesoftheproject.Thedesignerandcontractorshouldmakethemselvesawareofthe owner's capabilities for management of the project, particularly the project front-endactivities.

Projectinitiationforperformingorganizationsoftenbeginswitharesponsetoarequestforproposals(RFP),publicnoticeinvitations,orwordofmouthawareness,inhopesofobtainingnewwork as the project developmentmoves forward.Gathering and analyzing assumptionsandrestrictionsisthefirststepindevelopingtheprojectmanagementplan.Formostphasesofageneralcontractor'sprojectlifecycle,subcontractorswillneedtobeintegrated.

Architectural, engineering, and construction (AEC) projects are exposed to physical andenvironmentalrisksinfargreaternumbersthanothertypesofprojects.Eachconstructionsiteshouldhavespecialplanstoaddressenvironmentalconsequences,personnelandpublicsafety,

and security considerations.Green initiativesmay be a part of a regulatory or even designrequirementforobtainingacertain levelofenergyusageorfor thedisposalofconstruction-generatedwasteandrecyclables.Otheritemsincludetheftprevention,damageandemergencyresponsecontrolforhazardousmaterials,secureworkzonesforairports,infectioncontrolinhealthcaresettings,accesstoworkincorrectionalinstitutions,andpotentialimpacttoexistingstaffinbusinesses.

The charter or a business case may include a full cost-benefit analysis necessary foreffectiveownerresourceandfinancialplanning.Constructionbusinesscasecomponents,allofwhichcouldhaveaninfluenceontheowner'sprojectfinancialplanning,couldinclude:

Projectsitecharacteristics;Existingassetconditions;Designparameters;Outlineoftheengineeringrequirements;Technicaldefinitions;Designandconstructiontimelines;Referencedapplicablecodesandstandards;Inspection/testingrequirements;Sitesafety,security,andenvironmental-relatedrequirements;andExistingorotherpossiblegovernmentalregulations.

Inadditiontothebusinesscasecomponents,certaininputshaveanoverridinginfluenceonhow the projectwill be planned. These inputs, as further described below, include projectdevelopment with the stakeholders, the geographical location, and the engagement of theprojectserviceproviders.

4.2.1 ProjectStakeholdersThe stakeholder register is a significant input to earlydevelopment andproject initiation.

Forexample,anownerthatintendstobuildanewhouseorfacilityonitspropertysetsasidefunds to finance the construction. If the owner fails to explore the local regulatoryrequirements, the property ownermaybe responsible for street development, environmentalregulations for site parking surfaces, sidewalks, and water drainage. These elements willresultinprojectswithcostsbeyondthefinancialcapabilityoftheowner,leadingtoanearlyprojecttermination.Earlyandregularcommunicationwithstakeholdersaboutpotentialthreatsiscriticaliftheownerisnotexperiencedinconstructionprojects.

Projects may involve active stakeholders and stakeholders that may be affected by theproject.Theneed tomakeappropriatechoices,alongwithotherdecisions involvingprojecttrade-offs,competingprojectobjectives,stakeholderexpectations,andprojectconstraintswillhaveasignificanteffecton theprojectapproach.Anowner that lackssufficientconstructionknowledgeandexperienceshouldacquiredesignandconstructionmanagementservicesasone

ofitsfirstprocurementfunctionstoinitiatefront-enddevelopment.

The scale of the project often dictates themanner in which projects are developed. Forexample, public- or government-funded projects often involve complex solicitation andbidding procedures along with jurisdictional regulations that are incorporated into theconstruction requirements.Entities relyonexpert judgmentwhendecidingwhetherornot topursue a particular project.Most often itwill be the owner as the stakeholder that sets theproject culture.Having anowner that iswell informed throughout theprojectwill chart theprojectonasuccessfulcourse.

For an owner, facilitation techniques can be used to obtain input from the impactedstakeholderstomitigatepotentialunknownrisks.Thesestakeholderscanincludecommunities,localgovernments,tribalconcerns,andadjoiningpropertyownersorbusinesses.Acharteringtechnique, not to be confusedwith the project charter, helps formulate an agreement amongvarious community and governmental stakeholders. The outcomes can be represented byintergovernmental agreements, community or tribalmemorandums of understanding, or otherformsofprojectalignmentbetweenstakeholders.

Aneffectiveprojectchartershouldidentifyprojectcomplexitiesintermsofprojectsystembehavior, interdependencies, and potential ambiguity regarding stakeholder needs andsubsequentdesignrequirements.

4.2.2. EnterpriseEnvironmentalFactorConsiderationsAn organization not bound by geographical borders can be uniquely constrained by the

regulations and jurisdictional laws that govern the location—the enterprise environmentalfactors. Performing organizations are required to comply with the laws and the effects ofgovernmentalregulationsontheproject,regardlessoftheproject'slocation.Afewexamplesoftheseconsiderationsinclude:

Governmentorindustrystandards,Infrastructurerequirements,Naturalresourcesandprotectedhabitats,Personneladministration,andLaboragreementsandjurisdictionalrequirementsforconstructiontrades.

In addition, considerations should be given to extreme climatic conditions that can limitworkinghours,limittimespentinhazardousconditions,andeffectlaborproductivity.

4.2.3 ProjectServiceProviderEngagementAprojectcharteringprocess,regardlessof itsphysicaloutput,canprovideabasisfor the

managerialactivitiesrequiredtoaddresscomplexityintermsofprojectinterdependenciesandstakeholderneedsfordesignrequirements.Thesolicitationprocessresultingfromprocurementactivitiesmay triggerproject initiation.A successfulbidbya contractor and the subsequentcontractmaytakemanydifferentformsandserveastheprimaryinputforconstructionasthe

projectrequirementsareincorporatedanddefined.Forthedesignprofessional,dependingontheexpertiserequired,afee-for-servicearrangementmaybeused.

Contractdocumentsincludethedeliverablesandconditionsspecifyinghowtheprojectwillbeadministered, applicable referencedocuments (e.g., standards for codes,procedures, andprocesses), and technical specifications outlining the material, equipment, and installationprocesses.Thesedocumentssetforthsubsequentplanningforprocurements,whichcanbeassimple as a house remodel or a complex infrastructure requiring regulated solicitation,selection,andadministeringoftheprojectcontract.

4.3ProjectIntegrationManagementPlanningInitial project planning may consist of various applications and techniques based on the

performingorganization'sprojectrole,responsibility,andexperience.Theprojectmanagementteam applies this knowledge and skill, alongwith the necessary processes, to integrate thesubsidiaryplansfromallKnowledgeAreasthatfittheprojectenvironment,levelofdetail,andimplementationrigorrequired.Theiterativenatureofthiseffortandthetransformationoftheprojectinformationbyeachoftheprojectentitiesestablishthestructuredapproachforprojectdelivery.

4.3.1 PlanningInputsSpecialattentionshouldbepaid to incorporating themanyproject-specificplansrequired

by construction projects, including safety, quality, security, environmental, and resourceacquisition plans. Most service providers have specific organizational procedures thatprescribe theplanning function, alongwithpolicies and/or constructionguides that assist indevelopingtheprojectplan.Insomeinstances,serviceprovidersmayhavedistinctproductionplansforvariousconstructionactivities.

Planning for construction projects is carried out under the terms of a written contractbetweentheowneranditsserviceproviders(e.g.,contractors,subcontractors,ordesignandengineeringprofessionals).ForthepurposeofProjectIntegrationManagement,thecontractisconsideredtheprimarydocumentthatauthorizesthework.Thecontractoutlinesprogressandcompletionmilestones,contractprice,reportingrequirements,andinspectionandcompliancerequirements,allofwhichareintegratedforprojectsuccess.Contractorsthatarenotresidentsofthehostcountrymaywanttoconsiderthefollowingwhendevelopingaprojectmanagementplan:

Exportcontrolsonmaterials(importandexportregulationsofthehostcountryandexportingcountry);Security(e.g.,worksitesecurityrequirements,residenciesforworkersoffsite,andtransportationroutesformaterials);Culturalnorms(contractoremployeeswhoarenotresidentsofthehostcountrymayneed training on cultural values and customs, which may be complemented withethics,integrity,andtransparencytraining);and

Constructionskillstraining(considerationsforlaborcrafttrainingorotherspecialskillsthatprescribethein-countrylaborutilizationaswellascontractoremployeesfromothercountries).

4.3.2 ValueEngineeringValue engineering (VE) is particularly useful in developing the project plan and scope.

Value engineering analyzes the functions of systems, equipment, facilities, services, andsupplies for the purpose of achieving essential functions at the lowest life cycle costwhilemaintainingconsistency,quality,reliability,andsafety.WhileVEistypicallyusedneardesigncompletion,itisgoodpracticetoapplyvalueplanning(VP)concepts,methods,andanalysesearlyintheprocessandtransitionintoVEduringthedesigncycletoensurebestvaluefortheowner.WhileformalVEisoftenconductedinaccordancewithestablishedindustrystandards,informalVEcouldidentifybeneficialprojectimprovements.BothformalandinformalVEmayinfluencethefinalcostandothersuccessfactorsoftheproject.

From a contractor's perspective, VE is useful during bidding to explore potentialcompetitive advantages in constructability. The contractor's means and methods satisfy thedesign and schedule requirements outlined by the architects and engineers. Alternativesdeveloped should be monitored in light of the contract and stakeholder engagement forincorporation or rejection throughout the project. For the design professional, a similarVPprocess is the charretteworkshop. This practice occurs at the project conception stage andusesworkingsessionstoachievetheoptimalfacilitydesignthatmeetsthefunctionalneedsofthefacilityowneranditsusers.

4.3.3 IntermittentContractClosuresandCommissioningVarious service providersmay complete theirwork performanceweeks,months, or even

years before the final project completion. As part of administrative closure, the CloseProcurements process should be done intermittently with performing organizations. Theconstructionindustryadoptedcommissioning,whichinvolvesmorethanjustthephysicalandadministrative procedures for closing out and the start-up of the completed facility.Commissioning involves reviewing plans and determining whether the facility works asplanned. It verifies new construction and renovations of the subsystems for mechanical(HVAC), plumbing, electrical, fire/life safety, building envelopes, interior systems,cogeneration, utility plants, sustainable systems, lighting,wastewater, controls, and buildingsecuritytoensuretheowner'sprojectrequirementsaremet.

Asacomponentoftheprojectplan,acommissioningplanhelpstoensureworkperformanceconstraints for construction processes for quality, performance, and longevity of the facilitymeetthedesignintent.Oncertainprojects,beneficialoccupancybyanownermayincludetheinitialfacilitystart-upandmanagementbyaprofessionalfirmthatwilloperatethenewfacilitypriortofinalacceptancebytheowner.

4.3.4 ProjectStrategy

From the owners’ perspective, project strategy defines how they intend to acquire theproject through the various project delivery methods. From the contractors’ perspective,projectstrategydefineshowtheywillexecutetheproject,eitherbyusingtheirownworkforceorbyprocuringsubcontractorsforallassociatedconstructionworks.Aprojectstrategyisanimportantoutputasitformsthebasisoftheoverallgoalfordeliveringtheproject.Dependingonthesizeoftheprojectorperformingorganization,theprojectstrategymaynotbeaphysicaldocument,butratheranoutlineof tacticsonhowtheserviceprovider intendstogenerateitsrevenue. Similar to an organizational initiative or objective, aligningwith this objective isvital for the performing organization and its eventual profitability. It is dictated by allpreceding project planning efforts and outcomes. Project tactics may include, but are notlimitedto,thefollowing:

Methodsforprocuringmaterials,equipment,andsubcontractorservices;Methodsforprojectstakeholdermanagementtoadministercontractdocumentsandpricingstrategiesforintegratedchangemanagement;Contractdocumentinterpretationandeffectivecostmanagementforreceivingownerpaymentsandpayingforprocurements;Approachtowardriskallocationandprojectuncertaintywithinthescopeofwork,which may depend on whether or not exceptions to the clauses of the contractdocumentscanbemadeduringthebiddingprocess;Reactions tochanges in influencingfactors thatareconsideredminor issuesat thestartoftheprojectbutbecomemoreprevalentastheprojectadvances;Provisionsforhumanandotherresources,thatis,externalorinternalandthetimingthereofinordertosatisfythescheduleperformance;andApproachtowardprojectcommunicationswithsubcontractorsandtheowner.

Theprojectstrategyalso includes theapproaches theperformingorganizationwill take tomanageandexecutetheotherKnowledgeAreas,suchasProjectQualityManagement;ProjectHealth, Safety, Security, and Environmental Management; Project Risk Management; andProject ResourceManagement. The owner and its architectural and engineering (A/E) teamshould address the sustainabilityof the finishedproduct at thebeginningof theproject.Thestrategy should be carefullymonitored to ensure it remains currentwith thework practicesadoptedandthatitremainsapplicabletotheprevailingprojectconditionswhichcouldchangeas a project progresses. Effective communications, flexibility, and critical thinking areimportantfortheconstructionprojectmanagerwhenimplementingastrategyinthepresenceofcomplexityandchangingconditions.

Some organizations practice a form of variation management; that is, strategies aredevelopedbasedondeviationsorvariationsfromthecontractanddesignrequirementsforthepurposeofleveragingrevenueorcostsavings.Practicesofthisnatureoftenresultinavarietyof emergent issues and problems often impacting time, cost, and scope and creatingunnecessary adversarial relationships among the project team and project owner duringconstruction.Thispracticeisoftenfrowneduponbytheindustry.

4.4ProjectIntegrationManagementExecutingExecutingthemanyproceduresandprocessesisacriticalandtimelyfunctionoftheproject

team.Inadditiontothephysicalandadministrativeproceduresforcommissioning(turnover)of the completed facility, the work performance constraints that accompany constructionoperations forquality,performance,and longevityof the facilityneed tobeconsidered.Thefollowingsectionselaborateupon theseexecuting functions tohelpensure the facilityalignswiththedesignintent.

4.4.1 WorkPerformanceandInspectionThe contract documents are the primary executing components. They detail the proposed

scope of work as well as the time, cost, quality, and performance reviews to ensurecompliancewith the building, life safety, and environmental codes. The contract documentsdetail the inspection andverification requirements for thepermanentmaterials, fabrications,andonsiteconstructedcomponentstoensurethattheworkperformanceandtheblendeduseofmaterialandinstallationsmeetthedesignintent.Theprojectqualitymanagementplandetailsthe inspection and quality programs while the project communications management plandescribes the reporting systems that capture and communicate the results of inspections andcontractadministration reporting.The resultsof these inspectionsare significantoutputs thatserve as the acceptance criteria and basis for contract payments and product deliverableacceptance.

Despite the best intent, the dynamics and potential for contractual interpretations andexpectationscanleadtoimproperperformanceandunresolvedissues.Timelyandtransparentinspectionandreportinginalignmentwiththecontractandprojectrequirementshelpcreateacollaborativeprojectenvironment.

4.4.2 ValueEngineeringinExecutingValueengineering (VE) in theExecutingProcessGrouphas thepotential to lowerproject

costs and shortenwork durations. From a contractor's perspective, altering the constructionmethods without impacting the owner's goals can potentially reduce construction costs andraiseprofitability.Onceaconstructioncontracthasbeenawarded,valueengineeringcantaketheformofsubstitutionrequestssubmittedbythecontractororanownerrequestforproposal(RFP).Regardless of the initiating factor, once the contract is in place, this formof changerequestisadministeredthroughintegratedchangecontrol.

4.4.3 ConstructionAdministrationAdministrativefunctions,alsoknownasconstructionadministration,shouldbepracticedby

allentitieswithrespecttothescopeofwork.Withadvancementsintechnologyandtheabilityto share contract documents electronically, reporting and documentation are practically atransparent process. Projectmanagement information systems (PMIS) supplement the accessnecessary for the administrative functions and activities. The following list is the range of

integrationtopicsthatrequirediligentadministrationpracticesoneveryconstructionproject:

Subcontractorcoordinationandsafetyprograms;Changeorderresolution;Projectschedulingandprogresspaymentapprovals;Designclarificationandconstructabilityproblemsolving;Commissioning,pre-startoperations,andfacilityturnover;Sustainabilityandenvironmentalcompliancestatus;Projectcostandfinancialstatus;Riskreviewsandmitigationtactics;Disputeresolutionreviews;Submittalreview/approvalandprocurementstatus;andDiversityutilizationreviews.

4.4.4 InitiateandManagePartneringPerspectives and relationships among stakeholders can evolve and change during project

executionforanumberofreasons.Partneringisacollaborationtechniquethatstrivestocreateaprojectenvironmentoftrust,respect,accountability,andcommitmentamongtheprojectteammembers.Projectmanagementpracticesacrossthecontractagreementsandwithintheprojectteam structure canyield tremendousbenefits.The applicationsof thepartnering componentsare vital for initiating project partnering and creating a collaborative working environment(seeAnnexA1).

Regular partnering follow-up meetings are essential to maintain the team workingenvironmentandcanbeused to resolveperceptional responsibility issuesanddisputeswiththeteamand/orstakeholders.Thesefollow-upmeetingsareanidealsettingforriskreviewsamongtheteammembersinanonconfrontationalenvironment.Otherbenefitsincludeprocessandsystemimprovementsfortimelyturnaroundofsubmittalsordecisionsonchanges.Theuseofapartneringassessmenttoolcanevaluateaproject'sculture,itsprogresstowardgoals,andthe integrationof the contractual relationships.Figure4-2 illustrates a partnering evaluationtool,whichcanmeasureprogressonperformanceindicatorsandsuccesscriteriabasedontheproject teaminterrelationships.Byvisuallydisplaying the results,areasof focus forwhat isworking andwhere potential problems could be simmering among project partners becomeevident.Many of the performance indicators can be adjusted to reflect projectmanagementKnowledgeAreasandtheprocesseswithinthem.

4.4.5 ChangeOrderManagementManaging change requests are an important administrative function that cannot be

overlookedortakenforgranted.Inconstruction,“changeorder”isthetermusedforapprovedchange requests.Dependingon theproject, changeorder requests (COR)canalsobecalledchangeorderproposals (COP),potentialchangeorders (PCO),or requests forchangeorder(RCO).Approvedchangerequestsaregeneratedfromthechangeorderproposal (COP)andmodifythecontractagreement.Changerequestsmayoriginatefromanyprojectdocumentthatcapturesunknownprojectrequirementsatthestartofproject.Thesedocumentsinclude:

Requestforinformation(RFI),Designclarificationverificationrequests(DCVRs),Workchangedirectives(WCDs),Architecturalsupplementalinstructions(ASI),Actualchangedorunknownconditions,Changeorderrequests(CORs),Constructionchangedirectives(CCDs),andChangeorderproposal(COP).

As there can be an infinite number of factors that result in change requests, all changerequests should be documented. It is essential to adequately and timely document changerequeststhatreflectarchitecturalorengineeringinterpretationsorconstructabilityperceptionsdiscoveredduringthecourseofconstructionasthesediscoveriesmaybevieweddifferentlybythe stakeholders. All stakeholders, including the contract administrative authority, should

identify changes in a timelymanner and advise the owner of their effect, both positive andnegative, on thequality, cost, and timeaspects of theproject. It is equally essential that thechangeorderisapprovedbythedesignatedcompetentauthorityasdefinedbytheownerinthecontractunderthechangeorderprocess.

4.5ProjectIntegrationManagementMonitoringandControlConstruction execution generates an enormous amount of work performance data. All

elementsoftheprojectmanagementplanaresubjecttothecollectionofrawobservationsandmeasurements. Managing these data during the Monitoring and Controlling Process Grouprequires the traceability of the work performance through tracking, reviewing, evaluating,reporting, and distributing performance information. Project management activities inconstruction, such as forecasting schedule and cost, validating work progress, processingapproved change requests, and processing pay applications, should be done for all opencontractswithsubcontractors,vendors,suppliers,anddesignconsultants.

4.5.1 TechnologyIntegrationProjectmanagementinformationsystems(PMIS)andbuildinginformationmodeling(BIM)

programsenhanceProjectIntegrationManagement.Thesesystemscansignificantlyenhancetheteam's ability to collect, collaborate, problem solve, update, integrate, and distribute workperformance. Construction photography supplements project status reporting and recordsdocumentation.Withtherisksassociatedwithprojectsiteconditions,digitalphotographyandvideo can be helpful to record project discoveries and situations. Many project job sitesemployfull-timeonsitevideomonitoringsystems(includingaerialdrones)thatenablejobsiteobservationfromanylocationorinternetconnection.Thesetechnologysystemsfurtherenhancethe accuracy of recording project progress and archive the data for future uses. Comparingprojectprogresswithtime-scaledschedulescandigitallydisplayplannedversusactualprojectprogress.Suchasystemmakesitfareasiertodemonstratehowaprojectwasconstructedovertimetosupportordefendprojectdelayclaimsortodemonstrateproperconstructionpracticeswithoutdestructiveinvestigationsintheeventofafutureconstructiondefectsclaim.

4.5.2 IntegratedChangeControlControlling project changes is one of the most important aspects in monitoring and

controlling.AsdescribedinthePMBOK®Guide,integratedchangecontrol:

Identifiespossiblechanges;Reviews change requests for impact on project scope, cost, schedule, and workactivitiesintermsofqualityandsafety;Notifiestheownerinaccordancewithproceduresandtimerequirements;Processesthechangerequestsasstatedinthecontractdocuments;andEnsuresthataproperprojectrecordismadeofthedispositionforachange.

Change control and configuration management systems enable the effective and timelymanagementofchanges.However,anabsentordeficientchangecontrolprocess isoften thecausefornegativeeffectsonprojectsandmayimpactthereputationofcontractors,designers,andownersalike.Althoughchangesmaybeinitiatedverbally,itisimperativethatchangesbeexecutedinawrittenformatasrequiredbythecontract.Table4-1displaysanexampleofachangeorderlogandthevariousprojectdocumentsthatcanleadtoachangeorder.

4.5.3 SourcesofProblemswithProjectChangesControl or approval of changes ismost often the responsibility of the owner or owner's

representative.Changesmay occur for a variety of reasons and often originate from one ofthesecategories:

Owner-requestedscopechanges,Designerrorsandomissions,Unforeseenevents,Increasedwork,Changedorunknownconditions,andRegulatoryinterpretations.

Itisimportantthatperceivedchangesberesolvedbyanauthorizedcontractrepresentativeof theownerina timelyfashion,assituationscouldarisewherecontractorsactonachangerequestfromanunauthorizedperson.Thismayresultinacontractor-incurredcostthatmaynotreceiveownerapprovalandcouldinitiateaclaimforcompensation.Itistheresponsibilityofthecontractororthecontractadministrativeindividualtoidentifychangesinatimelymannerandtoadvisetheowner,inwrittenform,oftheireffectontheprojectquality,cost,andtimeofperformance.Onlargerprojectsandonsomegovernmentprojects,theremaybeamoreformalcontrolboardthatperformstheanalysisandapprovalorrejectionofchangesonbehalfoftheowner. Additionally, different contracts executed between contractors and subcontractors,vendors, suppliers, or other service providers,whichmay ormay not affect changes to theprojectowner,canaddtothecomplexityofmanagingthechangeorderprocess.

4.6ProjectIntegrationManagementClosing

Closingtheprojectorphaseinvolvesperformingtheprojectclosureportionoftheprojectmanagementplan.ThisprocessincludesfinalizingallactivitiesacrossallProjectManagementProcessGroupstoformallyclosetheprojectorphaseandtransfertheprojectappropriately.Insomeprojectsituations,contractsmaybeterminatedbytheownerasallowedbythecontract.This terminationmay be for cause, and the contracting partieswill negotiate any remainingworkandcontractpaymentsforsettlementpurposes.Inothersituations,aperceivedwrongfultermination on behalf of the contractors can lead to extensive litigation if a compensablesettlementagreementisnotreached.

4.6.1 DelayedProjectClosurePost-constructioncostisaburdenforallcontractingparties.Asagoodpractice,eachphase

oftheprojectshouldbeproperlyclosedonatimelybasistoensurethatimportantcontractualand project information is not lost, and that the administrative procedures are adequatelyadministered.

Various closing activities should not be delayed until final project completion; this isparticularlyimportantwithconstructionprojectsduetothelargenumberofprocurementsthatneed to be closed. With the exception of contract payment retention, a seller's workperformancecouldbeacceptedbytheownerforconstructionworkthatwascompletedmonthsor even years prior to the final turnover of the project to the owner. Unresolved changerequestsor construction claimscould stretchout the time frame for closure tomonthsor, insomecases,severalyears.

4.6.2 CloseoutDocumentsDocumentsthataffectclosureincludeallcontractdocumentsandmodificationsaccumulated

sinceproject initiation.Thesedocuments, often referred to as theproject dossier or projectrecord documents, become the master set of documents delivered at project closure. Forconstruction projects, these documents also include material and product information,inspection and testing records and reports, operation andmaintenancemanuals, and similarrecordsthatarerelevanttothecompletionandperformanceoftheproject.

As-built records of the construction work in place that show actual dimensions andelevations of the completed work, especially with regard to underground work or behindfinished walls, are examples of required documentation. When a project uses BIM, themajority of the required design and as-built construction drawings may have already beencompiled,thuseliminatingtediousmethodsforconformingprojectrecords.

4.6.3 ProjectPunchListTheprimarytechniqueforowneracceptanceofconstructedcomponentsisthegenerationof

alistofalloutstandingcontractperformanceitems,generallyknownastheprojectpunchlist.As a good practice, contractorsmay precede the formal project punch list with an internalpreliminarypunchlist,alsoknownasacontractorworklist.Thiseffortallowscontractorstocorrectanyperformancedeficienciespriortotheownerorstakeholderoccupyinganyportion

ofthefacility.Onprocessfacilities,asignificantportionofthepunchlistmaybeoperationalor performance testing of the completed facility. Equipment suppliers will conduct acertificationofproperly installed equipment andprovideoperational training to theowner'smaintenanceandoperationalstaffduringthisperiodaswell.

Theprimecontractor,thedesigneranditstechnicalconsultants,alongwithvariousmembersoftheowner'sorganization,jointlyperformtheprojectwalkthrough,whichgeneratesthepunchlist.Thisprojectpunchlistisoneofthelastclosuredocumentsandofteninitiatesthestartofvarious warranty periods for the facility components and equipment, which equates to theformalpracticeofacceptingprojectdeliverablesandvalidatingapprovedchangerequests.

4.6.4 BeneficialOccupancyandSubstantialCompletionSome projects enable the owner to occupy a portion of the project and begin operations

beforetheentirefacilityisoperational.Thisacceptanceisknownasbeneficialoccupancy.Itmayvarydependinguponcontractualagreementsandmostoftenrequiresthecompletionofanypunchlistwork.Mostcontractsalsostipulateatimeperiodafterbeneficialoccupancywhereinalloutstandingdocumentsandworkperformancearetobecompleted.Substantialcompletionisoftenacontractualrequirementdefinedasapointintimewhenallconstructionworkshavebeencompletedwiththeexceptionofmiscellaneouswarrantyorsiteclean-upactivities.Thiscontractrequirementusuallytiesdirectlytothecontracttimeforcompletionoftheprojectandisfollowedbyafinalcontractcompletionmilestone.

4.6.5 CloseContractsAdministrativeandprojectprocurementclosureproceduresmaybesequentiallyclosedas

significantportionsof theprojectarecompletedand turnedover to theowner forbeneficialoccupancyorprovisional acceptance. In addition to the formal acceptancedocuments,manyprojectshaveformalcontractdocumentation that is requiredbygovernmentalagencies tobepreparedanddistributed.Theformalactionoffinalacceptanceandclosurewill,inalmostallcases, be guided by the provision of contractual documents under which the project isgoverned. In addition, all construction financing should be closed or transferred to typicalfinancial mortgages and all construction insurance policies should be terminated withinsuranceresponsibilitiesturnedovertotheprojectowner.

4.6.6 FinalProjectReportandLessonsLearnedInsomecases,certainstakeholdersandownersmayrequestafinalprojectreportdescribing

anddocumentingthehistoryoftheproject,includingwhatwentwellandwhatdidnot.Lessonslearned or post-project reviews are outcomes of a collaborative process among projectparticipants. Project success, amplified with performing organizational feedback andtestimonials, describes the execution of the project. The areas of improvement describe thehardships or problems, the corrective action undertaken, and the preventive actions to beimplementedonfuturework.

In the event that the owner does notwant or require such a report, the contractor should

prepare the internal report to update its organizational process assets. As a good practice,closure for the performing organizationmay include archiving the project files and closuredocuments,recordinganddistributinghistoricalcostinformationforfuturecostestimating,andprocurement. Databasesmay bemaintained by the performing organization that expand andcontributetothecontractor'sanalogousorparametricestimatingdatabases.

4.7IntegrationManagementAdvancementsAdvancements in technology facilitate Project Integration Management across the entire

projectlifecycle.Theabilitytoaugmenttheconstructionprofessionals’expertjudgmentwillcontinue to develop as the role becomes more embedded in all aspects of design andconstruction.Leadingdevelopments includenotonly three-dimensionaldesigncapabilitybutfull integration of design, cost, scheduling, and changemanagement elements. The ability tointegrate databases enables document searching, multiple indexing, and categorization ofrelatedissuesanditemsgeneratedfromthefield.Alongwithinterfacingandunifyingmetrics,automatic updating of the most recent version of data and the documents, the sharing ofcommunicationanddistributionofreportsbecomesinstantaneous.

5PROJECTSCOPEMANAGEMENTThe Project Scope Management section of the PMBOK® Guide is applicable to

construction projects. This section of the Construction Extension presents additionalconsiderationsforplanning,monitoring,andcontrollingscopeonconstructionprojects.

Scopecanbemanagedinvariouswaysdependingontheconstructionprojectrequirementsand theperformingorganization (owner, contractor, constructionmanager, etc.).Early scopedevelopment creates a starting point for an owner, and scope development evolves as thedesignrequirementsarecreated.Foracontractor,thescopeofworkmostoftencomesfromacontractandasetofdesigndrawingsandspecifications.

Inconstruction,scopeplanning,scopedefinition,andworkbreakdownstructure(WBS)setthe early tone for the project framework, while scope verification and control provide amechanismtomonitorandcontrolprojectscopeinordertodeliveraprojectwithinbudgetandonschedule.

ThefollowingPMBOK®GuideProcessGroupsareaddressedinthisKnowledgeArea:

Planning,andMonitoringandControlling.

5.1ProjectScopeManagementinConstructionIntheconstructionindustry,contractdocuments,specifications,anddesigndrawingsdefine

the scope. The primary scope document in construction is the contract—whether it is aconstructioncontractbetween theownerand thecontractororadesigncontractbetween theownerand thearchitect/engineer.Secondarydocuments includedrawingsandspecifications.Design drawings for constructing a facility (e.g., a residential condominiumdevelopment, ahydroelectric dam, or a petrochemical facility) identify the scope ofwork, level of quality,tolerances,preferencesformaterialsandequipment,andtestingandinspectionrequirements.

Tender or contract documents and drawings typically define the scope and should bemanagedinordertodelivertherightsolutionfortheownerinanefficientandcost-effectivemanner.Scopemanagementprocessesensurethattheconstructionprojectincludesalltheworkrequired—and only the work required—so that the deliverables align with the owner'srequirements.Thispreventsscopecreepandthepotentialriskforclaims.

Early scope definition is critical in controlling project costs. Changes on a construction

project,whenresolvedmutuallyandamicably,generallyresultinchangeorders.Claimsoccurwhentheappropriatepartiescannotagreeuponthechanges.AdditionalinformationonclaimsisprovidedinAnnexA1.

Large projects may involve multiple contractors and subcontractors. Particular attentionshouldbepaidtobatterylimits.Abatterylimit isaphysical locationwherethescopeends.Forexample,whenconstructingnewindustrialplantsitiscommontoassigndeterminedunitsto different contractors, and have one contractor building the off sites (e.g., interconnectingracks,ways,andotherstructures).Inthisexample,thepipingbatterylimitbetweenaunitandtheinterconnectingrackislocatedtypicallyatavalveneartheinterconnectionpoint,butthereshouldbeacleardefinitionofwhichcontractor is responsible for supplying, installing, andtestingthevalve.Anotherchallengeinthissituationistoensureaparticularportionofworkisnotduplicatedincontractors’orsubcontractors’scopes.Constructionscopemanagementandbatterylimitsarealsorelatedtodivisionofresponsibilities.Acommonexampleisidentifyingwhichpartyisresponsibleforprovidingenergyandwater,andatwhichpointtheenergyandwaterwillbeprovided.

5.2ProjectScopeManagementPlanningProject scope management planning in construction projects is based on the contract,

product scope, and division of responsibilities. A make-or-buy decision to subcontractportions of work creates new interfaces and increases the probability of issues related tobatterylimitsanddivisionofresponsibilities,allofwhichposeadditionalchallengestoscopemanagement. Thus, scope management planning and make-or-buy decisions should beperformed in tandem forbest results.Practitioners shouldbemindful thatwhileoutsourcingdecisions transfer part of the scope to third parties, they create additional managementactivitiestoconsiderwhenplanningforscopemanagement.

5.2.1 DefineScopeThefollowingaspectsshouldbekeptinmindwhendefiningprojectscope:

Statutory requirements. Construction projects often require a statutory permitprior to commencing construction. The permitmay specify requirements thatmayimpact the project scope. The government establishesminimum safety and healthrequirements to protect the construction workers, the general public, and theenvironment.As a condition to obtain a statutory permit, owners usually performsocial and environmental impact assessments (SIA and EIA, respectively).Remedialorimprovementactionsresultingfromthoseassessmentsareincludedaspartoftheprojectscopeandshouldbeplannedaccordingly.Stakeholder requirements. In addition to the processes related to stakeholdermanagement, as discussed in Section 13, stakeholder requirements may influencescopeplanning.Therequirementsshouldbeidentifiedandanalyzedearlytoensurethey are properly addressed. For example, traffic in highly populated areas mayrestrictthedeliveryofconstructionmaterials.

Contract. Together, the specifications, drawings, legal terms and conditions, andvariousothertechnicalandadministrativeprojectrequirementsdescribethescope.Thecontractobligatescontractingpartiestoadheretoallcontractrequirements.Design specifications and drawings. Specifications identify the scope of work,level of quality, tolerances, testing and inspection requirements, etc. Industryassociationsoftencreateandmaintainthestandardsandformatsforspecifications,whichshouldbeconsideredwhenproducingdesigndrawingsandotherengineeringdocumentation.Typically,theprojectmanagementteamisresponsibleforensuringthe drawings are delivered to the project team and the relevant supply chain;therefore, this interface should be clearly defined among the various teams inconstruction projects. The handling of these responsibilities may be part of thecontractor'sorganizationif theproject iscarriedoutunderadesign(e.g.,buildorEPC contract). Because of the iterative nature of engineering design, there areseveral stages of progression from preliminary drawings in an early conceptualstage todetaileddrawings later in thedesignphasewith the appropriate level ofdetail to construct a facility.Although scope planningmay startwith preliminarydrawings, construction should not start before the issued for construction (IFC)drawingsareissued.Lifecyclecosting,valueengineering,andconstructabilityanalysis.Thesethreetechniques are applied during scope planning, in order to compare differentexecution alternatives. Constructability analysis involves integrating constructioninputinearlyphasesofaprojectsothatengineeringsolutionscantakethoselessonslearned into account and maximize benefits. Life cycle costing and valueengineering, as explained in the PMBOK® Guide, help identify which set ofalternativesreachestheprojectobjectivesandrequirementswiththegreatestsafetyfor all stakeholders, the least social andenvironmental impact, and the least timeandcost.Theanalysisshouldencompassallprojectaspects,includinglogisticsandtransportation, availability of machinery and materials, manpower loading, andothers.Projectmanagementaspects.Scopemanagementplanningshouldconsiderand/ordetermine aspects such as critical milestones, project budget, deliverables,acceptance criteria, scope exclusions, constraints, assumptions, and results fromriskassessment,whichtogetherrevealhowtheprojectshouldbeconstructed.

5.2.2 CreateWBSThe PMBOK® Guide and the Practice Standard for Work Breakdown Structures [3]

providedetailsoncreatingaWBS.

Someconstructionprojectsintheresidential,commercial,andinstitutionalsectorsmaynotinclude an officialWBS, butmay follow the format of specifications. These specificationsutilize a unique numbering system (called a division) depending on the discipline of theconstructiontrade.IntheWBS,thesemaybedividedintoconstructionworkpackages(CWPs)

toaidinscopecontrol.SomeownersprovidethecontractorswithapredefinedWBSfortheproject.WorkingwithanunfamiliarWBSmaycreateanaddedchallengeforacontractor.

It is not uncommon in the construction industry to create a WBS with a breakdown ofdeliverables that directly compose the facility to be built. Deliverables related to projectmanagement,suchasperformancereports,invoices,etc.,maybeleftoutoftheWBSinthosecases. This does notmean that such deliverables have become exclusions; they just do notappearinthatparticularrepresentationoftheprojectscope.

5.3ProjectScopeMonitoringandControlProject scopemonitoring and controlling is critical to delivering aproject onbudget and

schedule.Scopecreep,asdescribedinSection5.3.2,canderailaproject.Controllingprojectscope ensures all requested changes and recommended corrective or preventive actions areprocessedthroughintegratedchangecontrolprocess.

On unit price contracts, scope monitoring and control may involve actual measuring ofquantities.Forexample,totalcubicmeters/feet/yardsofpouredconcretecanbemeasuredandcompared against the baseline to check for any deviation. In some reimbursable contractswhere scope is looselydefined, reviewingperformance reports aids indeterminingwhetherscope reduction or scope addition is needed depending on if the project is under or overbudget.

Managing scope changes is of the utmost importance in construction projects. From theoutset,scopecontrolprocessesshouldbeinitiatedtodeterminethefactorsthatleadtoprojectscope changes in order to control their impact on the project objectives. These processesensureallchangerequestsandproposedactionsareevaluated.

5.3.1 ScopeValidation/VerificationScope validation is the process of formalizing acceptance of the completed project

deliverables. Construction projects have clearly defined phases and required verificationsteps.The first phase is at the end of the concept phasewhen the project is approved.Theconstruction contractor may or may not be involved in this process, but it results in apreliminary scope and a contract that generally outlineswhat is to be constructed.The nextphaseisadefinitionphase,wheresufficientplansandspecificationsaredevelopedtoprovideabaselinecriteria,budget,andschedule.Thefinalphase,theacceptanceoftheproject,shouldbeproperly completed in accordancewith the contract.Completionof eachof thesephasesshouldbemarkedbyaformalverificationprocessbeforeproceedingtothenextphase.

Inconstructionprojects,quantitymeasurementsare typicallyperformed toverify installedquantities of materials. The bill of materials (BOM) and material take-offs (MTOs) arematerialquantitymeasurementsfromthedrawings.Forexample,thenumberofpilesinstalledcan be compared against the number of piles within the scope as shown on constructiondrawings.

Onprojects involvingmultiplesubcontractors, thebidsshouldbe invariablyanalyzedand

adjustedforscopecomparisonpurposes.Thisisduetosubcontractorsincludingorexcludingpartoftherequiredscopeintheirbids.

A few examples of milestones signifying the completion of a construction project or thedeliveryofcompletedfunctionalpartsoftheprojecttotheownerforbeneficialoccupancyare:

Substantialcompletion,Finalcompletion,andSuitabilityforoccupancy.

Inspections aid in verifying completion of these milestones. Generally, a punch list iscreatedtoshowoutstandingitemsthatneedtobecompletedbeforeaparticularmilestoneisconsideredcomplete.

Many construction contracts contain a retainage clausewheremonies arewithheldby theowner until it is verified that a contractor has satisfactorily completed the scope of work.Alternatively, owners may request contractors to present performance bonds to guaranteefulfillment of contract obligations. Scope verification, which may include a third-partyinspection,isusedtoascertainwhetherthescopeiscomplete.Incertaincases,evenafter theacceptance of the deliverables, there is awarranty period duringwhich bank guarantees orappropriate insurance policies are provided to ensure the functionality of the deliverablesduringthatperiod.

5.3.1.1 RequestforInformation(RFI)Itiscommononconstructionprojectstousearequestforinformation(RFI)documentasthe

basisforscopeclarificationandchangecontrol.ContemporaryresearchhasdemonstratedthattheuseofBIMreducesRFIssignificantly.RFIsmayhelpidentifyifthereisaneedforchangeorders.TheuseoftheRFIplaysanimportantroleinmonitoringandcontrollingnotonlythescopeoftheprojectbutalsotheeffectivecommunicationofpotentialscopediscrepanciesandconflicts.

5.3.2 ScopeCreepandChangeManagementChangeisanaspectofeveryprojectandmaybebeneficial;scopecreepisnot.Scopecreep

canoccurinmanyways.Somecommonexamplesaredesignerrors/omissions,unclearbatterylimits, and unrecognized/uncontrolled accumulation of changes by the owner. Scope creepchangesmaycomefromprojectstakeholders(additionalrecognizedneeds,incompletedesignwork, incomplete project documentation, contractor's change requests, etc.), from projectconditions(lackofmaterials,laborissues,newlegislation,regulations,etc.),andfromprojectconstraints (financing issues, societal issues, environmental issues, etc.). Therefore,construction projects require robust changemanagement processes. The contract documentsshouldbereferencedbecausetheyspecifythescopebaseline.Section4onProjectIntegrationManagement provides additional details on integrated change control management. If notmanaged effectively, changes stemming from the management of the contractual scoperequirementscanoftenleadtodisputes.

6PROJECTSCHEDULEMANAGEMENTThe Project Schedule Management section of the PMBOK ® Guide is applicable to

construction projects. This section of the Construction Extension presents additionalconsiderations for planning, and monitoring and controlling the schedule on constructionprojects.

Theconstructionindustryisoneofonlyafewindustrysectors that involvethemeticulousdetailofProjectScheduleManagement.Theschedulingmethod,thelevelofdetail,theprojectparameters,andtheplanningfactorsallshouldbeconsideredanddemonstratedasdefinedbythe contract conditional requirements. In addition to standard scheduling practices, ProjectSchedule Management in construction includes details for schedule management plandevelopment;levelsofdetailforactivitydefinition;requirementsforresource,cost,andrisk-loaded activities weightage definition; progress curves; monitoring and schedule controlprocedures;andconditionsforowneracceptanceorapproval.Theschedulemanagementplansets the early tone for the project framework to satisfy the contractual requirements, whileprogress monitoring and schedule control provides the mechanism for contractor progresspayments and to deliver theprojectwithin the required completiondate as stipulated in thecontract.

6.1ProjectScheduleManagementinConstructionProject ScheduleManagement in construction involves complex challengesmainly due to

themagnitudeof stakeholders involved such as the owner, prime contractor, subcontractors,vendors,materialsuppliers,endusers,regulatoryagencies,etc.Someofthefactorsthatgiverisetothiscomplexityare:

Thevastnumberofactivitiesandtheirdurationsthatneedtobescheduledsuchasprocurementandinstallationofequipmentandmaterials,contractsubmittals,approvals,andperformanceinspections,procurementbiddingprocess,andcontractexecution;Typesofrelationshipbetweenactivitieswithleadsandlagsandcomplexinterrelationshipsbetweenworksequencesandmaterialinterfaces;Integrationofschedulesfromamultitudeofstakeholdersthatarebothdirectlyandindirectlyinvolvedintheconstructionperformance;Activitydurationsforperiodsoftimeforcontingencyduetopotentiallosttimeasa

resultofinclementweatherconditionsandmaterialinstallationrestrictions;Levelofdetailindifferenttypesofschedulessuchasmasterprojectschedule,weeklycontractorworkactivityschedules,two-weeklook-aheadschedules;andMonitoringandcontrollingconstructionandadministrationactivitiesforalloftheinvolvedstakeholders.

Thecomplexityof the schedules, theunique interrelationsbetweenconstructionactivities,and the need to interpret and understand the process makes construction time managementdifferent fromthatofother industriesdue to thegreaterneedformoredetailedplanningandelevated technicalanalysis.Constructionpredominantlyuses thecriticalpathmethod(CPM)for its scheduling practice. Its use is often the focus of contract claims due to project timeimpactsanddelaystothecontractcompletion.

Schedulinginconstructionisacomplicatedandseriouseffortwithamajorcontractclausebeing “time is of the essence.” Should the project fail to be completedwithin the contractcompletion, consequential damages and project cost impacts may be incurred by thestakeholders.Multiple contractors are involved to ensure the facility is completed on time;otherwise,anownerunabletooccupythefacilitymayincuranimpacttoitssourceofrevenueorothercommitmentstowardthepublicandprivatestakeholders.Thegeneralcontractorhastheoverallresponsibility tomeet theowner'scompletionmilestone.If thegeneralcontractordoes not complete on time, it may be assessed liquidated damages as spelled out by theconstructioncontract.

Otherschedulemanagementconsiderationsinconstructioninclude:

Numberandtypeofresourcesneededforeachprojectactivity;Existingandimposedenvironmentalsiteconditionsandregulations;Influencesofweatherconditions;Schedulingmethod;Constructabilityorcriticalsequenceconstraints,includingpartialusebytheownerorpublicforinfrastructureprojectslikeroadways;Allowancesforowner-occupiedfacilitiesduringconstruction;Considerationsandpotentialimpactsonexternalstakeholdersandsocialgroups;Timeandworkaccessconstraintstoavoidimpactontheenvironmentandsatisfyregulatoryrequirements;Restrictionsarisingfromthirdpartiessuchaspermitanddesignapprovals,andrightofwayacquisitions;Availabilityandprocurementtimefactorsforspecializedcontractors,equipment,andmaterial;Requirementsforlabor,material,andequipment;andLocal,state,federal,andinternationalregulations.

6.2ProjectScheduleManagementPlanningContractual requirement documents often dictate the components of the schedule and the

requirements for activity definition, resources, cost loading, and performance evaluation.Thesedocumentsshouldbereviewedthoroughlywhenpreparingaschedulemanagementplan.Apre-projectplanningoutlineshouldberequiredforallprojectownersandshouldbecreatedforeveryproject.Theoutlineservesasabaselineforprogressreportingandisoftenusedtojudgethefinalsuccessoftheprojectdelivery.Pre-projectplanningshould:

Bedrivenbytheownerandcontract,Includeclearlydefinedrolesandresponsibilities,Includeuserssuchasoperationsandmaintenance,andStartasearlyaspossible.

Theconstructionorganizationshouldkeepacentral repositoryofall schedule informationandrecordsofpreviouslyexecutedprojectssoas to reduce theamountofeffort required torecreatethisinformationforeachnewproject.Thiscentralrepositorymayincludeallofthedocuments,templates,policies,procedures,plans,guidelines,historicaldata,costinformation,schedulemetrics,andriskassessments.Allmembersof theprojectmanagement teamshouldhaveeasyaccessanduseoftheserepositories.

6.2.1 DefineActivitiesThe projectmanagement plan defines the decomposition process to identify the activities

required by the project team to complete the project deliverables, which may include theprojectscopestatementandworkbreakdownstructure(WBS).Astructuredviewbreaks theprojectdeliverablesintomanageableworkpackages,anddefineswhatshouldbedeliveredtoachievetheprojectobjectives.Examplesincludeworkperformanceactivitiesthatgenerateanactivitylistalongwiththeiractivityattributes,andpossibly,amilestonelist.

Performing organizations may utilize activity templates from previous projects. Forexample,onahousingproject,acontractormayidentifyactivitiessuchasexcavation,concretefoundations,wallframing,drywallandpainting,anddoorandwindowinstallations,andonlyadjustthedurationsbasedonbuildingsizeandquantities.

When defining activities and choosing tasks—particularly tasks to be performed bysubcontractors—taskinterconnections,interdependencies,andthepossibleemergenceofnewconditions as a result of such interdependencies should be considered possible risks.Examples may include all testing of pipes and electrical systems to be completed prior toinsulationandclosureoftheworkspace.Manycontractsalsolistintermediatemilestonesforcertaincompletionsorfacilityturnover.

6.2.1.1 WorkBreakdownStructureTheWBS used in scheduling should fully address the entire project scope and contract

requirements. To be consistent in addressing the cost, risk, and resource aspects, theWBS

shouldbeintegratedtomeettime,cost,andresponsibilitycommitments.Asinmostindustries,theWBS can form the foundation for all subsequent planning and can extend several stepsfurther by incorporating themultiple contractors andmany contract requirements for properadministrationandexecutionoftheconstructionworks.

6.2.1.2 DecompositionThelevelofdetailisakeyconsiderationonmostprojects.Scheduleactivitiesbrokendown

intotoosmallcomponentscanleadtoanunmanageablelevelofdetail.Construction-specificindicatorsfordecompositionwilloftendescribetheminimumviablelevelofdetailmeasuredby units of work, work weeks, work days, or work hours. The level of detail should beappropriate for the particular project and capable of producing project reports at differentlevels per stakeholder requirements.These hierarchical scheduleswill serve to address thedifferentstakeholdersandtheirneedsforscheduleinformationsuchas:

Ownersummaryschedule,Generalcontractor'smasterschedule,Submittalandprocurementschedule,Resourceandsubcontractorschedules,Three-weeklook-aheadplanningschedule,andSuperintendent'sweeklyworkforceplanningschedule.

6.2.1.3 ActivityAttributesActivity attributes—characteristics that are common for a group of activities—include

durations,costs,laborhours,andquantities.Attributesmayalsobedeterminedbythecontract.

TheactivityattributeshouldbeusedwhendeterminingtheactivityweightsforeachleveloftheWBS.InthefirstleveloftheWBS,theattributeisusuallythedeliverablecost.Whenthedecompositionlevelissufficienttoidentifyanotherattributethatiscommontoallactivitiesinthat level, then that attribute should be used.When the decomposition level reaches projectactivities, thereisusuallymorethanonecommonattribute,andexpertjudgmentisneededtodetermine which attribute to use. The scheduler's experience and expert judgment areconsiderable assets for the construction organization.The attributes determine theweight ofeach project deliverable or activity (Section6.2.5).A summation of those attributes can bemadeandtransformedintoapercentagefortrackingconstructionprogress.

6.2.1.4 ProgressMeasurementPlanandCriteriaAprogresscurvemanagementplandescribeshowprogresswillbemeasuredandmonitored

foractualprogresscalculations.Itmayalsodescribehowchangestotheprogresscurveswillbemanaged, but these usually result from schedule changes. It may be formal or informal,highlydetailedorbroadlyframed,dependingontheneedsoftheproject.

Progress measurement criteria are the components used to determine how progress is

measured for an activity. Preestablished progress measurement criteria are used to avoidconflict among stakeholders when assessing project progress. In construction, physicalquantitiessuchasconcreteorsteelaremeasuredtoascertainprojectprogress.Documentation(e.g.,sitelogs)isalsocheckedtoverifyprogressandvalidateorapproveprogresspaymentforcontractors.

6.2.2 SequenceActivitiesSequencing activities identifies and documents relationships among project activities and

should reflect the construction strategy.Activities should be sequenced in a logicalmanner,determining predecessors and successors. The type of relationship, such as finish to start,shouldalsobedeterminedwithleadsorlags,whererequired.Propersequencingisnecessaryandrequirestheparticipationofexperiencedconstructionpersonnelandindividualsproficientintheuseofschedulingsoftware.Sequencingexamplesinclude:

Specificexcavationincloseproximitytoanexistingstructureandtheplacementoffoundationsbeforebackfillingoperations;Concreteformremovalandwatercontainmentstructuresmayhavealagtimetoaccountforconcretecuringandwaterleakagetesting;Specializedequipmentandmaterialinstallationslinkedwithaprocurementschedule;andAcontractstipulationrequiringthetransferofthefacilitytotheoperationalownerbyafixedcontractdate.

In construction, most sequencing is displayed using commercially available schedulingsoftware.Technologydevelopments, such as specialized4-D software,makes it possible toincorporate the project design plans to semi-automatically develop the schedule layout,activitydurations,andlogicrelationships.

Thelinearschedulingmethod(LSM)isoftenusedonlinearprojectssuchashighways,pipeand transmission lines, or tunnels. The station or mile post numbers depict the physicallocationofthework;activitiesarevisuallyrepresentedataphysicallocation.Figure6-1helpsinunderstandingandtrackingtheflowofworkandmayaidinidentifyingprogressoftheworkwhen actual progress is depicted on the same schedule. LSM is also referred to as line ofbalance,time–location,ordistance–locationscheduling.

6.2.3 EstimateActivityResourcesAcontractorestimatestheresourcesneededtocompleteeachactivity.Theseresourcescan

beequipment,material,orhumanresources.Excavationmayneedabackhoewithanoperator;roofingmay need a roofing crewwith quantity of roofingmaterial to be used. Contractorsgenerally use historical records for activity resource estimates, along with the team's pastexperience, but may also use industry publications that provide resource estimates in aparametric fashion. The manner and method used is often a final choice depending on theconstructionknowledgeandexperienceoftheorganization.

Activity resources and supplementation for peak levels is a source of contention inconstruction,especiallywithat-riskcontracts.This isoftendue to stackingof trades,whichcan reduce productivity and create resource inefficiencies without improving the scheduleduration. Research has shown that there are many instances where adding labor not onlyresultedinwastedeffortbutgeneratedadverseeffectsfortheparticularactivity.Diligenceandexperienceisimperativewhendecidingtosupplementactivityhumanresources.Section9onProjectResourceManagementprovidesadditionalinformationforthisconsideration.

Resourcebreakdownstructures(RBS)andresourcecalendarsareoftenestablishedforkeyresources suchas towercranes, excavators,backhoes, equipmentoperators, and specializedconstructioncrews.Aconstructionoperation,suchassteelerectionaboveotherconstructiontrades, is a significant safety concern and influences the decision on effective resourcescheduling.Projectcostestimatingiscloselylinkedwithestimatingactivityresourcesas thetypeanduseofresourcesformalargeportionoftheoverallprojectcost.

6.2.4 EstimateActivityDurationsDuration estimates indicate the number of work periods needed to complete an activity

basedonanticipatedresourceavailability.Theseworkperiodsaremostofteninhours,days,or weeks. Depending on the stage of the schedule development, the project estimator orconstruction superintendent may review the design drawings and associated work to beperformed and compare it with the budget and time constraints (a form of parametricestimating) to determine the activity duration. The superintendent may refer to historicalrecords(analogousestimate)foracomparisonormaybasetheestimateonexperience,whilealsoconsideringexpectedproductivityofeachresource.Giventhecomplexityanduncertaintyoftheriskconsiderationsfortheexpectedactivityduration,additionalestimatingfactorsmaybeconsideredtoallowformitigationorcontingencyactions.Activitydurationestimatingmayalso includeananalysisof the totalprojectdurationasa functionofprojectormanagementreserveforunanticipatedorunknownrisks.

Oncertainplantmaintenanceprojects,oftencalledturnaroundsorshutdowns,workperiodsmaybeestablishedinminutesduetothecriticalnatureofgettingtheplantbackonlineandthesequence of operational start-up requirements. Some turnarounds can have around-the-clock(24-hour)schedulingutilizingthreeworkshiftswithprogressupdatesoccurringevery8hours.

6.2.5 ActivityWeightageDefinitionActivityweightageistheevaluationofactivitycharacteristicsandattributesforthepurpose

of assessing the contributionof each activity to theoverall project.Activityweights canbeassigned to the overall progress or to the progress of a given phase or deliverable of theproject. Examples of activityweights can be units of production such as lineal feet,metrictons, resourcematerialquantities,andactivitycost includingequipment,material,and labor.Activity weights are used to determine the planned and earned values for earned valuemanagementand tomakeprogresspayments forworkperformed.Relativeweightsareoftencalculatedasapercentageoftherelativeweight'scontributiontotheproject.Absoluteweightsare theweightofanactivityrepresentedby itsspecificorabsolutevaluecontribution to theoverallproject.

6.2.6 DevelopScheduleDevelopingthescheduleistheprocessofanalyzingactivitysequences,durations,resource

requirements, and schedule constraints to create the integrated schedule model, whichgenerates the project schedule. Developing the schedule model is an iterative processinvolving numerous stakeholders, sometimes with contrasting interests and intent.Incorporatingthesecomponentsisachallengetoestablishingthebaselineschedule.Thelevelof detail becomes a key attribute for activity consistency onmajor projects involvingmanystakeholders.Historicaldatagathered fromlessons learned frompreviousprojectsoftenaidtheschedulingeffortforsubsequentprojects.

6.2.6.1 VendororSubcontractorScheduleAnalysis

It is necessary to consider the potential impacts of the additional constraints thatsubcontractorsandvendorshaveontheintegratedprojectschedule.Forexample,stackingoftrades sometimesoccurswhen several trades (i.e., electricians, painters, plumbers)performworkinthesameareaatthesametime.Itisimportanttoanalyzesubcontractorschedulesforscopeverification,materialorequipmentdeliverydates,crewsize,andactivitydependenciesthatmaycausestackingorphysicalconstraints.

Theneedforscheduledevelopmentflexibilityisimportantasthevendorandsubcontractorelements become evident. For example, excavation for underground work may restrict orprevent the access to some areas. Similarly, scaffolding for elevatedworksmay restrict orpreventaccesstoworkingbelowthescaffoldinginsomeareas.Thesesituationscreateaneedforfindingalternativesolutionssuchaschangingactivitysequencing,staggeringsubcontractorworkhours,oradjustingavailableworkareasatspecifictimeperiods.

6.2.6.2 ConstraintsAtypicalconstructionprojectmaycontainmultiplecontractmilestones.Thesemayinclude

specific events that are contractually fixed and are considered constraints. In addition toavailability windows (e.g., access restrictions, equipment availability, and environmentalregulations),anumberofotherconstraintsshouldbeintegrated.Forexample:

Imposeddatesandmajormilestones.Aninterimconstructionphaseorprojectcompletiondateisanexampleofanimposedfixeddateonconstructioncontracts,andisusuallyasignificantconstraint.Thedatewhenallcontractscopeisturnedovertotheclientisreferredtoasthesubstantialcompletion.Apost-projectcompletiondateisoftenaftersubstantialcompletion,andiscalledthefinalacceptancedateorcontractcompletion.Thisisthepointintimewhenthecontractisclosedandonlyequipmentandfacilitywarrantyaspectsmayremain.Statutoryrequirements.Developmentofthescheduleshouldconsideralllimits,restrictions,orotherobligationsplacedontheprojectbymunicipal,regional,national,orinternationalregulations.Forexample,theremaybeloadlimitsonroadtravelduringcertaintimesoftheyearormigratoryhabitatrestrictions.Further,possibletimecontingenciesshouldaccountfortheincorporationofpotentialriskevents.Weather.Constructionisoftenexposedtotheelementsofnature.Weatherconditionscanaffecttheperformanceofmaterialsandinstallationefforts.Thescheduleshouldintegrateplanningtoavoidtheweatherconstraintsthatcouldaffectcertainconstructionoperations.Inspections,approvals,andpermits.Activitiesandprocessesbythirdpartiesshouldbeintegratedforsubmittalapprovals.Buildingandaccesspermitsandconstructioninspectionsareallcontingentconstraintsaffectingtheschedule.

6.2.6.3 ScheduleBaselineAschedulebaselineis theapprovedversionoftheschedulemodelandisoneofthemost

importantdocumentsintimemanagement.Scheduleprogressismeasuredagainstthecontractandschedulemilestonedates.Thebaselineisanimportantreferencedocumentifcontractandprogressdelaydisputesarisebetweenstakeholders.

6.2.6.4 UseofMetricsMetrics play an important role in schedule management for construction. Metrics from

previousprojects(e.g.,actualactivitydurations,productivity,andlaborhours)canbegatheredas an input for preparing a resource estimate. Schedule time and cost growth are commonperformance metrics used in construction, which can provide a snapshot of constructionprogress.

6.2.6.5 ScheduleDictionaryAscheduledictionaryincludessupportingdocumentationthatprovidesaclearandcomplete

descriptionofhowtheschedulewasderived.Informationusedmayinclude,butisnotlimitedto,productionrates,levelofaccuracy,exclusions,andassumptions.Mostschedulingsoftwareincludesadditionaldatafieldsforeachactivitythatcanbeusedforthisbasis.

6.2.6.6 ScheduleRiskAnalysis(SRA)Scheduleriskanalysisestablishesandvalidatesschedulecontingencies, identifiespriority

risksandrisk-drivenevents,andcontinuouslymonitorsforproject-relatedrisks.Riskeventsimpact scenarios,andalternativescanassist in risk response toavoidschedule impactsandestimate the time needed formitigation or contingency purposes.MonteCarlo simulation isuseful for performing schedule risk analysis and planning scenarios for projects that areexceptionallycriticalintermsofprojecttimeandrisks.

6.2.7 ProgressCurvesDevelopmentandUpdateProgress curves development is the creation of a progress baseline. This is created in a

mannersimilar toacostbaseline.Progressisplottedagainst thebaselinetoprovideatrendlinethatcanbehelpfultoforecastfutureprogress.

Progresscurvesaregraphicalrepresentationsofprojectprogressandmayberepresentedasfollows:

Earlyorlate.Earlyprogresscurvesarebasedonactivitiesofearlystartandfinishdatecalculations.Lateprogresscurvesarebasedonactivitiesoflatestartandfinishdatecalculations.Overallorpartial.ThesegraphsrefertoaprogressdescriptionthatisrepresentedfortheoverallprojectorforspecificWBSdeliverables.Inengineeringprocurementconstruction(EPC)projects,progresscurvesareusuallyplottedfortheoverallprojectandtheE,P,andCphases.

6.2.7.1 WeightsDistributionStandardCurves

Eachactivityweightiscalculatedbasedonaparticularactivityattribute,suchasman-hoursconsumption,material,orcostapplied.Forexample,thelengthoftimeforbackfillinganareaisafunctionofthevolumeofsoildepositedinthatarea;thesoildepositionrateisdeterminedbytheequipmentcapabilitiesandislinearlydistributedalongtheactivityduration.

6.2.7.2 MathematicalAnalysisMathematicalanalysisisusedtocalculatetheweightdistributionalongtheprojectduration.

Eachactivityhasaweightandisutilizedaccordingtostandardcurves.Calculatingtheweightcompleted for each activity in a work period highlights the project progress for that workperiod.Repeatingtheanalysisforallprojectworkperiodsgivestheoverallprojectprogresscurve.Projectmanagementsoftwareisgenerallyusedtoautomatetheprocessofperformingamathematicalanalysis.

6.3ProjectScheduleManagementMonitoringandControlControl Schedule is the process of monitoring the status of project activities to update

projectprogressandmanagechangestotheschedulebaselineinordertoachievetheplannedprojectcompletiondate.Documentation,suchassitelogsanddaily/weeklyprogressreports,arecheckedtoverifyprogress.Scheduleupdatesareproducedonapredeterminedfrequencyas outlined in the schedulemanagement plan.These are reviewed to evaluate anydeviationfromthebaseline.

Progressmonitoringistheevaluationoftheactualprojectprogresscomparedtothebaselinein order to take preventive or corrective action. The evaluation includes examining theactivities involved and their characteristics. The actual start and finish dates for projectactivities form thebasis for actualprogress calculationsanddocument theas-built scheduleinformation.Determiningifpreviouslyimplementedcorrectiveactionshavebeeneffectiveisalsoacriticaltaskinprogressmonitoring.

Schedulecomponentsthatrequireprogressmonitoringarethecriticalpath,thenear-criticalpath,andnoncriticalpathactivities,generallyconsideredallotherworkactivities.Ifcriticalpathactivitiesslip, theywill immediatelycauseprojectdelay. Ifnear-criticalpathactivitiesslip,theycouldpotentiallybecomethecriticalpaththatdelaysprojectcompletion.Ifthemasswork activities—noncritical path activities—slip and are not progressed appropriately, theymay cause trade stacking and space/location work area conflicts, and likely cause projectdelay.Thecomponentscanbemonitoredbyavarietyof techniquessuchasfloatdissipation(erosion of float), missed start and finish dates, actual duration analysis, and earned valuemanagement.

6.3.1 ProgressCurveUpdatesProgresscurvesareusedasabasisforcomparingtheschedulebaseline.Aprogresscurve

update indicates the progress information occurring in a work period. When the projectschedule,WBS,orbotharemodified through integratedchangecontrol, theprogress curvesarerevised to indicate thenewprogresscurve information.Appropriatestakeholdersshould

be notified as needed. Progress curve updatesmay ormay not require adjustments to otheraspectsoftheprojectplan.

Figures 6-2 is an example of an updated progress curve depicting the total float on theupdated baseline schedule and the status schedule with respect to the project substantialcompletion.

6.3.2 ScheduleImpactsUnplanned situations occur for a variety of reasons and impact the construction schedule

(e.g.,theemergenceofunforeseennewissuesorchangesinknownorunknownconditionsontheprojectsite).Thesechangesshouldincludethequantificationoftheimpactonprojecttime,cost, and resources. Contractors often have to demonstrate to the owner the need for timeextensions by providing a detailed schedule analysis. This may involve a complex andcomprehensivereviewandcomparisonusingoneofseveraltechniques,suchascomparingtheas-built and the as-planned schedule. There can be consequential effects that should beevaluated,whichcouldrequirechangestotheprojectormayresultinclaims.

Organizations should have in place the knowledge and industry-recognized schedulingpractices when it comes to documenting and evaluating a schedule impact situation. Thesepracticesareessentialforassessingandpresentingtheoutcomesthroughachangerequestandintegratedchangecontrolinordertoavoidunwantedconstructionclaims.

6.3.3 ProgressandPerformanceReviewsProgressandperformancereviewscomparescheduleperformanceovertimeandareoften

used in conjunction with contract progress payments. Success factors in time managementreflecttheeffectiveuseofchangemanagement.Controllingtheramificationsofchangestothe

project baseline is done through theuseof special techniques, such as time impact analysis(TIA).Thistechniqueisusedwithcriticalpathmethodology(CPM)schedulesbyproducinganup-to-datemodelof theconstructionplan, insertingactivitiesdesigned tomodel thechangedcondition, adding appropriate logic, and recalculating the schedule. The difference inmilestonecompletionshowstheimpactofthechangedconditiononthebaselinemilestonetimeframe(seealsoSection10.4.1).

Oneofthemainsourcesofclaimsisthefailuretoprovidetimelyandaccurateanalysisfortimeextensionrequests,evenwhenthecontractorisentitledtoatimeextension.Arejectionofa requested timeextensionmaybedue to inappropriatesubmissionsbycontractors,butmayresultinabreakdownintherelationshipbetweentheownerandcontractor.Thesebreakdownscommonly show up in claims, so it is important that all parties deal with requests forextensionsoftimeinafairandtimelymanner.

7PROJECTCOSTMANAGEMENTTheProjectCostManagementsectionofthePMBOK®Guideisapplicabletoconstruction

projects. This section of theConstruction Extension presents additional considerations forplanning,andmonitoringandcontrollingcostonconstructionprojects.

ProjectCostManagementinconstructionincludescostestimating,costbudgeting,andcostmonitoring and control, and further entails managing the day-to-day project costs. This isconsiderably different from financial management, which deals with revenue sources forfinancing the construction project, its return on investment, its cash flow, and its investmentpaybackanalysis,tonameafew.

Foranowner,theabilitytoinfluencecostisgreatestattheearlystagesoftheproject,whichmakes early scope definition critical. The costmanagement planning effort, which includesestimatingandbudgeting,occursearlyinprojectplanningandsetstheframeworkforefficientandcoordinatedcostmanagement.Costcontrolprovidesamechanismtomonitorandcontrolprojectcostsinordertodeliveraprojectwithinbudget.ProjectCostManagementiscriticalto a successful project as it impacts, among other important aspects, organizationalprofitability.

7.1ProjectCostManagementinConstructionConstruction estimates are different from estimates in other industries. Some differences

maybesubtle,whileothersarecompletelydifferent.Inconstruction,estimatesmayrangefroma simple estimate for pouring a small concrete foundation to an estimate for building amultibillion-dollar processing plant. Construction estimates incorporate direct and indirectcosts.Directcostsarethosethataredirectlyattributabletoaspecificscopeofwork,andmayincludeequipmentcosts(e.g.,abackhoethatisusedexclusivelyforexcavation).Indirectcostsarethosecoststhatcannotbedirectlyassociatedtoaspecificscopeofworkandareallocatedequitablyovermultiplescopesofworkonasingleproject(e.g.,equipmentandsmalltools).

InEPCprojects,directcostsareorganizedbydisciplines.Thesedisciplinesarespecializedscopes ofwork such as civil, structural,mechanical, piping, electrical, and instrumentation.Indirectcostsaremanagementandsupervisorycostsplusgeneralexpensesfortheorganizationthatareallocatedtoaparticularproject.

Giventhattheconstructionindustryisfragmented,thereisnogeneralagreementonwhethertoincludecertaincategoriesasdirectorindirectcosts.Theclassificationdependsmostoften

ontheorganizationanditsgeneralcostmanagementpolicies.

Challenges to cost management in construction include the vast number of stakeholdersinvolved, quality and availability of skilled labor in a particular area, weather impact onproductivity, transportationinremoteareas,andfluctuationsinmaterialprices.Trackingandmanagingthesecostsisacomplexprocess,whichinvolvesdetailedplanning,monitoring,andcontrol.

Inaddition,costestimatingisafunctionthatoccursthroughoutthelifecycleoftheprojecttoreflect scope, design, constructability, and performance changes. The cost of the project isproportional to itsscope,whether thatscope isbasedonanowner'sability to fund itor thecost efficiency and profits for contractors to build it. Cost management is fundamentallycriticaltoallactivestakeholders.

Costmonitoringandcontrolisproactiveandisusedtopredictthefinaloutcomeofaprojectbased on actual costs,which allows preventive or corrective actions to avoid variations infinal cost. Cost control techniques may differ on some projects, depending on the type ofcontracting strategy used. It is imperative to the overall project planning effort that costmanagementintegratesotherKnowledgeAreastoreflectnotonlythescopeandresources,butalsothecostmanagementtechniquesusedindifferentprojectdeliverymethods.

7.2ProjectCostManagementPlanningThe cost management plan in construction is primarily concerned with the cost of the

multitudeofresourcesneededtocompleteprojectactivities.Thecostmanagementplanshouldconsider the life cycle cost of a project andmay include operating costs, depending on theprojectdeliverymethod.Theplan shouldbecustomized for theneedsof theowner/sponsorwithdueconsideration tootherstakeholders’needs.Costmanagementplanning isa functionthat should bemanaged throughout the design process in an effort to enhance the ability to“designtocost”anddeterminehowthebillofquantities(sometimesreferredtoasBoQ)willbeprepared.TheBoQisaspecificdocumentofmeasuredquantitiesfortheworkidentifiedbythe drawings and specifications. Establishing cost drivers early in the design process andcontinually monitoring those drivers as well as providing staged cost estimates is vital tovalidatingthecostoftheprojectandalsothecostofdesign.

Together, life cycle costing, value engineering, and constructability analysis are used inearlyplanningstagesonconstructionprojectsto:

Reducecostandtime,Improvequalityandperformance,Optimizedesign-to-costfacilityperformance,andOptimizethedecision-makingprocess.

The cost planning effort begins with estimating and transitions into budgeting. ThePMBOK®Guide defines an estimate as “a quantitative assessment of the likely amount oroutcome.”Thisdefinitionisusuallyappliedtoprojectcosts, resources,anddurationsandis

usuallyprecededbyamodifier(i.e.,preliminary,conceptual,feasibility,order-of-magnitude,anddefinitive).Costsareestimatedforallresourcesthatwillbechargedtotheproject.Thisincludes,butisnotlimitedto,labor,materials,equipment,services,andfacilities,aswellasspecialcategoriessuchasinflation,costofprojectinsurance,andcontingencycosts.

7.2.1 EstimatingCostsandTechniquesEstimatingthecostofaprojectinvolvestheprocessofdevelopinganapproximationofthe

monetaryresourcesneededtobuildtheproject.Thesecostestimatesareapredictionbasedontheknowninformationatanypointintime.Forexample,apreliminarycostestimate(order-of-magnitude) may provide the owner with sufficient details to allocate funding to build theproject.Acontractor,ontheotherhand,maypreferamoredefinitiveapproachtosubstantiatethe planned cost of construction, for example, details on all materials, equipment, laborresources,overhead,andprofit.

Themostprevalentconstructionestimatingtechniquesareanalogous,parametric,bottom-up,three-point estimating, andMonte Carlo simulation. Techniques that producemore accurateestimates requiremore detailed andmore voluminous information regarding the project andtakemore time and resources to develop. Figure 7-1 highlights analogous, parametric, andbottom-uptechniquesinrelationtotheknownprojectinformationusingtheWBSasthebasisforreference.

Apreliminaryestimateisperformedearlyintheprojectandisnormallyrequiredforhigh-leveldecisionmaking.Itisthefirstdeliberateestimateoftheresources,cost,andschedule.Itserves as the basis for measuring subsequent estimates, which generate the cost estimatebaseline.

Resource histograms are developed from these estimates. Section 9 on Project ResourceManagement provides additional details on histograms. The estimating tools used inconstructionareoftenbasedontheconstructionsector,trade,organization,orproject-specificapplication.

7.2.1.1 Analogous(Conceptual)EstimatingAnalogous estimates are also referred to as preliminary, conceptual, top-down, order of

magnitude(OOM),androughorderofmagnitude(ROM).Generally,analogoustechniquesarecustomizedforindustrialsectorsthroughtheuseofindustry-specifichistoricaldata.Someofthe notable analogous techniques used in construction are capacity-factored and equipment-factored estimating. Industry publications provide estimating data. Industry sector historicalindexes and consumer price indices should be consulted for the most up-to-date cost andpricingdata.

7.2.1.2 ParametricEstimatingParametric estimating uses a statistical relationship between relevant historical data and

otherproject-specific variables (e.g., square footage inbuilding construction) to calculate acost estimate.Theconstruction industry frequentlyuses software applications thatprovide alocalindustry-specificcostdatabaseand/oravailablecostinformationofferedbyspecializedpublicationsandprofessionalassociations.

Commonlyusedparametricindicatorsareratioofsteelinconcrete(averagesteelpercubicmeterorcubicyardsofconcrete),percentageofreinforcementsteelfordifferentcomponentsofstructure,andlaborrequirementfor1m3(35ft3)ofreinforcedconcrete.

7.2.1.3 Bottom-Up(Detailed)EstimatingBottom-up techniques are the estimating tool of choice when the detailed project design

becomes available. The cost and accuracy of bottom-up cost estimating are typicallyinfluenced by the size and complexity of the individual activity, work package, or workcomponent.

A prerequisite to a bottom-up estimate is a clearly defined and detailed scope includingdocuments such as aWBS, issued for construction (IFC) drawings, and specifications. Thedetailedestimatingtechniqueresultsinatransparentandstructuredestimatefortheprojectthatismoreaccurateandreliable.

7.2.1.4 Three-PointEstimatingCostestimatesbasedonthreepointswithanassumeddistributionprovideanexpectedcost

andhelpclarifytherangeofuncertaintyaroundtheexpectedcost.Aprojectsimulationmodel

maybeused,whichtranslatesthespecifieddetaileduncertaintiesoftheprojectcostintotheirpotentialimpactonprojectobjectives.

7.2.1.5 MonteCarloSimulationThetypicalstatisticaldistributionsusedformodelingconstructioncostsarebeta,triangular,

andlognormaldistributions.However,opinionsdifferonthepracticaladvantages(accuracyofestimates) of using mathematical models for project cost analysis and quantitative riskanalysis,whichisassociatedwithcostestimates.

7.2.2 BillofMaterials(BillofQuantities)Thebill ofmaterials (BOM) andmaterial take-offs (MTOs) are terms commonlyused in

constructionformaterialquantitymeasurements.Billofquantities(BOQ)isalsoacommonlyused termthat refers toadocument that itemizesmeasuredquantitiesofmaterial,equipment,andlabor.MTOsarealsousedasatoolforcomparingtheestimatewithpastsimilarprojectsand to determine whether the quantities are within an acceptable range. Generally, eachconstruction discipline has a standard of quantity measurement, such as excavation andconcrete quantities are measured in cubic meters or cubic yards, while electrical cablequantitiesaremeasuredinlinearmetersorlinearfeet.

Many contractors have had to adoptmultiple quantity take-off and estimating solutions todealwithtechnologicaladvances.TheuseofBIMtoolsandtechniquesforquantitytake-offs,estimating, and budgeting is rapidly expanding. It is important to note that metrics frompreviousprojectssuchasactualcost,productivity,andlaborhoursareessentialcomponentsforpreparingestimates.

7.2.3 Allowances,Contingency,andManagementReserveHow the termsallowances andcontingency are used on a construction project can vary.

Typically, allowances refer to a specific discipline or component of work, whereascontingencyreferstothetotalprojectcostoranaggregatedcontrolaccount.

Thequantityoftheallowancedependsonthephaseoftheprojectandscopedefinition.Forconceptualestimateswhenthescopeispreliminary,ahigherallowanceshouldbeadded.Onthe other hand, for a project in a detailed design phase, a lower allowance is needed.Generally,allowancesarebasedonhistoricaldataandvaryfromorganizationtoorganization.

Cost estimates include contingency to account for cost uncertainty. Contingency is thecategorywithinthecostbaselinethatisallocatedforidentifiedrisks.Forexample,reworkforsomeprojectdeliverablescouldbeanticipated,whiletheamountofthisreworkisunknown.TheamountofcontingencymaybeapercentageoftheestimatedprojectcostsordevelopedbyusingquantitativeriskanalysistechniquessuchasMonteCarlo.

Contingencyispartofthecostbaselineandtheoverallfundingrequirementsfortheprojectandshouldbeclearlyidentifiedanddocumented.Managementreserve,ontheotherhand, isnot included in the cost baseline but is part of the overall project budget and funding

requirements.

7.2.4 Escalation,Inflation,andCurrencyExchangeEstimates formultiyear projects should include escalation. Escalation should account for

marketconditionsthataffectpricinginadditiontomonetaryinflation.Althoughextremelyrare,someprojectsmayaccountforde-escalation.

Inflationisageneralindexfortheaverageincreaseofpricesinaneconomy.Thereareotherindexesthatshouldbetakenintoaccount,suchaspriceofcommodities(steel,cement),whichmayvaryinapatterndifferentfrominflation.Manycontractorsfollowcommoditypricesandtrytotakeadvantageofpurchaseopportunitieswhentheyarise.

Thecurrencyusedforestimatesandexchangeratefluctuationsisanimportantconsiderationinconstructionprojects.Thiscanbedifficultwhenestimatinginternationalprojects,especiallywhen allocating responsibility for currency exchange risk and taking into consideration theimpactduetotaxlegislationinthecountriesinvolved.

7.2.5 MetricsMetricsusedinestimatingmayincludeplantcapacity,sizeofstoragefacilities,laborhours,

direct to indirect cost ratio, and price per square feet. Different construction disciplines(electric,plumbing,etc.)havestandardreferencedocumentsthatprovidegeneralestimatesforspecificdeliverables.Metricsusedareprimarilyacombinationoflaborhours,equipment,andmaterialcosts.Parametriccostmodelsusedwithinconstructionrelyonmetricssuchassquarefootage,location,andqualityofmaterialstodevelopanestimate.

7.2.6 AdditionalConsiderationsinEstimatingThe accuracy of an estimate depends primarily on how well the scope is defined. The

accuracy of a project estimate increases as the project progresses through the project lifecycle.Figure7-2 shows the relationshipbetween evolutionof scope and estimate accuracy.Empirical evidence suggests that project successmay be directly related to the appropriateapplicationofprojectestimatingprinciplesthroughouttheprojectlifecycle.

Publishedcommercial information, suchas laborproductivity, crewmix, location factors,country cost indexes for wages and materials, and resource cost rate information, is oftenavailablefromcommercialsources that trackandprovidestandardcostsformaterial, labor,andequipment.

The following list provides some additional factors that should be considered inconstructioncostestimating:

Siteconditions(asitevisitisgenerallyrecommendedtoevaluatesiteconditions);Laborresourceavailability,type,andwagerates(unionsoropenshop);Siteaccessrestrictions;Restrictedworkinghours;Proximitytofacilitiesavailable;Equipmentandmateriallogisticalrequirements;Weatherconsiderations;Localcommunityandsocialgroupimpacts;Health,safety,andenvironmentalregulations;andGeotechnicaldata.

Mostestimatesarebasedonasimilarprojectbasisoronpublishedratesfromgovernmentprojectswhereintheprojectedestimateisbasedonanescalationorinflationindex.Thebasisofestimate(BOE)isanimportantdocumentthathelpsdriveestimateaccuracy.BOEprovidessupporting documentation with a clear and complete description of how the estimate wasderived,includingbutnotlimitedtothelistofincludedinformation,forexample,thelevelofaccuracy,exclusions,andassumptions.

Past project lessons learned aid in the estimating effort for the next project by providing

historicalcostdata.Lessonslearned,especiallytheactualcostofactivities,isoneofthemostvaluableassetsforaconstructionindustryorganizationasconstructioncostsarespecifictoanorganization.

Table 7-1 shows a sample EPC estimate summary for an oil and gas owner/operatororganization.

Table7-2showsasampledirectlaborhourssummary.Theselaborhourscanbecomparedtohistoricaldataonsimilarpastprojectstoascertainwhethertheestimateiswithinacceptablerange.

7.2.7 DetermineBudgetAprojectbudgetcanbeestablishedonceanestimateisapproved.Thisinvolvesaggregating

theestimatedcostsofindividualactivitiesorconstructionworkpackages.Thekeybenefitisthat itdetermines thecostbaseline inwhichprojectperformancecanlaterbemonitoredandcontrolled.

Thebudgetshouldhavetheabilitytobeadjustedandfine-tuned,suchthatthecurrentbudgetisrealisticandinsyncwithanyrevisedestimates.Further,constructionbudgetsarealsousedtoperformcomparisonswithsubcontractorbidsreceivedthroughtheprocurementprocess.

Some organizational process assets that influence budgets often include organizational-related policies, procedures, guidelines, and tools; historical cost databases; and capturedactual costs from each project that the construction organization undertakes, including thereportingmethods.

7.2.7.1 ConstructionWorkPackage(CWP)CostestimatesareaggregatedbyworkpackagesinaccordancewiththeWBSandareoften

referred to as constructionwork packages (CWPs). Thesework package cost estimates areaggregated for the higher component levels of the WBS, such as control accounts, andultimately, for the entire project. Work packages most often include all labor, material,equipment,andsubcontractorcosts.

7.2.7.2 CostBaselineFigure7-3illustratesthevariouscomponentsofaprojectbudgetandcostbaseline.

Eachcontrolaccountisassignedauniquecodeoraccountnumber(s) that linksdirectlytothe performing organization's accounting system. A cost breakdown structure (CBS) issometimes developed as a mapping tool between the project WBS and the organization'sdesignatedcodeofaccountstoaidinreportingcosts.

7.3ProjectCostManagementMonitoringandControlProject costmonitoring and control includes the status of the project to update and track

project costs, to manage changes to the cost baseline, and to provide a forecast for allremainingcosts.Thekeybenefitofcostcontrolisthatitprovidesthemeanstorecognizeinatimelymanner the variance, if any, from the plan in order to take corrective andpreventiveactionsinordertominimizeprojectcostrisk.

Many complex and ambitious megaprojects run the risk of project cost overruns due toineffectivecostcontrol.Manycompaniesareseekingwaystoimprovecostpredictabilityandcontain costs. For most, the answer may lie in integrated tools that provide visibility forproactivemanagementsuchasearnedvaluemanagement(EVM).Muchofthecostmonitoringand control effort in construction involves using either true EVM or variations of EVM toanalyzetherelationshipamongallthecomponents.

7.3.1 ActualCostMostorganizationshaveasetschedule(cut-offdate)forcapturingtheactualcostattheend

of awork period (weekly, biweekly, ormonthly) depending on the activity or project. Theproject accounting system captures the actual labor, material, equipment, and subcontractorcostsfromthatworkperiod.Theaccountingreportisreviewedandanalyzedforcompletenessandaccuracybytheprojectteam.

Onlargeandmegaprojectsinvolvingmanysubcontractorsandvendors,itcanbedifficulttocaptureactualcostsforthesameworkperiodwheneachentitymayutilizeadifferentcut-offdate.Aworkaroundthathandlesthisissueistheuseofanaccrualmethodtocapturerevenueandcostsasworkinprogress(WIP).Constructionworkinprogressbecomesageneralledgeraccountwheretheassetcoststhataredirectlyassociatedwiththeconstructionarerecorded.

Once that asset is placed in service, all costs associated with it are tracked in theconstruction WIP account and are shifted to the code of accounts line item that is mostappropriateforthatworkcomponent.

7.3.2 EarnedValueManagementIn construction, EVM can be based on quantities tomeasure physical progress,which is

donebymeasuringinstalledquantitiesandcomparingthemtoplannedquantitiesonaperiod-by-periodbasis.

Manygovernmentprojectsutilizeearnedvalueasamethodinwhichprogresspaymentsaremade to the contractor. The contractor gets paid by achieving predetermined contractualmilestonesorperthecostloadedscheduleactivityinwhichquantitiesofactualworkinplacearepaidperthecontractunitpriceforeachquantifieditem.

7.3.3 ProgressandPerformanceReviewsProgresscanbemeasuredinseveralways,suchasunitscompleted,realandapproveduse

of resources, incremental milestones, start or finish of work activities, or based on aninspectoror supervisoropinion.Progressandperformance reports (PPR)showing theEVMvaluesarepublishedformanagementreviewand,ifneeded,anyresponsiveactions.

7.3.4 ForecastingorEstimateatCompletionForecastsaregenerated,updated,andreissuedbasedonworkperformancedataprovided

duringprojectexecution.Estimateatcompletion(EAC)istypicallybasedontheactualcostsincurred forwork completed, plus an estimate to complete (ETC) the remainingwork. It isincumbentontheprojectteamtopredictwhatitmayencountertoperformtheETC,basedonits experience to date. Where actual quantity measurements are available, ETC can becalculatedbasedonremainingquantities.

The most common EAC forecasting approach is a manual, bottom-up summation by theprojectmanagerandproject team.Projectmanagementsoftware isoftenused tomonitor thethreeEVMdimensions(PV,EV,andAC),todisplaygraphicaltrendsandtoforecastarangeofpossiblefinalprojectresults.

Asworkontheprojectprogresses,costcontrolcapturesmorepreciseinformationandthesecontingencyreservesmaybeused,reduced,increased,oreliminated.Aschangesneedingtheuse ofmanagement reserves arise, the change control process is used to obtain approval totransfertheapplicablemanagementreservefundstothecostbaseline.

8PROJECTQUALITYMANAGEMENTThe Project Quality Management section of the PMBOK® Guide is applicable to

construction projects. This section of the Construction Extension presents additionalconsiderationsformanaging,assuring,andcontrollingqualityinconstructionprojects.

Quality is one of those crucial attributes in construction that relates to all aspects of thefinishedconstructionproject.Mostcomponentdeliverablesarevisibleatsomepoint in timeandshouldbeaccepted.Qualityinconstructiontakesonanadditionallayerofexpectationsforthe participants when one considers the visible construction work and its constructionpracticesalongwithhowwelltheprojectwasmanagedwithrespecttoitscostandschedule.Quality in construction relies on the project management systems to ensure that the projectmeetsallaspectsoftheconstructedproject.

8.1ProjectQualityManagementinConstructionTheperformingorganizationimplementsthequalitymanagementsystemthroughthepolicy,

procedures, and processes of quality planning, quality assurance, and quality control, andundertakes continuous improvement activities throughout the project. As with safety andenvironmentalmanagement, qualitymanagement ensures that the projectmanagement systememploysalloftheprocessesneededtomeettheprojectrequirements,andthattheseprocessesincorporate quality. Project Quality Management shares many common characteristics withProject Safety Management and Project Environmental Management. The requirements aresimilar: itensuresthat theconditionsofthecontract(includingthosecontainedinlegislationand any project technical quality specifications) are carried out to implement quality to theproject and its deliverables; it addressesmanagement of the project and the product of theproject(anditscomponentparts);anditintegrateswithprojectrisk,safety,andenvironmentalmanagementprocessestoaccomplishthestatedobjectives.

8.1.1 QualityRequirementsProject Quality Management applies to all attributes of project management. In the

construction industry, this consists of addressing the following distinct (and sometimesconflicting)setsofrequirements:

Mandatory statutoryquality requirements. These requirements are imposed bylegislationandenforcedbystatutorythird-partyauthoritiesintheregionwherethe

projectistobeconstructed.Thesearegenerallyapplicabletoconstructionprojectsin specific application areas (nuclear, power generation, oil, gas industries, etc.)wherecompliancewithquality requirements is consideredparamount for the safeoperation of the facility. Construction projects for tunnels, airports, governmentbuildings, etc., may have similarly imposed quality requirements imposed bylegislationandenforcedbystatutorythird-partyauthoritiestoensuredesignersandcontractorsusespecifichigh-quality, long-lastingmaterials thatmayhaveahigherinitial cost to ensure the stability of the structure for a long service life due tocharacteristicsoftheproject,use,location,soilconditions,earthquakes,andwinds,amongothers.Customer quality requirements. These requirements, which are outlined in thecontractconditions,definehowthespecificqualityrequirementswillbeundertakenand administered, and establish the criteria for technical quality performance andacceptance (as defined in project specifications). Technical quality requirementsfrequently referencemandatory legislative requirements and incorporate those forsafetymanagementandenvironmentalmanagement.Specific requirements of the performing organization. When the performingorganizationhasmorestringentqualityrequirementsthanthoseofthecustomer,theperformingorganizationadherestothemorestringentstandards.Specificationsofqualitymanagementsystemsstandards.Wheregeneralqualitymeasuresareconsideredinsufficienttoprovidetherequiredassuranceandcontrol,theprojectteamreferencesqualitymanagementsystemsstandards,forexample,theISO9000Series.Industry-specificcodesandstandards.Thesearecodesandstandardsthatdefinespecificprojectproductperformanceandacceptancecriteria.

Itshouldbenotedthat thelackofanISOqualitymanagementprogramorsystemdoesnotnecessarilymeanthesystememployedbytheperformingorganizationisineffective.Likewise,havinganISO-compliantqualitymanagementsystemorprogramdoesnotmeantheperformingorganizationwillproduceaquality-compliantproduct.

The ISO 9000 series has been revised tomake it application-area specific,which is thereason for thevastarrayof standardsassociatedwith the ISO9000series.Forconstructionprojects,material testing is a common andoftenmandatory requirement. ISO/IEC17025onGeneralRequirementsfortheCompetenceofTestingandCalibrationLaboratoriesaddressesthe unique competency and operational requirements for material testing laboratories.However, as stated previously, having an ISO/IEC 17025-compliant testing laboratorymanagementsystemisnotequivalenttoaproject-compliantsystem,ascustomerrequirementsoftenexceedthebasicrequirementsdetailedinISO/IEC17025.Thescopeofrequirementsforaproject-compliantsystemisdependentontherequirementsoftheindustryapplicationarea,projectsponsor/ownerrequirements,and/ortheperformingorganization'sscopeofISO17025accreditation.

Additionally, ISO 10006 on Quality Management Systems: Guidelines for QualityManagement in Projects offers guidance on the application of quality management inconstruction project work and is applicable to projects of varying complexity in variousenvironments.

8.1.2 ModernQualityManagementModern quality management complements project management. For example, both

disciplinesrecognizetheimportanceofthefollowing:

Prevention over inspection. Although verification by inspection and testing aresynonymousastheypertaintoconstructionprojects,itisimportanttodeterminethemostappropriatemethodsofverificationandverificationcriteria.Itisimportanttodistinguish between verification and inspection: verification is a planned andsystematicactivityaspartofthequalityassuranceprocess;inspectionisaspecificactivity within the quality control process. Critical issues include, but are notlimitedto:

Evaluating performance characteristics of the end product for the project (orcomponentpart)asawholevs.inspectingortestingindividualcharacteristics,andEnsuringthat thecorrectandobjectivedataarecaptured,rather thanarbitraryorsubjectivedata.

Riskmanagement. Quality, safety, and environmentalmanagement are frequentlyconsideredasubsetof riskmanagement.Assuch, thesefactorsaddressmore thanthe technical requirements of a project. It is frequently overlooked that theconstruction contract itself is a quality, safety, and environmental managementsystem standard. A specialized management system to address the uniquecharacteristics of a specific construction project is frequently required. Forexample,therequirementsforsurfacerailorhighwayinfrastructureprojects,whicharefundamentallydifferentfrombuildingprojects,requirespecificriskmanagementparameters. Such specialization frequently requires conformance with therequirementsofthisConstructionExtensionandISOstandards.

8.2ProjectQualityManagementPlanningQualitystandardsarecomprisedofprojectcodes,regulations,andstandards.Thisincludes

anyconditionofacontractforwhichtangibledeliverableshavebeendefinedandwillbeusedtodetermineacceptance,includingacceptancebydefaultifnecessary.

Thecontractanddocuments,suchasdesigndrawingsandspecifications,are theprincipleproject quality standards as these specify the applicable statutory and legislative qualityrequirements,technicalqualitycodes,standards,andregulations.

8.2.1 ContractRequirements

Contract requirements include any and all requirements specified in the project contractdocuments (e.g., specifications, regulations, legislation, and standards [technical orlegislative]).Permitsobtainedbythebuyingorganizationalsobecomepartofthecontract.Theproject management team should consider area-specific standards, specifications, orregulations,includingthosearisingfromlocal,regional,andnationalregulatoryagenciesthatwillaffecttheproject.Specifications,regulations,legislation,andstandardsgenerallyrefertoeither:

Performanceandacceptancecriteriathatpertaintotheproduct(s)oftheproject,orWorkmanshipcriteriaorhowworkistobeundertaken.

8.2.2 ProjectStakeholderRequirementsThequalityrequirementsandallselectedalternativestobalancetheserequirementsshould

be negotiated and agreed upon with project stakeholders, which include the surroundingcommunityandgovernmentagencies.

8.2.3 QualityPolicyThe quality management policy also includes the degree to which the performing

organization'smanagementiscommittedtoqualityandcontinuousimprovement.Itcanhaveamajorimpactontheeffectivenessofaqualityprogram.Thequalitymanagementpolicyoftheorganization includes quality assurance and quality control. Quality control is the set ofprocedures established to verify requirements for quality. The performing organizationmayhaveestablisheddesignandconstructionqualitystandards.

8.2.4 QualityAssuranceMeasurementsAqualitymetricdefinestheattributesoftheprojectandproduct,andhowthequalitycontrol

process will measure those attributes to validate that a requirement or the successfulcompletionofadeliverableismet.Tolerancedefinestheallowablevariationsofmetrics.

8.2.5 QualityChecklistA quality checklist of a component or deliverable is a structured tool, specific to each

component,whichoutlinesasetofstepstobecarriedouttoverifythattheacceptancecriteriadescribedintheprojectscopestatementaremet.

8.2.6 ProjectRequirementsReviewAprojectrequirementsreviewincludesanassessmentanddeterminationofthefollowing:

Characteristicsandcriteriaofeachcomponentoftheproduct(s)orprojectandhow to satisfy them. The contractor's staff or a third-party entity performs aconstructabilityreviewofthedesigner'sdocumentstoensuretheintentofthedesignisunderstandableandfeasible.Anearly review,suggestions to thedesigners,and

some minor changes to the design can help to improve quality and maintain theprojectwithinscheduleandcostlimits.Applicableverificationcriteria.Thisincludescriteriarequiredtodemonstratethatacceptanceandperformancecharacteristicsarefulfilled.Alternativereviewandselection.Inconstructionprojects,itiscommonforsomeactivities to be performedwith different processes or arrangements for achievingthe same result or output. This applies equally to qualitymanagement. Examplesinclude:

Rockformationsthatcanberemovedbyblastingorbyusingpneumaticbreakers;Effluentsfromchemicalpipecleaningthataretreatedatanonsitewastetreatmentworksortakentoanexternaltreatmentfacility;Materialsthataretestedatanonsitelaboratoryorsenttoanexternallaboratoryfortesting;andInspections that can be carried out by independent inspection organizations orundertakenby thosecarryingout thework,provided thecompetenceof the latterhasbeendetermined,assessed,andagreed.

Anotherfrequentoccurrenceiswhenarequirement(standardorspecification)developedinonegeographicalregionisemployedinanotherlocation,whichsometimesresultsinprocessesor actions that are not commonly used in that region. This is where trade-offs may benecessary,andrequalificationoftherequirementsisnecessarytomeetthequalityobjectives.The term“trade-off”doesnot imply loweringstandards forquality,butmeans that the sameendresultcanbeachievedindifferentways.Trade-offsshouldbecarefullyscrutinizedsoasnottocompromisequalityorotherrequirementsand,forobviousreasons,arerarelyacceptedwithoutvalidjustificationbyprojectsponsorsorowners.

Generally,allprocessesareanalyzedtodeterminealternativestoincreaseeffectivenessandefficiency.Forexample,cost-benefitanalysesandotherswheretime,cost,quality,safety,andenvironmentalaspectsneedtobebalancedorexceedrequirements.Qualityrequirementscaninvolvemandatoryconstraints,asnoncompliancecancause thepermits for theproject tobecanceledorrevoked.

8.2.7 QualityManagementPlanThequalitymanagementplanisacomponentoftheprojectmanagementplananddescribes

howtheprojectmanagementteamshouldimplementthenecessaryqualitycontrolactivitiesfortheperformingorganization.Thequalitymanagementplaneithercontainsormakesreferenceto specific procedures that are applied for ensuring the quality compliance of the workperformed.

Theprojectqualitymanagementplandefinesthemonitoringandcontrollingactivitiestobeemployed,especiallythefollowing:

Itemofworktobemonitored;

Reference to the applicable document, specification, or standard and acceptancecriteria;Applicableverificationactivitiesthatareconductedandtimeswhentheseactivitiesareperformedinrelationtotheoverallprocess;Responsiblepartiesfortheworkandverificationactivities;Applicablecharacteristicsandmeasurementsthataretakenorrecorded;andApplicable supporting documentation, which is generated to demonstratesatisfactoryorunsatisfactoryperformance.

AnexampleofaprojectqualityplandocumentisshowninFigure8-1.

8.3ProjectQualityManagementExecutingThequalitymanagementplandescribeshowqualityassuranceisappliedandperformedon

theproject.Inconstructionprojects,executingqualitymanagementinvolvestheuseofmetricsandprocessesdefined in thequalitymanagementplan toassurequality isbeingexecutedasplanned. The project quality management plan provides inputs to the Perform QualityAssuranceprocess.

Performing quality assurance in construction projects enforces the prevention of qualityproblemsthroughplanned,systematicprocedurestoensuretherequiredorspecifiedqualityisbuiltintoeveryprojectsubsystemanddeliverable.

Quality assurance measurements generate feedback on quality assurance activityperformance and are fed back into the Plan Quality Management process for use inreevaluatingandanalyzingtheprocessandperformingcontinuousimprovement.Thisfeedbackmayincludetheplanningactivitiesof theperformingorganization, thecriteriaandprocessesemployed, and a decision quality assessment as an indicator of areas thatmay need furtherinvestigationandreassessmentoftheriskordecisionstakeninearlyprojectphases.

PerformingQualityAssuranceinvolvesthefollowing:

Applying the planned, systematic quality activities to ensure that the projectemploysallprocessesneededtomeetqualityrequirements;Determiningwhethertheseprocesses(andtheirintegration)areeffectiveinensuringthe projectmanagement systemwill fulfill the quality requirements of the projectandtheproductoftheproject;andEvaluating the results of quality management on a regular basis to provideconfidencethattheprojectwillsatisfytherelevantqualitystandards.

8.3.1 QualityAuditsAuditsof theprojectproduct(s)and/or itscomponentpartsaresometimestermed“quality

technicalaudits”or“qualitycomplianceaudits”andincludeanevaluationofresultsoroutputofworkactivitiescomparedtotheperformanceandacceptancecriteriadefinedinthequalitymanagement plan, project scope, regulatory requirements, and construction specifications.Audits can be internally performed by the project team or externally performed by thirdparties.

Quality audits can be performed on the projectmanagement system as awhole or on itsindividualcomponentparts,suchastheprocurementmanagementsystem,designmanagementsystem,commissioningmanagementsystem,etc.Auditsarecarriedoutwhencompliancewithquality management systems standards are required; for example, the ISO 10011 series onqualityauditingestablishescriteria,practices,andguidelinesforconductingqualityaudits.

Integrated audits are commonly adopted to provide a more accurate measure of theeffectivenessofaspecificareaofworkinfulfillingprojectrequirements(e.g., incorporatingtheapplicablerequirementssuchasthoseforquality,safety,andenvironmentalmanagement).Theseauditsassesstheeffectivenessofthecontrolsemployedonaprojectasawholeratherthanindividually.

8.3.2 QualityManagementReviewsQualitymanagement reviews,whichareexecutedby theperformingorganization,provide

an assessment and evaluation of the effectiveness and suitability of the projectmanagementsystemasawholeorinpart.Resultsofqualitymanagementreviewsareusedtoeffectchangesandimprovementstothoseelementsoftheprojectmanagementsystemthatarenotperformingsatisfactorily.

8.4ProjectQualityControlTobe effective, qualitymonitoring, control, andverification shouldbe integrated into the

overall constructionorprojectdelivery schedule.Thisprocessestablishescontrolpointsorgates throughout theprocess toensure that thenextphaseofworkdoesnotproceeduntil theprecedingworkhasbeencompletedandverifiedtomeettheestablishedcriteria.

Qualitycontrolinvolvesthefollowing:

Determiningandapplyingthemeasuresformonitoringtheachievementofspecificproject results throughout theproject to identifycompliancewith therequirementsandunsatisfactoryperformance;Identifying techniques to eliminate causes of unsatisfactory performance, whichincludes identifying failureson thepartofqualityplanningandquality assurance;andDelivering a quality dossier that compiles all quality control outputs and is animportantinputtovalidatetheproject.

Itemsthatareinspectedandfoundtobenoncompliantwithrequirementsareincludedinanonconformancereportthatoutlinesthedeficiencies,theimmediatecorrectiveactiontobringthe nonconforming work within the permissible tolerance limits, and actions to preventrecurrence of the condition that caused the nonconformance. Nonconformance reports takemanyforms,forexample:

Fielddeficiency reports (FDRs). FDRs record product orworkmanship defects.Repeatedfielddeficienciescouldleadtothematterbeingelevatedtothestatusofanonconformancereport,because thiswould indicateproblemswith theprocessorsystembeingemployed.Nonconformance reports (NCRs).NCRs record system deficiencies or estimatethe cost of rework to fix deficiencies, such as those identified during audits.Repetitivenonconformanceissuescouldresultinthematterbeingelevatedtothatofa contract violation notice, indicating the existence of problems with themanagementofcomponentpartsfortheproduct.Contract violation notices (CVNs). CVNs record principle contract documentviolations,whichwouldindicatefailureonthepartoftheperformingorganizationregarding the overall requirements of the contract. The issuemay be elevated toothercontractactionssuchasnotificationofdefault,curenotice,andterminationifthecontractordoesnotcorrecttheconditions.Observation reports (ORs). ORs are compiled by architecture and engineeringteams,typically,andarenotnecessarilydeficiencyreports,butratherobservationsofthesite,providingbothgoodandbadinformation.Submittals. Verifying conformance of construction materials with the contractrequirementsbeginswiththecontractorsendingproductsubmittalstothedesigners.Thesubmittalsidentifythespecificproductsthatwillbeused,detailhowtheywillbeinstalled,andindicate if there isanyvariancefromthespecifiedmaterial.Thearchitects and engineers check the submittals for conformance with the contractdocuments and note discrepancies so the contractor can bring the product intocompliancewiththecontractpriortopurchasingthematerials.Thisprocesshelpsto avoid rework that would be caused if the contractor ordered nonspecifiedmaterialsandthedesignerdidnotseeuntiltheywereinstalledonthejobsite.

Issues related to NCRs or CVNs for work on contracts require formal contract

correspondenceon thenotednonconformance to requirements.Rework is theaction taken tobringdefectiveor nonconforming items into compliancewith the regulatory requirements orproject specifications.Rework, especially unanticipated rework, increases costs and causesscheduleoverrunsonconstructionprojects.

Theprojectteamshouldmakeeveryreasonableefforttominimizerework.Muchreworkiscausedbypoorsitesupervisionorpoor-qualitytradeworkattheconstructionsite.Additionalcauses of rework can often be prevented or minimized by imposing an approved qualitycontrol program at a supplier's plant. These supplier quality programs are often developedjointly between the performing organization and the supplier, and can include the projectsponsor/owner, other applicable project stakeholders, certified inspectors for various endproductsofthewholeconstruct,andanyapplicableindustryregulator.

9PROJECTRESOURCEMANAGEMENTHumanresourcesmaybeaconstructionorganization'smostvaluableassetandakeyfactor

for business success. Many other resource types play an important part in the success ofconstruction projects, and the relative importance of each resource depends on the type offacility being built, the construction strategy, and other factors. This section addressesmanagementofall typesof resources in thecontextofconstructionprojects.Theexpressionhuman resources refers specifically to the peopleworking on the project. ThePMBOK ®GuideProcessGroupsPlanning,Executing,andMonitoringandControllingareaddressedinthisKnowledgeArea,alongwiththeadditionoftheClosingProcessGroup,whichemphasizesthemajoreffortofprojectteamdemobilization.

9.1ProjectResourceManagementinConstructionResources form the biggest part of the cost in any construction project; productivity and

timelyavailabilitygreatlyinfluenceprojecttimeandcost.Thus,resourcesshouldbecarefullymanagediftheprojectistoreachitsgoals.Constructionprojectsfeatureuniquecharacteristicsthataffecthowresourcesaremanaged,someofwhicharedescribedhere.

9.1.1 ResourceTypesResourcescanbeclassifiedinmanyways.Thefollowingare themostcommonresources

usedforconstructionprojects:

Human resources. The teammanaging the project, as well as the team actuallyperformingtheconstructionitself.Machinery. Themachines that are used in replacement of direct human work toperformconstructionactivities.Examplesofmachinesarecranes,bulldozers, andtrucks.Machineryisalsocalledequipment.Forclaritypurposes,thisConstructionExtensionaddressesthistypeofresourceasmachinery,inordertodifferentiateitfromtheequipmentthatisinstalledinafacility.Tools. Elements that are used by human resources in order to enhance theircapabilitytodirectlyperformconstructionactivities.Examplesoftoolsareshovelsandhammers.Permanentequipment.Equipmentthatisinstalledaspartofthefacilitybeingbuiltand that ismanagedby tagnumber.Examplesofpermanentequipmentarepumps,

compressors,boilers,andelectricpanels.Bulk materials. Materials that are installed as part of the facility being built.Because of the use of these materials in different parts of the facility, they arecontrolledinbulkquantitiessuchasmeters(feet)orkilograms(pounds).Examplesofbulkmaterialsareelectriccables,steelpipes,andfloortiles.Consumptionmaterials.Materials that are applied in construction activities andprocesses that are consumed as part of the constructionwork in large quantities.Examples of consumptionmaterials arewelding electrodes, industrial gases, dustmasks,nails,bolts,rivets,andfuel.Consumption resources. Electric energy and water are applied in constructionactivities and processes in a similar way as consumption materials but aredifferentiatedbecausetheyaremanagedinadifferentway.Temporary facilities. Site camp, warehouses,machinerymaintenance shops, andother temporary structures built for accommodating the project team and otherresources, as well as all the equipment necessary for their functioning, such asfurnitureandsoftware.

9.1.2 ProjectLocationTheproject location isalmostalwaysunique to theprojectandmaydiffer fromthehome

location of many of the management team—usually in the temporary environment of aconstruction site.Apart from thedirect impact inhuman resourcemanagement, this situationmeansdealingwithresourceprovidersthatarenewtotheperformingorganization,whichmayrequireagreaterlevelofformalityandbureaucracyinresourcemanagement.

Theavailabilityofresourcesfromskilledlabortoconsumptionmaterialsvariesatdifferentprojectsites.Inprojectswithmultiplesites, theavailabilityofresourcesmayvaryfromonesitetoanotherandmayinfluenceconstructionstrategy.Forexample,thechoiceofthelocationfor a concrete production facility in a road construction project is usually the result ofbalancing the distance from the sources of sand and gravel and the distance to the concreteapplicationareas.

Themethodsandproceduresforacquiring the teamandotherresourcesforaconstructionprojectcanvarysignificantlyindifferentpartsoftheworld.Managersofconstructionprojectsshouldbeawareoflocalconditionsandcustomsandtheirimpactinprojectmanagementandexecutionstrategy,includingaspectssuchastheprojectworkcalendar,andthesize,type,anddisplayof site temporary facilities.For example, one such caseoccurred in a hydroelectricplantprojectinMalaysia:thelivingfacilitiesfortheconstructioncrewsincludedtemplesforeightdifferentreligions.

9.1.3 ProjectSizeandTypeDependingonthesizeoftheproject,hundredsoreventhousandsofhumanresourcesmaybe

employed.Insuchlargeteams,itisnotpossibletorelysolelyontheinterpersonalskillsofthe

project manager for leadership, communication, negotiation, and conflict resolution.Interpersonal skills are required at all layers of the project hierarchy and of everystakeholder'shumanresourcesworkingontheproject.

The type of facility being built may require resources from multiple origins. This addscomplexitytothelogisticsofactivitiessuchasestablishingoffshorepurchasecontractssubjectto different local tax and labor regulations; adhering to international law; managingtransportationtothejobsiteinforeigncountries,whetherbyroad,sea,orland;andobtaininginsurance,customclearance,andotherpermits.

9.2ProjectResourceManagementPlanningOnce the typesandquantitiesof resourcesareestimated, it ispossible tochoose thebest

alternative formanaging those resources.Division of responsibilities, as determined by thecontract, is another important input formanaging resources.For example, theownermayberesponsibleforpurchasinglong-lead-timeequipment,butthecontractormayberesponsibleforunloading, storing, and preserving it at the site until installation and start-up. Constructionstrategy determines the quantities, locations, and time frames when each resource will bestoredandmadeavailable.

Resourcemanagementplanning involves the logisticsofbringingresources to thesiteandstoring or distributing them to each construction front. Special cases in logistics are theplacement of telecommunications facilities, energy and water points, and the handling ofoversize and overweight loads. Other unique logistics involve the daily transportation ofworkersinandoutofthesiteand,insomeprojects,betweenthedifferentconstructionfronts.

The strategy, processes, and performance indicators for resource management should becollectedintoaresourcemanagementplan,addressingatminimum:

Number, size, type, and layoutof facilities for storinggoods.Thedesignof thesefacilities should take into account applicable standards and regulations forhazardousmaterialsandmanufacturerrequirementsforequipmentstorage.Resource requirements for resource management, such as warehouse crews;logistics and transportation teams; equipment suchas trucks, cranes, and forklifts;andconsumptionmaterialssuchasgreaseandnitrogenforpreservation.Histograms for themost relevant resources in the project, such as heavy cranes,concrete,andothers(dependingontheprojectsizeandtype)(seeTable9-1).Processesforresourcesreceiving,handling,stocking,preserving,anddeliveringtothe point of application, along with responsibilities and authorizations forrequestingresources.

In construction projects, the human resourcemanagement plan is a stand-alone document.Theuniquecharacteristicsrelatedtoprojectlocationandnatureoftheprojectteamrequirethatspecial attention be paid to at least two components of that plan in a construction project:humanresourcepoliciesandstaffingmanagementplan.

As each construction site has its particular characteristics, contractors’ corporate humanresource policies tend to be broader ormore general to leave flexibility for the project todetermineaspectsthatareaffectedbythoseparticularcharacteristics.Itisnotuncommonforconstructionprojectstohavetheirownhumanresourcepolicy,whichshouldmakereferencetoa general or corporate policy. Some examples of topics thatmay vary from one project toanother andmay be covered by a project human resource policy for corporate constructionpersonnelare:

Incentives or restrictions for teammembers tomove to the region of the project,withorwithouttheirfamilies;Scheduleofperiodicvisitstothemembers’homelocations,allowabletimeoff,andtripcostsreimbursement;Currencyinwhichsalarieswillbepaid,aswellasthelocallabortaxesinvolved;Sitecampusconditions;andSitepersonnelfringebenefits.

Thehumanresourcepolicyisaverysensitiveone,asitcoversbothlaborandmanagement,includinglocalandforeignworkers.Iflocalandforeignworkersareincludedintheproject,thepolicyshouldbewrittensoastobalancetheattractionofbothforeignandlocalworkerstoprevent creating a feeling of undervaluation for local workers. This policy should bedevelopedduring thebiddingphase, as it implies costs that shouldbe taken into account incontractprices.

9.3ProjectResourceManagementExecutingThe execution processes for resource management take place as soon as resources are

procured and delivered to the project job site. All materials and equipment should becoordinatedfordelivery,includingoffloadingandstorageuntilthesebuildingcomponentsarepermanently installed. The continual movement and storage of these components leads tohigher job site costs until permanently installed. The following are some of the importantpointstoconsiderwhenmanagingresourcesduringtheexecutionofaproject:

9.3.1 GeneralResourcesStockingquantitiesmanagement.Althoughstocksizeisanissueinmostprojectsdealing with resources, the interdependence and the quantities that constructionprojects usually dealwithmake inventorymanagement a very important process.For example, the lack of fuel may cause site machines to stop, causing lowproductivityanddelays;excessfuelmayincreasetheimpactofeventualaccidentsandrequiresadditionalstoragefacilities.Expiration dates. Some materials, such as cement and paint, are subject toexpiration dates, which pose an additional requirement for stock sizing andinventoryreplacement.Hazardous materials. Paints, fuel, chemicals, and other hazardous materialsrequirespecialconditionsoftransport,storage,handling,anddisposalofresidues,which may include dedicated water or runoff collection systems and ventilationrequirementsatsite,andspecialpermits.Materialsrequiringspecialstorageconditions.Somematerials,suchaselectronicartifacts or electric motors, require controlled temperature and/or humidityconditions.Machinery maintenance. The resource calendar for machines should foreseemaintenanceperiods.Maintenanceisperformedatadedicatedfacilitywithitssetoftools,consumables,andspareparts,forwhichresourcesmanagementappliesaswell. According to standards and regulations, this type of facility usually hasinstallationsforcollectionofcontaminatedwateranddisposalofresidues.Permanentequipmentpreservation.Mostoftheequipmentthatwillbeinstalledaspartofthefacilitybeingconstructedrequiressomekindofpreservationactivity,such as periodic greasing and rotation of axis. Owners usually require apreservation plan to be approved and executed. The preservation evidence isusuallyapartofthefacilitydatabookordossier.

9.3.2 HumanResourceConsiderations that are importantwhenexecutingproject human resourcemanagement for

constructionprojectsaredescribedinSections9.3.2.1through9.3.2.3.

9.3.2.1 StaffingAlthoughthestaffingprocessisthesameforboththelaborandmanagerialforces,thetools

and techniques that are effective for eachmay be different. For example, networking is animportanttoolforstaffingthemanagementteam.Constructionprojectsusuallyrequirecertaintypesofpeoplewithspecificcharacteristics,suchas theability tomovefromone'shometoanotherlocation,adaptabilitytodifferentcultures,andasenseofmission.Throughnetworking,afirstscreeningofpotentialteammemberscanbeaccomplished,expeditingtheacquisitionofexternal workforce. For the labor force, networking is seldom used, as the construction

workforcemay be acquired from trade associations, labor unions, local labor agencies, orsolicitation through job postings, which may be very effective in remote communities.Unionized construction trades are usually obtained from the local union hiring hall, and thecontractormaynegotiatewiththeuniononthenumberandtypeofworkersaswellaspayscaleandbenefitsforlargerprojects(usuallythroughacollectivebargainingprocess).Theresultsofthenegotiationvarydependinguponthestateoftheconstructioneconomyandemploymentlevelamongunionmembers.Fornonunionprojects,itisusuallythecontractor'sresponsibilitytoacquiretheworkforcelocallyorfromthecontractor'sownworkforcedatabase.Forforeignprojectsorwherealargelaborforceisrequired,thecontractormayberequiredtonegotiateagreementswithlocalfirmsthatcontroltheavailableworkforce.

9.3.2.2 TeamBuildingConstructionprojectsusuallybringtogetherdifferentstakeholdersworkinginconjunctionto

reach a common result. In this environment, the concept of team crosses the borders of thevariousorganizationsworkingontheproject,andteam-buildingactivitiesshouldbeplannedwiththataspectinmind.

The durations of typical construction projectsmay range from less than 1month tomanyyears. Within that time frame, the various stages of construction activities require themobilization of crewswith different skills, so the team-building effort is always at a start.Team development strategies for the labor workforce should use different techniques fromthose applied to the managerial workforce. One popular technique is to offer incentiveprogramssuchasawardsbasedoncrewperformanceintermsofsafety,productivity,andotherfactors.Otheractivities,suchasabarbequelunchforthelaborandmanagerialworkersonajobsite,maybeeffectiveforteambuilding.Theseeventsmayincludesubcontractorsandsomeform of celebration or recognition, especially around completion of key milestones ordeliverables.

9.3.2.3 InterpersonalSkillsInterpersonal skills are an important tool for managing project teams. In construction

projects,theprojectteamcanbeverydiverseintermsofculture,knowledge,education,andotheraspects,whichmakesinterpersonalskillsevenmoreimportant,notonlyfortheprojectmanager,butalsofortheentireteam.

9.4ProjectResourceManagementMonitoringandControllingMonitoringandcontrolling resources in constructionprojects isprimarilyconcernedwith

productivityandconsumptionrates,aswellaswiththeprocessofallocationandreallocationofhuman resources (HR leveling)according toprojectneeds.Productivityandconsumptionrates estimate howmuch a given resource can produce in a given time, or howmuch of aresourceisconsumedtoproduceaunitofagivendeliverable.Forexample,theproductivityofabulldozercanbemeasuredincubicmetersperhourofearthmoved,whiletheconsumptionof welding electrodes can be measured in kilograms of electrode per inches of weld

performed.Productivityoflaborcanbemeasuredintermsoflaborhoursperunit.Productivityand consumption rates arewidely used as a basis for estimating resource usage, leading toactivityresourcerequirements,andactivitycostestimates.Controllingproductivityduringtheexecutionoftheprojectisusuallyakeyfactorforperformingtheprojectwithinthetimeandcostbaselines.

Productivity control isperformedbymeasuringexecutedquantities inworkpackages andthen measuring and relating workforce, machinery, and materials usage to those workpackages.For theproductivitycontrolprocess toactuallywork,constructionstrategyshouldbe accurately translated into a matching set of work breakdown structure, cost breakdownstructure, and time schedule. The success of the productivity control process is establishedduringplanning.

Reporting is another key factor for controlling productivity rates. For example, knowingwhichequipmentworkedforwhichworkpackageallowsthecomparisonofproductivityratesfordifferentequipment,eventuallydetectinganeedformaintenanceoroperatorretraining.

Consumption materials and resources are controlled by inventory as they cannot beindividualized. The focus of controlling those types of resources is in savings rather thanproductivity.Reducingresourceusageisbeneficialnotonlytoprojectcostobjectives,butalsotoenvironmentalmanagement,bothbyreductionofuseandbyreductionofwaste.

Another factor thatmayaffect theability toaccomplish theproject'scostobjectives—andshould be monitored—is the turnover rate. The turnover rate is the ratio of the number ofworkers that are replaced in a given time period to the average number ofworkers and isusuallyexpressedasapercentage.Hiringandfiringonahigherratethantheoneconsideredinthebudgetmayleadtohighercostsinpayroll,productivity,andtraining.

Construction companies usually include records of productivity and consumption rates,alongwithananalysisof theconditions impacting(positivelyornegatively) thoseresultsaspartoftheirlessonslearned.Theorganizationdependsonthisfeedbacktocreateandupdateorganizational process assets that may represent an important competitive advantage fortenderinginthemarketplace.

9.5ProjectResourceManagementClosingAs the constructioneffort of thevariousphasesof theproject approaches completion, all

permanentequipmentandbulkmaterialshouldbeinstalled.Therespectiveprojectresources,includinghumanresources,areeitherreassignedtootherprojectsorreturnedtotheirtradeandunion associations and providers, whereas equipment, residual materials, concrete formingsystems,andinstallationtoolsandsupportingconsumablesareremovedandmaybesenttothenextprojectorstoredforsubsequentfutureuse.

9.5.1 GeneralResourcesThe procurement of equipment and materials is performed by the contractor; the owner

usually requires a set of spare parts to be purchased in conjunction with each piece of

equipment.Theclosingprocessincludeshandingovertotheownerthosesparepartsandallotheritemsthat,percontract,belongtotheowner.

Itiscommonforthecontractortopurchaseasurplusofsomematerials,suchassteelrebarand electric cables, to account for accidental damage of materials. The remainder of bulkmaterialsintheownershipofthecontractorandthestockofconsumptionmaterialsandtoolsshouldbedisposedof,eitherbysendingthemtoanotherconstructionprojectorsellingthemtothemarket.Rentedmachinery is returned to the owner, and the respective rental contract isclosed.Ownedmachineryisreturnedtotheperformingorganizationforemploymentinotherprojects.

9.5.2 HumanResourceTheprocessofreleasing teammembers inconstructionprojectsmayinvolve thousandsof

people,requiringalotofeffortandpossiblyinfluencingaproject'sobjectives.Thecloseoutand dissolution of the project team is a major consideration for construction projects. Ascertain responsibilities are completed, teammembers are released and either return to theirsourcedepartment,areassignedtoanotherproject,orarereturnedtotheirpointofhireandtheopenjobmarket.Whentheprojectiscompleted,alloftheremainingteammembers,includingtheprojectmanager,arereleasedfromtheproject.

As a project approaches its conclusion, some team members may take steps to findsubsequentemploymentandleavetheprojectbeforetheirassignmentiscompleted.Thismaydelaytheproject'scompletionandgenerateapotentialnegativeimpactonprojectobjectivessuchas timeandcost.For thesereasons,extractinggoodpracticesandlessons learnedfromteammembersshouldbeaconstantpracticethroughouttheprojectlifecycleinorderfortheorganization to capture practical knowledge and experiences. The projectmanagement teamshouldhaveathandprocessestohandlesuchcasesinordertokeepkeyperformanceindexeswithinacceptablelimits.Forexample,offeringabonusforstayinguntilthefinalclosureoftheprojector forcompleting taskswithinacertain timeframecanbeeffective inoffsetting thistypeofproblem.

10PROJECTCOMMUNICATIONSMANAGEMENTThePMBOK®Guide states thatProjectCommunicationsManagement ensures timely and

appropriategeneration, collection,distribution, storage retrieval, andultimatedispositionofprojectinformation.ThisKnowledgeAreaisveryimportantinthedesignandconstructionofaproject because of the number and diversity of key players and the need to communicateinformationinatimelyandaccurateway.Consequently,considerablethoughtandplanningisrequiredtoprovideasystemthatmeetsthesetwocriteria.

10.1 ProjectCommunicationsManagementinConstructionThe construction industry is critically dependent upon efficient communications among

stakeholders,stakeholdergroups,organizations,andoftenthesocietyatlarge.Communicationwithinconstructionenvironmentspresentsspecialchallengesduetothehighnumberofpeoplecomingtogetherforshortperiodsoftimeandtheinterdisciplinarynatureofprojectteams.

Fromacommunicationsperspective,theprojectteamintheconstructionindustryhasuniquecomplexcharacteristicssuchas:

Theprojectteamisworkingonsite,usuallyinanunfamiliarenvironment;thisisanaddeddifficultyforcommunications.Theproject team is formedbydiverse individualsandorganizations fromawiderange of occupational backgrounds, needs, and cultures that form a temporaryrelationshipwithotherunfamiliarindividualsandorganizationsthatsometimeshavecompetitiveneedsandobjectives.Contractors tend to rely on casual labor and subcontractors with shared projectobjectives,butindividualinterestsandgoals.Various formal and informal technical language and jargon are used within thefragmentedstructureoftheprojectteam.

Theprojectteamandprojectmanagerarethefocalpointofprojectcommunications.Theytranscend project and organizational boundaries, not just for distributing project-generatedinformation, but also for gathering, analyzing, and responding to stakeholder-initiatedinformation(feedback)toovercomecontractual,social,andculturalbarriers.

Project documentation is a major consideration for construction projects given thesignificant volume of design documents and the extensive design of construction contract

requirementsformanagingthecontemporaneousdocumentationproducedduringthecourseofaproject.Thedynamicnatureofconstructionsprojects,thedistancebetweentheorganization'scentralofficeandprojectsite,thetechnicallanguage,organizationalandculturalbackground,andmanyotherfactorsmaydistorttransmittedinformation.

Oneof themostcommonformsofcommunication inconstructionprojectsoccursbetweenindividuals using face-to-face interpersonal communication (e.g.,meetings) or through othermediasuchasemail, text, instantandvoicemessaging,andmultimediacommunicationsovertheinternet.

Constructionprojectsdevelopstrong informalnetworksofcommunicationchannelswheredesigners,engineers,managers,andtheworkforcebelongtodifferentorganizationsthathavetheir own formal and informal communication procedures. Communication channels aredependent upon the contractual arrangement and procurement routes adopted for the projectthatdefinetherelationshipbetweenparties;however, theyrarelygovernthecommunicationsproceduresandmayevenconstrainthenaturaldevelopmentofrelationships.

A typical basic type of network used to represent the formal communication flow intraditionalconstructionprojectsisshowninFigure10-1.Inthisnetwork,theprojectmanageristhecenterofformalprojectcommunicationsexchange.

ThebasicnetworkrepresentedinFigure10-1isrepeatedforthevariousprojectteamsandstakeholders.Theoutputof this isamajornetworkdiagramwhereeach teamhassecondarynetworksthatinteractwithoneanotherandwiththeowner'snetwork,whichincreasesthetotalpotentialcommunicationchannelsasshowninFigure10-2.Thecomplex,multiorganizational,multisector, diverse, competing-interest-driven communication network created between

stakeholdersinconstructionprojectsisamajorchallengetomeettheprojectneeds.

Processesand techniquesforprojectcommunicationsmanagement inconstructionprojectsarethesameasthosedescribedinthePMBOK®Guide.SomesignificantconsiderationsforProjectCommunicationsManagement on construction projects are described in this section.PMI'sPulseoftheProfession®In-DepthReport:TheHighCostofLowPerformance:TheEssentialRoleofCommunications[4]suggests thatorganizations thatwant to improvetheircommunications and become high performers should consider tailoring communications todifferentstakeholdergroups.

10.2 ProjectCommunicationsManagementPlanningAlongallthephasesoftheprojectlifecycle,importantinformationisgenerated,collected,

and distributed between the project teammembers and other stakeholders. Communicationsmethodsandprotocolsshouldbeplannedaspartofeffectiveprojectmanagementpractice.Thevariousconstructionorganizationsinvolvedaspartofthesupplychainshouldacceptandagreeonplannedcommunicationprotocolsfortheproject.

10.2.1 CommunicationsManagementPlanWhenplanningaconstructionproject'scommunications,importantconsiderationshouldbe

giventothecontractdocuments.Theseincludethecontract,thegeneralandspecialconditions,andthedesigndocumentsandanyreferenceddocumentsthatindicatespecificrecordsand/orcontemporaneousdocumentationandreportingrequirements.Theseitemsshouldbegeneratedandmanagedforthedurationoftheproject.

The construction industry has many unique requirements involving labor, jurisdictionalreporting,certifiedpayrolls,andotherregulationsthataredesignedtoprotecttheworkers,theenvironment, and enterprise environmental factors. A checklist for these documentationrequirements—the project documentation requirements checklist—serves as a supplement tothecommunicationsmanagementplan.

10.2.2 ProjectDocumentationAssessmentTherequirementsoutlinedinthecontractdocumentsdeterminewhatshouldbedocumented

inordertofulfillcontractualobligations.However,theextensivenessandlevelofdetail,alongwithstakeholders’internaldocumentationrequirements,shouldbeassessedatthestartoftheproject. Stakeholders assume that everything will proceed smoothly on the project, untilsomething goes wrong. It is important to have supporting documentation illustrating thesituation at hand, for example, daily field reports (see Section 10.2.5), inspection reports,submittalapprovals,jobsitevisitor'slog,telephoneconversationrecords,orawell-describedrequest for information(RFI) (seeSection10.2.5)withprojectdelaysnoted.These typesofdocumentsandthelevelofdetailareextremelyimportantinthecaseofadispute.

Well-established construction stakeholders frequently have job site and projectcommunicationproceduresinplace.Theseshouldbeevaluatedinrelationtotheproject'ssizeandcomplexity,andshouldnotprecludeanyoftherequiredbasicdocumentation.Asamplesetof project documents that support the stakeholders and project requirements can set theprecedentforadequateandthoroughdocumentation.

10.2.3 CommunicationsSkillsThePMBOK®Guidedescribescommoncommunicationsskillsforgeneralmanagementand

project management. Other important management skills may be mentioned related toconstructionprojects’communication,suchas:

Effective communication, in a comprehensive way within different levels andtailoredtotheinterculturalanddiverseprojectteammemberaudience;Effectivemanagement of projectmeetings and arranging and chairingmeetings toensureproductivecommunication;andEncouragementofintergroupcommunication.

Inconstruction-relatedprojects,itispossiblethatsomeskillsdonotexistwithintheprojectteam.Itmaybenecessarytoobtainspecificprofessionalservices,suchasapublicrelationsconsultant.

10.2.4 CorporateCommunicationandSocialResponsibilityOrganizationsarevulnerableandareexposedtothecriticalopinionofmediaandpressure

groups. Corporate social responsibility (CSR) has become a main concern for companies.Customersrequirepropercorporatesocialresponsibilityforproductsthatareavailableonthemarket. The construction industry is also immersed in this trend, especiallywhen operating

sensitivepublicprojectswithmajorenvironmentalexposure.

Social responsibility means developing social, ethical, and environmental responsiblebusiness policies through project activities. Communications about projects with externalstakeholders should demonstrate a responsible commitment toward the environment, thecommunity, and employees. Community involvement may become a key factor to achieveprojectobjectives.

Projectmanagersshouldhaveabasicunderstandingofmasscommunicationwhendealingwithexternalcommunicationsandsocialresponsibility.Effectivecommunicationwithexternalproject stakeholders early and often is a key factor to develop successful communityinvolvementwiththeproject.

Theproject communicationsplan shouldbedeveloped following thehigh-level corporateandsocialresponsibilitystrategyandthecorporatecommunicationsplan.

10.2.5 CommunicationFlowforConstructionChangeOrders,RequestsforInformation(RFIs),Instructions,andVariationRequests

One of the major considerations in planning a communications system for constructionprojects is to determine how construction communication workflows (from requests forinformation[RFIs]tochangeorders)aretobehandled.Communicationsbetweenthedesigner,contractor,subcontractors,suppliers,vendors,andtheowner(ortheowner'srepresentative—the construction project manager) can have a serious effect on the cost and schedule of aprojectandleadtoclaims.Itisimportanttoestablishandprovideanefficient,quickwayofmanagingclaimsandrecordingtheresults.Theseguidelinesmaybeestablishedintheprojectcontract,includingtheallottedtimeforansweringthem.

10.2.6 DailyReportDailyreports,dailyfieldreports,ordailyconstructionreportsaredailyrecordsoffactual

informationregardingtheworksiteconditionsandevents,includingamongothers:

Weatherandsiteconditions;Workmen,contractor,andsubcontractorpersonnelemployed;Equipmentarrival,departure,anddowntime;Projectactivity;Progressofwork;Resourcesusedtocompleteactivities;Significantcommunications,orders,directives,anddocuments;Safety and environmental accidents, breakdowns, injuries, delays, damages, andotherunusualevents;Significantvisitors;

Testsandinspections;Trafficcontrol;andSafety.

Daily reports are essential documents in construction projects and can be extremelyimportant fordispute resolution;properguidelines fordaily reportingmaybeestablished inplanning.

10.2.7 InformationandCommunicationTechnology(ICT)andProjectManagementInformationSystem(PMIS)

Informationandcommunicationtechnology(ICT) in theconstruction industryextendsfromthe design and production functions up to the operation of built assets and facilities. As apowerful tool it facilitates and enables communication and information distribution withinconstructionprojects.

Whenproject teamorganizationsaregeographically separated, theuseof informationandcommunication technology (ICT) can provide effective communication. The benefits ofadoptingmodernICTincludericher information toaiddecisionmaking,constructionprojectinformation obtained more quickly, closer relationships, improved information exchange,greatermanagementcontrol,enablinggeographicallydispersedgroupstoworktogether,etc.

ICT includes computer-assisted management and communication technologies. Some ICTapplicationscurrentlyusedintheconstructionindustryare:

Computer-aideddesign(CAD)applications;Virtualrealityapplications;Projectplanningandcontrolsoftware;Riskmanagementsoftware;Buildinginformationmodeling(BIM);andProjectmanagementinformationsystem(PMIS).

In the construction industry, the projectmanagement information system (PMIS) providesaccess to other tools, such as document management systems, configuration managementsystems,computer-aideddesign(CAD),andinformationcollectionanddistributionsystems.Itisdesirablethatalloftheseapplicationsarecompatibleandinterconnectedsothatinformationcanflowfromonetoanother.

The project management information system is a key supporting set of tools for aconstruction project's communications management. Contemporaneous and historicdocumentationshouldbemaintainedthroughoutthelifeoftheprojectasacriticaltoolusedfordispute resolution. Document evolution history, traces of revisions, and uploading anddownloading records should be available for future reference, thereby providing a betterunderstandingofthedocumentation'sevolutionhistory.

On large multidisciplinary, multiparty construction projects, the project managementconfiguration system should be adopted by the lead organization to centralize documentstorage,control,anddistributionandtoestablishproperaccessandauthorizationrules.

Theuseofbuildinginformationmodeling(BIM)asasinglerepositoryofcompleteprojectdatafromconceptualdesigntooperationandmaintenance—andcontainingdatageneratedandcoordinated concurrently by all the parties involved in the various project phases—mayprovide a better understanding of the construction project and facilitate effectivecommunication, coordination, and collaboration by avoiding errors and omissions andprovidingameansforearlyconflictdetection.

10.3 ProjectCommunicationsManagementExecutingThe highly complex environment within which a construction project operatesmakes the

developmentofaprojectcommunicationstrategyahighpriorityforconstructionorganizations.Inorder to enable efficient andeffective communication flowbetween stakeholders, projectcommunicationsshouldbemanagedproactivelytoensuretheinformationbeingcommunicatedisappropriatelygenerated,received,andunderstood.

The Project Communications Management Executing process can be managed under theguidelines described in the PMBOK® Guide with consideration given to the inherentparticularitiesofconstructionprojects.

10.3.1 ManagingConflictDifferentorganizationscoexistunderthetemporaryconstructionprojectenvironment.Each

of these organizations seeks its own goals (sometimes under competing interests) whenaddressing collective project objectives. This potential adversarial relationship betweenprojectorganizationsmayleadtoconflict.

Conflictmanagement,fromacommunicationsperspective,developstechniquesfordealingwithsourcesofconflictandconflictresolution.Managingconflictwithinconstructionprojectsshouldbeundertakenwithinacollaborativeenvironment,wherestrictcontractagreementsarethe predominant factor. Project managers play an important role in creating an opencommunicationculturethroughouttheproject.

10.3.2 ManagingMeetingsMeetings are fundamental to construction and should be held regularly and managed

professionallywithwrittenagendasandactionplans,andattendedbyallappropriateprojectteammemberorganizations.Meetingsshouldbeefficientlyplanned.Forexample,thecostofresourcesattendingaproblem-solvingmeetingmaybehigherthanthecostoftheproblem.Ontheotherhand,successfulmeetingsmaymotivatemembers,resultinginamoreeffectiveuseofresources.

10.3.3 ProjectDocumentationandInformationDistribution

Project documentation on a construction project is vast and extensive. Effectiveadministration of the documentation is critical and should be managed effectively from theonset and integrated throughout the life of the project. Consequently, the projectcommunicationsmanagementplanandthestaffchargedwithadministeringitmayrequiretheadditionalcapability,systems,andprocessestointegrateandmanagethevolumeofindividualdocumentsandtheinformationflow.

Majorcomplexprojectsmayneedtodevelopanagreedcentralizedmanagementofprojectcommunicationsbetweenmainprojectstakeholderstoensureeffectiveandefficientaccesstoanddistributionofprojectinformation.

Construction documentation may include contracts, pay estimates, design clarifications,changeorders,performancereporting,owner/maintenancemanuals,accident/incidentreports,invoice logs, submittal logs,correspondence logs, inspection reports, testingandacceptancedocuments,punchlists,andwarranties.

Much of the documentation generated by a construction project is time-sensitive andapproval-based, such as shop drawings, changes, and design clarification requests. Projectlogsfacilitatethecontinualexchangeofinformationandtrackturnaroundtimesandapprovals,and assign a document number corresponding to document type. These logs become anessential part of the project records and a source for recording dates and instructions fordocumentation.

Because of the potential for misinterpretation and contractual disputes on constructionprojects, documentation remains a priority throughout the life of the project. This type ofdocumentationisfundamentaltoresolvingdisputesandadequatelydescribingcircumstances.

10.4 ProjectCommunicationsManagementMonitoringandControl

Controlling the impact and repercussionsof project communications ensures that the rightmessage isdelivered to the right audienceat the right time throughout theentireproject lifecycle,andtheinformationneedsoftheprojectstakeholdersaremet.

Constructionprojectcommunicationscomefrommultiplesourcesandmayvarysignificantlyintheirformat,levelofdetail,degreeofformality,andconfidentiality.

10.4.1 PerformanceandProgressReportsPerformancereports includeperiodic(oftenmonthly)projectstatusreports.Theseinclude

statusupdatesfordesign,procurement,expediting,riskevaluation,andqualityactivitiesoftheprojectaswellasaforecastoffutureactivityofcostandearnedvalue.PerformancereportingshouldalsoincludetheRFIresponserecord.

Examplesofcommonformatsforperformancereportsincludebarcharts(alsocalledGanttcharts),S-curves,histograms,andtables.(SeeSection6onProjectScheduleManagementforvarious types of schedules and methods for monitoring and reporting project status and

progress.) In addition, progress reports for construction projects commonly require theinclusionof informationrelatingtoperformanceandcostmeasurementanalysestodeterminethemagnitudeofvariancesthatcan,andoftendo,occuronconstructionprojects.

Performancemeasurementanalysesincludeearnedvaluetechniques(EVT)andforecasting.In particular, this includes cost performance index (CPI) and schedule performance index(SPI),whicharepresentedintabularandgraphicalformtoidentifytrendsinprogress(orlackthereof).Suchpresentationsareoftenconsideredavitalelementofanyconstructionprogressreport.Tables10-1and10-2provideexamplesofsummariesofCPIandSPIinformationfora12-monthproject,withtheinformationpresentedingraphicalforminFigure10-3(byRadialMethod) and Figure 10-4 (by Linear Method). Forecasting will include the estimate tocomplete (ETC) and estimate at completion (EAC), both for individual disciplines ofworkandforthetotalproject.

CPI is a performancemeasure that is dependent on actual costs.Contractorsworking forownersmaynotshareactualcosts.In-houseforcesemployedbytheownermayhaveaccesstoactual costs; however, they should be aligned with the data, dates, schedules, EVM, andreportingcycles.

CPI may be most useful to contractors in managing the performance of their payrollemployeeswhoaredirectlypaidforconstructionactivities.Thebenefitsarethatthecontractorcanmonitorprojections forachievingoreroding theprofitestimatedwithin thecontractbidamount.

10.4.2 OtherReportingSystemsAmongthesafety,environmental,financial,andextensivequalitycontrolrequirements that

exist in the construction industry, many have specialized functions and contain specific

reportingsystemsbasedontheinformationanddocumentationtobegatheredandrecorded.Itisimportanttonotethatthetoolsandtechniquesrequiredforthesespecializedareasmayvary,buttheyareanessentialcomponentofperformancereporting.

10.4.3 ContractorPerformanceEvaluation(CPE)Contractor performance evaluationsprovide a recordof a contractor's performance along

the construction project life cycle. These performance assessments reflect the contractor'swork performance in different categories, such as health, safety, and environmentalmanagement;qualitymanagement;schedulemanagement;contractadministration;anddisputes.These evaluations provide records of performance that will contribute to future contractorprocurementselectionandtenderassessmentprocesses.

11PROJECTRISKMANAGEMENTProject riskmanagement includes theprocesses for conducting riskmanagementplanning,

identification, analysis, response planning, and controlling on a project. Project riskmanagementisessentialforsuccessfulprojectmanagementandshouldbeappliedthroughoutaproject's life cycle. The root objectives of project risk management are to increase thelikelihoodandimpactofpositiveeventsoropportunitieswhiledecreasingthelikelihoodandimpactofnegativeeventsorthreatstotheproject.Projectriskmanagementcanbeconsideredanextensionofotherprojectmanagementprocesses,forexample,addressingtheuncertaintyinprojectestimatesandvalidityofassumptions.Projectriskmanagementassistsstakeholdersbyproviding greater certainty about project outcomes, reducing risk exposure, determiningprojectstrategiesforbiddingandcontractnegotiation,andestimatingthecostandscheduleforcontingencyreserves.

MostofthematerialonprojectriskmanagementinthePMBOK®GuideandinthePracticeStandardforProjectRiskManagement[5]isapplicabletoriskmanagementforconstructionprojects.This section of theConstructionExtension presents additional considerations andguidelinesformanagingconstructionprojectrisks.

11.1 ProjectRiskManagementinConstructionEveryconstructionproject,regardlessofitssizeandcomplexity,continuallyfacesavariety

ofuncertainsituationsduetofactorscommontotheconstructionindustry,suchas:

Longdurationandaggressiveschedules;Changingenvironmentandthedynamicnatureoftheworkplace;Complextechnicalprocesses;Openlocationshighlyexposedtoenvironmentalagents;Unskilledworkforce;Materialshortages;Differentorganizationsactively involved in theconstructionprojectwithdifferentgoals,interests,andexpectations;Manyworksbeingofpublicinterest;Changeinmaterialprices;and

Regulatoryrequirements.

AppendixX3describesthemostcommoncausesofrisksinconstructionprojects.

Construction organizations should address risk management proactively as a team andconsistently throughout the construction project life cycle. While risk management offers aproactiveapproach,managementofissuesisareactiveapproach.

Some significant considerations should be taken when performing risk management incertain construction projects involving unique characteristics, for example, constructionprojectsdevelopedundercollaborativeconstructionprojectarrangementsandpublic-privatepartnershipsaswellasinternationalconstructionprojects.

11.2 ProjectRiskManagementPlanningCareful and explicit planning enhances the probability of success for other project

managementprocesses.Planningisalsoimportanttoprovidesufficientresourcesandtimeforrisk management activities, to establish an agreed-upon basis for evaluation risks, and todefine the required level of riskmanagement.Additional considerations, helpful documents,and toolsand techniques for riskmanagementplanning inconstructionprojectsasdescribedbelowshouldbeconsidered.

11.2.1 BiddingandContractDocumentsDuringthebiddingphase,thebiddingandcontractdocumentscanbearequestforproposal,

invitation for bid, or a similar document that the bidding team uses to implement riskmanagement.Thesignedcontract, togetherwiththeproposalandbiddingdocumentation,canbe considered the formal document that authorizes the project, much like a project charterauthorizestheformalexistenceofaproject.

11.2.2 OrganizationalMethodsThe method by which the organization addresses topics (e.g., which phases of risk

managementtoperform)canvarybasedonthetypeofprojectandthecontractarrangement.Itincludesindividualriskmanagementprocessesandhowtheiroutputswillbelinkedtooverallproject risk management. For example, in an engineering, procurement, construction, andmanagement(EPCM)project,theengineeringandconstructionphasesmayhaveindividualriskmanagementprocesses,whiletheprocurementandmanagementphasescanbetreatedtogether.Methodsalsoaddresshowsafetyandenvironmental riskmanagementplans interactwith theoverallconstructionriskmanagementplanandhowthesubcontractors’riskmanagementplanswillfitintotheoverallprojectriskmanagementplan.

11.2.3 BudgetingA budget should be established for risk management for the project, based on assigned

resourcessuchasinternalemployees,consultants(includingtheriskmanager),equipment,andworkshop rental space.The cost baseline should include estimated funds needed. Protocols

shouldbeestablishedfortheapplicationofcontingencyandmanagementreserves.

11.2.4 ScoringandInterpretationThePMBOK®Guideconsidersstrategicriskscoringsheetsasatoolforprovidingahigh-

levelassessmentoftheriskexposureoftheprojectbasedontheoverallprojectcontext.Forsafetyandenvironmentalplanning, theremaybe local standards,norms,and laws regulatingscoringandinterpretationmethods.

11.2.5 ProjectRiskManagementPlanningUnderCollaborativeConstructionProjectArrangements

A recent trend in construction regarding the assessment of risk is to collaborate withcompaniesofvariouscapabilitiestodelivertheproject.Ajointevaluationandunderstandingofoneanother'sriskscanhelpimproveperformanceandreducerisk.

A shared or joint risk register may be used to ensure that parties share the project riskidentificationprocessandprovidethebasisforacollaborativeassessmentofrisks.Asharedrisk register helps to avoid different perspectives on shared project risks and offers thecollaborative parties or integrated project team an opportunity to agree on risk ownershipallocation, responsibilities, responses, unified terminology and language, and a definitionofriskmetricstomeasuretheeffectivenessofcollaborativeprojectriskmanagement.

Projectcommunicationsbetweenprojectstakeholders throughout theproject lifecycleareofmajorconsiderationandcriticaltominimizetheimpactofrisks.

The resources needed to develop and manage collaborative project arrangementrelationshipscanbehigh.Opportunitycostsshouldbeconsideredforestablishingbenchmarks;expectedoutcomesshouldjustifytheresourcestobeinvested.

Additional considerations that should be givenwhen performing project riskmanagementundercollaborativeconstructionprojectarrangementsinclude:

Complexityaddedtodecisionmaking,suchascognitivebiasesofgroupsandindividuals;Conflictsofinterest;Implementationchallenges;Lossofautonomyandcontrol;Stakeholderconfusion;Lackofconsistencyandclarityonrolesandresponsibilities;Dilutionofbrand;Lossofintellectualproperty,know-how,andconfidentiality;Damagestocompanyreputation;Lossofawarenessoflegalobligations;and

Increaseddifficultyinthecontractchangeorderprocess.

Potentialopportunitiesinclude:

Financialsavings;Benefitsfromsharingknowledgeandinformationandreplicatingsuccessfulpractices;Accesstonewmarketsensuringlocalknowledge;Betteruseofexistingresources,technology,labor,andnetworks;andEnhancedprofessionalskillsandcompetencesintheworkforce.

11.2.6 ProjectRiskManagementPlanninginPublic-PrivatePartnership(PPP)

Establishing public-private partnership projects in contractual arrangements is a longprocessinvolvingprivateandpublicorganizationswithincomplexprojectfundingandfinancesolutions. One of the key features is the risk allocation between the various organizationsperformingontheproject.

Projectrisksaretransferredtothepartybestabletomanagethematthelowestcostonanagreed-uponbasis,takingpublicinterestintoaccount.

Figure11-1showscommonlyusedPPPcontracttypes.PPPliesbetweenafullpublicsectorprovision design-build contract and a full private sector participation privatization. Privatesectorrisktakingincreasesfromlefttorightinthefigure.

A risk matrix may be useful for public and private parties to establish an organizingframeworkfortheallocationofrisks.

Theearlyinvolvementofthepartiesontheprojectinacollaborativerelationshipprovidesadvantagesinplanningandcanreduceoverallprojectrisk.Multipartyinvolvementpromotesvalue engineering and risk management approaches to achieve agreed-upon objectives andreduceoverallrisks.

Otherthantypicalconstructionrisksdescribedlaterinthissection,keyrisksmayneedtobeidentified at the pre-contract phase based on strategic analysis; these include revenue risks,financialrisks,andoperatingrisks.

Expert risk analysis is required for a successful designof contractual arrangementsmadepriortocompetitivetenderingandthatallocateriskburdensappropriately.

11.2.7 ProjectRiskManagementPlanninginInternationalProjectsWhenundertakingmajorprojectworkinaninternationalenvironment,carefulunderstanding

ofthecomplexdomesticriskenvironmentiscrucial.

PESTLE analysis (political, economic, social, technological, legal, and environmentalanalysis)isamarketingtoolthatfacilitatesthetrackingofthenewprojectenvironmentandby

which these factors are examined to determine specific risks associated with the projectlocation.

TheproposedclassificationofpotentialrisksisdescribedinAppendixX3. Inaddition tothemostcommoncausesofrisksinconstructionprojects,internationalprojectsbearadditionalpotentialsourcesofrisks,includingbutnotlimitedto:

Customprocedures,importduties,andimportandexportrestrictions;Culturalandreligiouspracticeseffectsonworkingpatterns,culturaldifferences,andlanguagebarriers;Timezoneandlegalworkingdaysdifferencesbetweensiteandcentraloffice;Locallaborunionpractices;Localweatherpatterns(e.g.,monsoonseason);Localregulations;Safetyandsecurityconcerns(e.g.,terrorism);Constraintsonemploymentofexpatriatestaffand/orworkvisaprocedures;Regulatedprofessionalservicesgrantedtolocals,governmentpressurestouselocalsuppliers,andinvestmentrequirementsinvolvingtheuseoflocalemployees;

andCurrencyconvertibility(exchangeratefluctuations)and/orrestrictionsonrepatriationoffunds.

11.2.8 RiskIdentificationinConstructionProjectsIdentifyingrisks isan iterativeprocess.Constructionprojectsdevelopandevolve through

successiveprojectphases.Previouslyidentifiedrisksmaychangeandnewrisksmayappearthroughouttheprojectlifecycle.

Forbetterplanningandidentificationofrisksinconstructionprojects,risksmaybegroupedunder a same risk category or trigger event that might allow several risks to be realized.PracticeStandardforProjectRiskManagementstates,“Identifyingcommonrootcausesofagroupofrisks,forexample,mayrevealboththemagnitudeoftheriskeventforthegroupasawhole alongwith effective strategies thatmight address several risks simultaneously” (e.g.,identifying risks that can occur at the same time or risks using the same resources forrecovery).

Risks can be classified according to many different approaches, among other optionscommonlyusedasclassificationsystems:

Dependinguponthesource,withinoroutsidetheorganization(e.g.,internalandexternalrisks);Accordingtothetypeofproject(e.g.,localorinternationalproject);Dependingonthepartieswhowillberesponsibleformanagingtherisksorthedifferentagentsinvolvedinthewholeconstructionprocess;Followingtheworkbreakdownstructure;Accordingtothesourcesofrisk;andAccordingtotheprojectlifecycle,orphase.

Regardless of the categorization system adopted, it should stimulate risk identification;enableabetterunderstandingabouttheproject'srisks;andhelpriskidentification,allocation,andmanagement.

Even though each constructionproject's characteristics andproject risks are unique,mostconstruction projects share common key root causes of risk regardless of the projectsingularity.Keyrisksmaybegroupedorcategorizedunderaheadingguideorpromptlistthatcan be used as a reference or framework for risk identification techniques such asbrainstorming,expertconsulting,workshops,orriskinterviews.

Anexampleofagenericcategorizationbysourcesofriskthataconstructionprojectmaybeexposed to is summarized in Figure 11-2. There are many other ways to classify risks foridentification purposes; organizations should tailor their own lists appropriately for theirprojects.

RefertoAppendixX3forexamplesofcommonrisksinconstructionprojectsthatfollowthe

suggestedcategoriesinFigure11-2.

11.2.8.1 ResourcePlanResourceproductivityestimatesareakeyinputtoriskidentification.Activitydurationand

costestimatesarebasedonthoserates,particularlyforengineeringandconstructionphases.

11.2.8.2 DocumentationReviewsIn construction projects, in addition to documents described in the PMBOK® Guide,

reviews should include other documents such as layout drawings, plant location and accessdiagrams, equipment erection specifications, geotechnical reports, construction occupationalhealth and safety study (HSE study), fire safety study, environmentalmanagement plan, andemergency response plan. Permits, licenses, and agreements with labor unions and/orcommunitiesmayalsoincluderequirementsthataddrisktotheproject.

11.2.8.3 ChecklistAnalysisChecklistsforconstructionprojectsmayincludesuchitemsastypeofcontract,unfavorable

clauses,siteandareafactors,weather,regulatoryandlaborfactors,knowledgeofclient,etc.,aswellastheusualappraisalofconstructionequipmentrequirements,techniquesneeded,andspecialmaterials.

11.2.8.4 AssumptionAnalysisForconstructionprojects,allassumptionsmadeduringthebiddingphasearebasedonaset

of hypotheses and scenarios and should be reviewed periodically to verify their validity,accuracy,consistency,orcompleteness.

11.2.8.5 LessonsLearnedandLearningfromOthers’ExperiencesStudying previous similar projects provides valuable information formore complete risk

identification, includingconstructionmethodsandsolutions,materials,andsuppliers.Projectevaluation reports present findings, conclusions, and recommendations from previousexperienceandevidence.

11.2.8.6 LocalExpertJudgmentExperts can provide significant knowledge of similar projects and project environment.

Interviewing local experienced project managers, industry professionals, constructionmanagers,andsubjectmatterexpertscanhelpidentifyspecificlocalrisks.

11.2.8.7 ConceptHazardAnalysisPerformedduringtheconceptdesignandfeasibilitystudy,concepthazardanalysisfocuses

on identifying potential hazards in the concept design and may be used to minimize futurechangestotheproject'sfundamentalconcepts.

11.2.8.8 PreliminaryHazardAnalysis(PHA)Preliminaryhazard analysis identifiespotential hazardous andaccidental events (e.g., job

hazardanalysis).

11.2.8.9 HazardandOperationalStudies(HAZOP)This is a systematic and structured approach used to analyze a process and its parts to

identifypotentialhazards,operabilityproblems,anddeviationsfromdesign.

11.2.8.10ConstructabilityReviewandChecklistAformalconstructabilityreviewprocessprovidesagooddiscussionforriskidentification.

Checklistsofconstructabilityhistoricalissuesmayserveasameansforriskidentification.

11.2.8.11ValueAnalysisStudyValueanalysisprovidesanorganizedapproachtoanalyzingaprojectandmaybeusedasa

sourceofinformationforriskidentification.

11.2.8.12FailureModesandEffectsAnalysis(FMEA)Failuremodesandeffectsanalysis(FMEA)systematicallyexaminesanddetermineshowan

itemmayfailandidentifiestheconsequencesofafailure.

11.2.9 QualitativeRiskAnalysisinConstructionProjectsQualitative risk analysis provides a rapid initial review of project risks with a quick

assessmentoftherisk'simportancetotheproject,andestablishesprioritiesforplanningriskresponses.Qualitativeriskanalysisisconvenientforanytypeandsizeofconstructionproject

wherearobustorcostlyquantitativeanalysismaynotberequiredormaynotbepossibletoexecute. Independent reviewers are persons outside the project who have significantexperience in similar projects and specifically on the local context of the project location.Local experts can provide significant knowledge of similar projects and the projectenvironment.Assigningvaluesforprobabilityandimpactofrisksreliesontheexperienceandprofessionaljudgmentoflocalexperts.

11.2.10 QuantitativeRiskAnalysisinConstructionProjectsOncerisksareidentifiedandprioritizedbythequalitativeriskanalysis,adeepanalysisof

theeffectsof those riskscanbeperformedbyquantitative riskanalysis. It isusedmostly toevaluatetheaggregateeffectofallrisksaffectingtheproject.

Quantitative risk analysis is mostly used on large and complex construction projects insupport of significant project management and financial decisions. The need for, and theviabilityof,developingaquantitativeriskanalysisshouldbeassessedthroughexpertjudgmentandmaydependontheprojectsize,theprojectteamlevelofexperienceinriskmanagement,theinformationanddataavailabletodevelopappropriatemodels,andtheresourcesassignedtoriskmanagementactivities.

Quantitative risk analysis uses techniques such as stochastic simulation and decisionanalysistodeterminemanyprojectassumptions,forexample:

Determining the probability of achieving a specific project objective. Aprobability distribution of project cost and schedule is generated based onuncertaintyandriskeffects.Whenbidding,ifthefinalprojectdateisnotdeterminedbytheclient,theprojectteamcanofferadatebasedontherisklevelitiswillingtoaccept.Identifying realistic and achievable cost, schedule, or scope targets.Acceleration plans benefit from this analysis and aggressive targets can benegotiatedwithalowerdegreeofuncertainty.Performing risk assessment. General and vaguely defined contingency reservescanbereplacedbyanassessmentofexplicitlydefinedriskevents.Analyzingthecostofariskresponse.Thecostofariskresponseisanalyzedincomparisontothecostofarisk.

Theadditional toolsand techniques listedbelowshouldalsobeconsideredasalternativequantitativetechniques.

MonteCarloanalysis.MonteCarloanalysisisaformofstochasticsimulationthatapproaches the uncertainty in the input data and, through a number of iterations,reflects the probability of project outcome.When possible, project uncertainty ismodeledasadynamicprocessalongthecompleteprojectlifecycle.AMonteCarlosimulationproducesvaluable information supporting contingencyandmanagementreserveanalysis.

Fault tree analysis/failure modes and effects analysis (FMEA). FTA is adeductive, top-downmethod aimedat analyzing the effects of initiating faults andevents on a complex system. This contrasts with FMEA, which is an inductive,bottom-up analysismethod aimed at analyzing the effects of single component orfunctionfailuresonequipmentorsubsystems.Failure modes, effects, and criticality analysis (FMECA). FMECA extendsFMEAbyincludingacriticalityanalysis,whichisusedtocharttheprobabilityoffailuremodesagainsttheseverityoftheirconsequences.

11.2.11 PlanRiskResponsesinConstructionProjectsThe involvement of subcontractors in construction projectsmakes risk response planning

morecomplex.Riskresponsesmayresultinadditionalcostsincurredbyoneparty,andthosecostsmayalsoimpactanotherparty.Riskcostsandriskresponsecostsshouldbequantified,discussed, negotiated, and justified.Given the complexity of risk response planning and theneed for carefully planned timing, it is critical that triggers be identified, planned for,monitored,andcontrolledthroughouttheproject.

11.2.11.1StrategiesforNegativeRisksorThreatsandPositiveRisksorOpportunities

Four strategies tomitigatenegative risks,asdiscussed in thePMBOK®Guide and in thePracticeStandardforProjectRiskManagement,areavoid,transfer,mitigate,andaccept:

Avoid.Riskavoidanceismoreeffectiveduringearlyprojectphasesandcontractnegotiation.Afteracontractissigned,someofthemajorrisksregardingplantperformanceandpenaltiescannotbeavoided.Anexemptionclausecanbeincludedinthecontracttoavoidthoserisks.Transfer.Transferringtherisksimplygivesanotherpartyresponsibilityforitsmanagement;itdoesnoteliminatetherisk.Riskshouldbetransferredtothepartybestabletomanageit,forexample,tosubcontractorsorinsurancecompanies.SeeSection11.2.12onInsuranceinConstructionProjects.Mitigate.Riskmitigationisariskresponsestrategywherebytheprojectteamactstoreducetheprobabilityofoccurrenceorimpactofarisk(PMBOK®Guide);forexample,theriskoflosingkeypersonnelinthelatestagesofconstructionprojectscanbemitigatedbyprovidingcompletionbonuses.Anotherwaytoreduceriskimpactisbysharingitwithotherpartiesthatmayhavetheappropriateknowledgeandresourcestomanageit.Accept.Acceptanceimpliespotentialtimeandcostimpacts,whichshouldbeincludedinthecontingencyreserve.Forexample,anambiguityinacontractclauseaboutwhoisresponsibleforprovidingwaterforhydrostatictestscouldbeacceptedifthevolume(andcost)issmallandtheavailabilityishigh.

A strategy to share the benefits of a positive risk or opportunity among the project

participantsshouldbeincludedintheconstructionprojectcontract.Identifyingandanalyzingprojectopportunitiesinaproactivemanneranddefiningappropriatestrategiestoexploitthemareeffectivewaystoobtainadditionalbenefitsandimproveprojectoutcomes.

11.2.12 InsuranceinConstructionProjectsThe various parties involved in a construction project (i.e., owner, project designer,

contractors,constructionmanagement,publicadministration,andfinanciers)confrontrisksthatcouldresultinpotentialeconomiclosstopersonsandentitiesinvolvedandtothirdparties.

Undersuchcircumstances,oneoptionthatconstructioncompanieshave,wheninsuranceisnotrequiredbylawandregulationorbyprojectcontractualarrangements,istostartareservefundinordertoassumethemultiplerisksthatmayariseduringtheconstructionprocess.Thispractice is called self-insurance. Sometimes this means assuming expensive extra costs toabsorballtheunforeseenrisks.Contractingwithaninsurancecompanyisanoptionthatcanbeusedtoavoidstartingareservefund.Governmententities,insomecases,assumeriskswithoutobtaininginsurance,countingontheirfinancialcapacitytocoverlosses.

Sharingariskwithotherpartiesbymeansofaninsurancepolicycontributestoconstructioncosts in the form of insurance premiums and provides financial protection to the interestedparties.

Insurance companies are an important stakeholder in construction projects that should beaddressed.Insomecases,insurersmayrequireathird-partytechnical,quality,environmental,orhealthandsafetyinspection,orcontroloftheprojectandworksincourse.Theseissuesareconsideredasinsurancecostsinthecostestimation.

11.2.12.1TypesofInsuranceTheconstruction industryuses avarietyof insuranceproducts as aprincipal risk transfer

instrument to handle some of its liabilities, for example, contract works insurance,builder's/contractor's all risks, property/material damage, business interruption, professionalindemnity,publicandproduct liabilities,workers’compensation,umbrellapolicies,contractguarantee, decennial liability insurance, and other on-demand special types of insurancecoveringenvironmentalrisks,currencyrisks,ordamagesbyactsofterrorism(seeFigure11-3).

Each organization, individual, or party directly or indirectly involved with the projectshouldevaluateanddecideuponappropriateinsurancepoliciesfortheircircumstances.Expertguidanceisnecessaryconsideringthatoverinsuringisapracticethatcanbeveryexpensiveforthe project and underinsuring could be very expensive in the event of claims or uninsuredlosses.

In the construction industry, insurance policies applied mainly depend on the projectlocationanditsregulatoryandjurisdictionallaws.Theseinsurancepoliciesvarywidelyfromcountrytocountrybothintheircharacteristicsandtheirdesignation.Nevertheless,constructionprojectssharethesamekindofrisksregardlessoftheprojectlocation.

Someofthemostcommoninsurancepracticesarelistedbelow.Forfurtherdescriptionwithconsiderations for local variations according to regulations, jurisdictional legislation, andspecificlocaldesignationrefertotheGlossary.

Constructionallrisksinsurance,contractor'sallrisk(CAR),erectionallrisks(EAR),contractworksinsurance,builder'sriskinsurance,andgeneralliability(GL)insurance;Insurancecoverageforconstructiondefectsanddefectsliabilitybond;Civilliabilityinsurance,publicliabilityinsurance,andemployer'sliabilityinsurance;Industrialspecialriskandbusinessinterruptioninsurance;

Wrap-upinsurancepolicies:owner-andcontractor-controlledinsuranceprograms(OCIPandCCIP);Professionalindemnityinsuranceandprofessionalliabilityinsurance;Integratedprojectinsurance;Latentdefectsinsuranceandinherentdefectsinsurance(IDI);Collateralwarranty;Suretybondsincludingperformance,paymentandbidbonds,contractbond,contractperformanceguarantee,tenderbond,andretentionbond;Decennialinsurance;Jointventurecoverageandinsuringdesign-buildrisks;andAdvancedlossofprofits,delayedcompletioncover,anddelayinstart-upcover(DSU).

11.3 ProjectRiskManagementMonitoringandControllingRiskmanagementisadynamicprocess.Riskidentification,analysis,responseplanning,and

riskmonitoringandcontrollingshouldbeaproactiveprocessperformedcontinuallyalongtheproject life cycle, particularly for large construction projects or those in dynamicenvironments.Astheprojectevolves,projectrisksmaychange,theprobabilityandimpactofidentified risks may change, new triggers may emerge, identified risks may disappear,secondaryandresidualrisksmayarise,andnewrisksmayemerge.Theriskregistershouldbeperiodicallyreviewed, identifiedrisksshouldbereassessed,projectrisk informationshouldbe updated, and the effectiveness of risk response actions and control measures should bemonitoredandevaluated.

Specialconsiderationsshouldbetakenregardingprojectcommunicationsandreporting,asproject success relies heavily on communication throughout the project life cycle. Riskmeetingsshouldbeheldregularlytoperformriskreviews;toupdatethestatusofrisksintheriskregister;andtorepeattheprocessofidentification,analysis,andresponseplanning.Somerisksmayneedtobeescalatedtoprogramandportfoliolevel.

Communicationwith project stakeholders is important in order to periodically assess theacceptable level of risk on the project. Standard templates for risk status reportsmay be ahelpfultoolforprojectriskreporting.

12PROJECTPROCUREMENTMANAGEMENTThe Project Procurement Management section presents additional considerations for

planning, executing, monitoring and controlling, and closing procurement on constructionprojects. It includes the processes required to acquire design and engineering services andconstruction-relatedmaterials,equipment,machinery,andservices.Itincludestheacquisitionofallgoodsandservicestodesignandconstructanewresidentialhome,transportationroute,electrical or water utility, public infrastructure, or manufacturing facility, or thedisposition/decommissioning of an outdated facility, often including the financing for theseprocurements. Homeowners may pay for the project from their private savings or anorganizationfromitsretainedearnings.Asprojectsincreaseinvaluewithlongerconstructiondurations,theprojectowneroftendependsonfinancialcontractsforfunding,whichcanbethemake-or-breakcomponentforgoingforward.

12.1 ProjectProcurementManagementinConstructionConstructionprojectsareoftenmultilayeredhierarchiescharacterizedbynumerousbuyers

and sellers, with many of the project stakeholders serving in both capacities, andmultiplelevels of procured goods and services. Typical contractual relationships exist between theowner and thegeneral contractor, andbetween thegeneral contractor and its subcontractorsandsuppliers.Examplesofprojectprocurementsincludeacquisitionofproperty,engineeringand design or turnkey services, construction, and even operational services. From acontractor's perspective, thismay include the acquisition of labor, lower-tier subcontractingservices, materials, and equipment from vendors and suppliers. Basically, procurement inconstructionisconductedtobettertransfertheperformancerisktosellerswhospecializeandareskilledinaparticularscopeofwork.

The PMBOK® Guide discusses procurement within the context of the buyer-sellerrelationship. In construction, the buyermay be characterized as an owner, client, customer,developer,generalcontractor,orgovernmentalagency.Numeroustermscanrefertotheseller,includingdesigner,architect,engineer,bidder,contractor,subcontractor,vendor,subconsultant,andsupplier.

The buyer-seller relationship on a small project is relatively straightforward: twoorganizations contractually doing business together. In construction, that basic relationshipexistsbetween theownerof theproject and theprimaryperformingorganization,orgeneralcontractor.Fromthatpointon,theprocurementprocessfortheperformingorganization(seller)

is repeatedmultiple timesand,perhaps,hundredsof timeson largeprojects.Anexampleofthis repetition is the general contractor procuring specialty services such as mechanical orelectrical services, which in turn procure equipment and materials from a lower-tiersubcontractor,which in turn procures the finished goods andmaterials from a supplier of amanufacturingorganization.Figure12-1 illustrates the common tiered structureof contractorprocurementrelationships.

Oneofthemostsignificantfactorsinconstructionisthecompetitivenatureoftheestimatingandbiddingprocessthatexistsinmostallprocurements.Competitivenessincreasesduetotheexistence of buyers and sellers globally, which also requires the adoption of strategies,practices,andefficientprocurementmanagementonaglobalbasis.Theprojectownerseeksthe greatest value at the least cost andwithin the project financial constraints.Although theleast cost bid is a significant component of contractor selection, other factors such asexperience, reputation, and personnel staffing can form important criteria for selection,especially for qualified skills such as engineering and project management. Many ownersutilizeaniterativemethodofanalyzingtheestimatewithabidvalueinacomparativeestimatewith present market factors, experience, technical capabilities, and personal staffing whileselectingsellers.

12.1.1 Contractor'sPerspectiveThe bidding process can be extensive for a contractor seekingwork. If unsuccessful, the

organizationneedstofocusonthenextopportunityandthebiddingprocessstartsover.Fromanorganizationalprocessassetperspective,thebiddingexerciseisconsideredacostofdoingbusinessforthecontractingorganization.Forsuccessfulbids,anagreement,oftendictatedbythecontractclauses,isestablishedbetweenthevarioussellersandbuyers.Specialattentionisneededinmanagingscope,risk,cost,andtimethroughtheintegrationprocessesandactivitiesgiventhecompetitivenatureofconstructionprocurement.Forthatreason,itisnecessarythat

theorganizationhastheexpertiseinpreparingwiningoffers.

Procurementprocessesshouldidentifytheproducts,services,orresultsthatcanbeachievedwithinthebuyerorganizationandthoseitemsthatshouldbeacquiredfromoutsidesellers.Asconstructionpracticesevolve,thegeneralcontractorisfocusedondirectingandmanagingitsspecific trades and subcontractor activities. General contractors generally align theirmanagementsystemswithindustrystandards,andtheirsubcontractorsshouldalsobealignedwiththosestandards.

12.1.2 Owner'sPerspectiveFromanowner'sperspective,thedecisiontoconstructanewprojectcandependonvarious

project delivery methods, most of which affect the overall cost and time for completion.Variations to these traditional delivery methods may further result in specialized or hybridcontractingmethods,whichcoulddictatethescopeofworkthatissubcontractedalongwiththemaximum price guarantees. For example, fast tracking compresses the project schedule byrunning design and construction phases simultaneously. Designmay run as little as 1 weekahead of construction, and often design decisions aremade in the field. Fast-trackmethodshave been around for decades and now account for a significant number of all buildingprojects. Figure 12-2 illustrates a project comparing the completion milestones andprocurementcomponentsforthreeofthemostcommonprojectdeliverymethods.

Procurement in construction has high financial conditions and factors that can result indevastatingconsequencestotheprojectownerandcanalsoripplethroughouttheprocurement

hierarchy.Contractmanagement, includingscopemanagementandknowledgeofconstructionlaw,isnecessaryforeventheseasonedpractitioner.

12.2 ProjectProcurementManagementPlanningThe project owner's decision to construct a new facility may immediately initiate the

procurementprocessbyseekingandretainingprofessionalexpertisetohelpinthiseffort.Theproject delivery process addresses the proposed scope of work, breaks down the workactivitiesintodiscretepackages,identifiestheprojectstakeholders,anddeterminesthetimingoftheirparticipation.Successfulprojectdeliverydependsonreal-timemonitoringandcontrolofsupplychainmanagementandprojectworkflows.Allprocurementactivityrelatedtotheseflowsshouldbecapturedinapermanentaudittrailasdefinedbytheprocurementmanagementplan.

12.2.1 ProcurementManagementPlanTheprocurementmanagementplan(sometimesreferredtoastheproject“buy-out”)defines

what, how, andwhenprocurementswill be carried out. It is an important component of theacquisitionprocessandisinfluencedbyorganizationalpolicies,culture,andprocedures,andbylessons learnedfrompreviousconstructionprojects. Italsohassignificant influenceoverhowcontrolsofcost,time,andqualityfunctionswillbeexercisedoncontracts.Moreover,thisplan reflects senior management's guidance, which considers the threshold for procurementrisksanditsallocationamongthestakeholders.Theconstructionprojecthasstakeholdersthataremoreoftenboundbycontract requirements,which raises theprojects’ financial riskandalso the technical and quality risks that could jeopardize the stakeholder relationships andsuccessoftheproject.

12.2.2 EnterpriseEnvironmentalFactorsThe planning effort should beginwithin the organization and its enterprise environmental

factors (EEFs).Organizations thatoutsourceallconstruction-relatedactivitiesmaycause theavailabilityofmanagementpersonnel, skilled labor, andmaterial inventory tobea concern.Conversely, theuseof in-house resourcesmay require the acquisitionof additionalmaterialinventories, equipment fleets, and staffing accommodations to perform the work withinoperations.

Market research can be an invaluable tool during procurement planning. Past experiencewith sellers, shipping lead times, unique local requirements, and the general marketplaceenvironment all influence procurement planning.Adding to this concern are factors that cansignificantlyimpacthowprocurementsarepackaged,solicited,awarded,andexecuted.Thesefactors include location, culture, climate, and political stability, which affect contractorliability and competency, work rules, work hours, labor competency, productivity, form ofcurrency,includingforeignexchangerates,hedging,andbarteringpractices.

Inaglobaleconomy,materialavailabilityorshortagesofmajorconstructionmaterials,and

the ensuing price escalations, are risks that may seriously affect the ability to complete aproject on time andwithin budget.During initial procurement planning activities, the buyerorganization most often conducts service provider solicitation using a form of request forinteresttoobtainfeedbackfrompotentialcontractors(seller).Buyerorganizationsusuallyrelyon the expertise of the seller's project team to provide analysis and guidance on decisionsrelatingtoprojectissuesandotherenvironmentalfactors,includinggovernmentalandindustrystandards.However,itisalsonecessarythatthebuyer'steamincludesomespecialistsinlocalandinternationalprocurementspractices.

12.2.3 SupplyChainManagementThere isagrowingneed forconstructionorganizations toadopt supplychainmanagement

strategiestocounterindustrycompetitionthatisnotonlyregionalornational,butalsoglobal.Buyersareincreasinglyseekingthebestvaluefortheirmoney,andadvancesintechnologyandtransportationhaveprovidedtheabilitytobuyfrompracticallyanycompanyanywhereintheworld to reduce costs, add value, and remain competitive. Inventory is a non-value-addedassetandasignificantcostelementforthecontractor.Aneffectivesupplychainmanagementstrategycanenableabusinesstoachieveareductionininventory-relatedcosts.

Ontheotherhand,thechainoforganizationsinvolvedinproducinganddeliveringaproductiscomplexandisfraughtwithmanyinherentuncertainties,suchasinaccuratecostforecasting,delaysin importorexportprocesses,unknownor lateequipmentdeliveries,breakdowns,orsubstandardmaterialquality.Sucheventscancontributetotimeandcostoverrunsonaproject.Themorecomplexthesupplychain,thegreaterthedegreeofuncertainty,andthemoreadversethe impact on the supply chain. Lean production, total quality management (TQM),prefabrication,andmodularconstructionmethodsareenablingmanyorganizations to realizemajorgainsbyeliminatingwastefromtheiroperationsintermsoftimeandcost.

12.2.4 OrganizationalProcessAssetsOrganizationalprocessassetsamongstakeholdersonaconstructionprojectcanvarywidely.

Amultinationalmanufacturermayhavelengthyandspecificguidelinesfortherenovationofaplant while a small manufacturing business may have no procedure or concept on how toprocureanewfacility tosatisfy itsneedsandbe totally reliantonoutsideservices.A largesubcontractor firm performing work over a wide area would likely have well-developedproceduresforprocurementoperations.Incontrast,asmallsubcontractorfirmmayrelyonpastknowledgewithoutanyformalizedapproaches.

12.2.5 ProjectScopeStatementTheinitialprojectscopestatementoutlinestheprocurementstrategyandactivitiesthatneed

tobeconducted.Theseactivitiesprovideacommonunderstandingoftheprojectscopeamongthe stakeholders and, among other things, describe the project deliverables and the workrequiredtocreatethedeliverables.

It is likely that large corporations with significant and ongoing construction needs have

established processes to develop a formal scope statement. Owners that rarely utilizeconstructionservicesmayengagearepresentative,suchasadesignerorconstructionmanager,to assist in the creation of a scope statement. Sellers such as the general contractor andsubcontractorswillnormallyutilizedocumentscreatedby thebuyer (owner) for their scopestatements.

12.2.6 TheWBSinProcurementGood practices define that both product deliverables and project deliverables should be

identified and broken down using a WBS. The development of the construction projectdeliverables should consider the dimensional components of the project as well as theacquisitionwithinlaborjurisdictionsorunionagreements,thecontractinghierarchyandworkphasing,andtheexistenceofmultiple-contractcoordination.

It is common for the owner to designate the architect/engineer (designer) to prepare thecontractdocumentsaspartoftheirwork,whichthendefinesthetotalscopeoftheproject.Theconstructionmanager,whileplanningtheworkwithaneyetowardschedulingandcostcontrol,maysubdividetheprojecttasksintoworkpackages.Aprimaryfocusoftheprimecontractingorganizationistheidentificationandmanagementofthecontractuallyresponsibleorganizationbecause of the potentially extensive number of contractual relationships on a constructionproject.

12.2.7 OtherServiceProviderProcurementsConstruction projects are almost entirely based on agreement both by choice and by the

requirementstosatisfycontractobligations.Beyondthetypicaldesignerandcontractorserviceprocurements,otherproviderprocurementtypesspecifictoconstructionare:

Bonding:

Bidbonds,Performancebonds,andPaymentbonds.

Insurances:

Projectsiteinsurance,Projectliabilityinsurance,Workers’compensationinsurance,ProfessionalIndemnity,andOtherspecialtyinsurance(delayinstart-up[DSU],transportandshippingservices,builder'srisk,etc.).

Inspectionservices:

Topography,

Geotechnical,Third-partyconstructioninspection,Generalqualitycontrolinspection,andHealth,safety,andsecurityinspection.

Permitsandotherpurchases:

Utilitylocateservices,Utilityrelocationandserviceconnections,Roadandpublicaccesspermits,Environmentalandlandusepermits,Buildingpermits(includingspecificelectricalandservicepermits),andCommissioningservices.

12.2.8 Make-or-BuyAnalysesBuyerandselleractivitiesincludespecifictechniquesforassessingsourceselectioncriteria

and procurement strategies. The make-or-buy analysis in construction relies on either self-performingtheworkorsolicitingbidsfromsubcontractorsforthework.Oncertainprojects,thesebuyersandsellersmaycontemplateacompetitivebiddingadvantagebyevaluating theprocurement alternatives available to them. This also involves determining the degree ofcontractualriskthatanorganizationiswillingtoassumeortheamountofpotentialrevenueitiswillingtoforgoinexchangefortransferringtherisktoanoutsourcedentity.

12.2.9 ProjectDeliveryMethodsSelecting theappropriatestrategyforprojectdeliveryconsiders factorssuchasdegreeof

designdefinition,timeofcompletiondesired,budgetlimitations,ownerengagement,andoftenjurisdictional statutes forpublicprojects.Determiningwhich aspectsof theproject arebestsuited for a particular procurement approach can involve the dynamics of the businessenvironment and the needs of the project itself. The project delivery approaches aretraditional,integrated,andturnkey;however,oneshouldkeepinmindthattheseformonlythegeneral approach for delivering the project and each method can be further modified orenhancedbythecontractagreement.

12.2.9.1 TraditionalApproachThedesign-bid-build(DBB)projectdeliveryisconsideredtobethetraditionalapproach,

whereas its construction functions are performed by organizations under separate contractswith the owner. This traditional delivery method relies upon a construction design that isessentiallycomplete,andcontractorsolicitationsareperformedbywayofcompetitivebiddingforallcomponentandtradedisciplinesoftheproject.Figure12-1 illustrates thiscontractualarrangement.

12.2.9.2 IntegratedProjectDeliveryandTurnkeyApproachesIntegrated and turnkey project delivery methods integrate people, systems, business

structures,andpracticesmostoftenintoasingleconstructionprojectcontractprocess.Thesemethods combine the expert knowledge and skills of participants for all phases of design,fabrication, and construction with the intention to optimize efficiency in project cost andschedule.Afewoftheintegratedprojectdeliveryandturnkeyapproachesarelistedbelow:

Construction manager/general contractor (CM/GC). Similar to the DBBdeliverymethod,theownersolicitsacontractorbasedonanearlydevelopmentsetofdesigncriteria.Thegeneralcontractor is selectedbasedonqualifications,pastexperience,andbestvalueforitscapabilityinperformingpreconstructionservices,feasibility studies, and constructability reviews, and in estimating servicesduringthedesignprocesses.TheCM/GCprovides inputregardingscope, time,cost,andconstructability, which all contribute to reducing the risk and constructionunknowns. Once design has reached 60% to 90% completion, a contract forconstructionisnegotiatedbasedonthedefinedscope,timeofcompletion,andtotalprojectcost,mostoftenintheformofamaximumpricetypecontract.TheCM/GCsubsequently conducts procurement solicitation for subcontractors, materials, andequipment.Variationsofthismethod,whichmaybegovernedbyjurisdictionallaw,includeconstructionmanager-at-risk(CMR)andconstructionmanagerasadvisororagent(CMA).Design-build(DB).Theresponsibilityforbothdesignandconstructionisobtainedfrom a single source solicitation. That single source may in turn be a speciallyformedcollaborationbetweenthedesignerandcontractorspecificallyforaproject.Sellers (subcontractors) are subsequently solicited and retained by the DBorganization.Design-build-operate-maintain-(transfer) (DBOM). This method encompassesthe design-build method with the added feature of time-scaled functions foroperating and maintaining the product after construction is completed. After theDBOMcontractiscompleted,thefinishedproductcanbetransferredtotheowneroranothercontractforongoingoperationandmaintenance.Alternatetermsforthismethodisbuild-operate-transfer(BOT)ordesign-build-operate(DBO).

Incertaincases theresponsibility toobtainfinancingfor theprojectand the long-term right to use all the finished project assets, is recognized as a concession.Governmentsusethismethodmainlyformajorpublicprojects,whichcouldnotbefinanced without the participation of the private sector. (See also public-privatepartnershipbelow.)Engineering-procurement-construction(EPC).TheEPCprojectdeliverymethodhasemergedasapreferredchoice formany industriesand ismostoftenused forprocessing or equipment-driven projects, such as oil refineries,mining plants, orelectricalenergyproduction.Theownerprocuresasinglecontractforperformanceofthedesign,equipment/materialacquisition,andconstructionservicesforturnkey

deliveryofthefacility.TheEPCfirmhasresponsibilityforpreconstructionservicesto define the scope, schedule, and costs of the project, and ultimately finalresponsibility for the design and construction. The advantage of this method isoptimalprojectperformanceresultinginacollaborative,value-basedconstructionprocessthatreducesprojectrisks,deliverspredictableresults,andobtainseffectivefinancial capital planning. A derivative of the EPC method is the engineering-procurement-construction and installation (EPCI) method. Front-end engineeringanddesign (FEED) is commonlyused in conjunctionwithEPC.FEED is amoremature basic design, allowing the timely procurement of long-lead items andreducing the uncertainty in final design for the detailed engineering, with asubsequentreduction inriskandoverallprojectduration.WithFEEDinhand, theownercanmovetoprocureanEPC-basedcontract.Constructionmanagement (CM). The CM organization, under contact with theowner, sometimes known as the professional services contractor, manages theoverall functions of the project including designing, bidding, purchasing, andconstruction,andcanexecutethedeliveryofconstruction“at-risk”orasanagency(CM at-fee). The at-risk CM functions much like a prime contractor with itssubcontractors,whereastheCMasanagencymanagestheworkofmultiplegeneralcontractors and their subcontractors.Theexpectationof thismethod is toprovidehigh construction value at a lower cost while providing preconstruction servicesduringdesign.Owners that donot have the skills or capacity tomanage in-houselargeconstructionprogramsand/orare less inclined toadd internal staff todosoare turning to professional firms for a wider spectrum of services. Constructionmanagement for fee and programmanagement (CMF-PM) is a growingmarket inboththepublicandprivatesectors.

ACM as agency deliverymethod is also known as an engineering, procurement,construction,management(EPCM)contractinmanypartsoftheworld.Thismethodis strictlyaprofessional servicescontractwhere thecontractor is responsible forengineering,procurement,andmanagementoftheconstructionphaseoftheproject,onbehalfof theowner;managementofconstructionas theowner's representative;and has overall responsibility toward the owner for the overall quality of theproject.Inbrief,theprimaryresponsibilitiesinclude:

Engineering/design:

EPCM contractor performs the basic front-end engineering and design (FEED)works;Aspecialist supplierperforms thedesign,usuallybyanagreementbetween thespecialistandtheowner;andThespecialistassumestheriskandresponsibilityforthedesign—nottheEPCMcontractor.

Procurement:

EPCMcontractoradvisestheowneroftheoptimumprocurementstrategy,andEPCM contractor assists owner and acts as owner's agent in implementing theprocurementstrategy.

Constructionsitemanagement:

EPCMcontractorperformsthecoordination,supervision,andmanagementoftheconstructionactivitiesbeingperformedbythevariousconstructioncontractors.

Public-privatepartnership (PPP). This alternative deliverymethod is a form ofalliance or partnership and is best used when owner financing is limited orsometimesnonexistent.Itisameansoffundingandmanagingtheend-to-endlifeofthe delivery and/or ownership of the project. It can provide new sources offinancial support for the construction andmaintenance of public infrastructure bycombining the resourcesofpublic andprivate sectors.Theapproachcanprovidethe owner with design, construction, financing, operations, and maintenanceserviceswithasinglesourceofprojectresponsibility.Stakeholdersformahybridjoint venture entity with a contractor whomay provide expertise in a variety ofroles including the design/engineering lead, owner's representative, constructioncontractor,consultant,orevenequitypartner.

Thismethodcanfacilitateprojects thatmightotherwisebedelayedornotbuiltatall. Project risk is of particular importance to these partnerships due to theparticipation of insurance underwriters who should look beyond the constructionperiod and into long-term operations. The PPP approach can also incorporatedelivery methods previously described as DBOM, DBO, and BOT. Yet anothermethodistheBOOT(build-own-operate-transfer).ABOOTprojectmodelisoftenseenasawaytodevelopa largepublic infrastructureprojectwithmost ifnotallprivate funding. BOOT is sometimes known as BOT (build-own-transfer) withvariations of the model as BOO (build-own-operate), BLT (build-lease-transfer)andBLOT(build-lease-operate-transfer).Single source,noncompetitive. In caseswhere the construction requirements areuniqueorwherethereisonlyonesourceforthedesiredresult,anegotiatedcontractwiththesourceistheusualroute.Job order contracting. This method reduces the need for unnecessary levels ofengineering,design, andcontractprocurementbyawardinga singlecontract for awidevarietyofrenovation, repair,andconstructionprojects. It ismostoftenusedbyorganizationsthatneedtoconstructnumerousprojectsquicklyandeasilythroughmultiyearcontractswhilealsoreducingtimeandprocurementcosts.

12.2.10 ConstructionContractsThetypeofcontractforserviceprovidersmightnotremainthesamethroughouttheproject

lifecycleandmaybedifferentforspecificservices.Reimbursablecontractsareoftenusedforconceptualandearlydesigndefinitionwhileafixed-pricecontractismostcommonlyusedfor

theconstructionservices.Factorsthatcanaffecttheselectionofthecontracttypeforspecificworkpackagesinclude:

Levelandmaturityofdesigndetailavailable;Urgencyoftheprocurement;Levelofcompetitiondesiredorlevelofcompetitionavailable;Organization'sriskutilityortolerance;Buyercompetencyinmanagingaconstructionproject;Uniquerequirementscommittedtobyowner;Fundingsource,suchasgovernmentfunding,financialinstitutions,orself-funded;andOwnerfamiliarityandexperiencewithconstructioncontracts.

Itisimportanttonotethatprocurementdocumentsshouldbepreparedcorrectly,astheyformthe basis for all contract requirements, work scope, and changes to the project. Contractformat, content, and language are guided by documented good practices and developedstandards frommany industry organizations, many of which also provide standard industrycontracts.

Specialorlong-leadequipmentitemsthattaketimetoprocureareusuallyidentifiedbythearchitectorengineerandoftenpurchasedbytheownerorbuyerseparatefromtheconstructioncontract. This procurement is often initiated early and subsequently incorporated into thecontractor'scontractformanagementandinstallation.

12.2.11 ContractRiskAllocationHow one intends to allocate contract risk on a project influences the type of contract

selected.Forgovernment-typeprojects,contractsshouldbedraftedaccordingtothespecificcountry'slegislation,ifsuchlegislationexistsandisobligatoryforallgovernmentprojects.

Themostcommon typesofconstructioncontracts,eachwith theirownparameters,areasfollows:

Fixed-priceor lump-sumcontracts.Work is performed and paid for based on afixed value or lump-sum price according to the contract. These contracts aresuitable forprojects that are sufficientlydefined,whichallows foranestimateofthetotalprojectcost.Unit-rate (price) or remeasurable contracts. Work is performed and paid forbased on a fixed amount (unit rate) for each unit ofwork. Purchase ordersmostoftenfallinthiscategory.Thesecontractsaresuitableforprojectswherethetypesof items are known, but not necessarily the quantity of units. Contracts can bewrittenthatcombinetheunitpriceandlump-summethodofpayment.Cost-reimbursablecontracts.Thecontractorperformstheworkonareimbursablecostbasisplusafee.Thesecontractsoftenincludevariationsofoneanother,often

withthefinalfeedeterminationbeingtheresultofnegotiations.Examplesare:

Costplusfixed-feecontract,Costplusfixedfeewithbonuscontract,Costplusfixedpercentagecontract,Costplusfixedfeewithguaranteedmaximumprice(GMP)contract(alsoknownasmaximumallowableconstructioncost(MACC)),Costplusfixedfeewithguaranteedmaximumprice(GMP)andbonuscontract,andCostplusfixedfeewithagreementforsharinganycost-savingscontract.

Timeandmaterialscontracts.Thecontractorisreimbursedforthetimespentandresourcesexpendedontheworkperformed.Incentivecontracts.Paymentisbasedontheservicesprovidedinaccordancewithanagreed-uponscope,budget,schedule,andquality.Thesecontractstaketheformoffixed-priceincentiveandcost-reimbursementincentivecontracts.Hybrid contracts. Large projects may create a hybrid form using one or morecombinationsof contracts.For example,ona largedesign-buildproject, the civilworksmaybeunderaunit-pricecontract,whileotherbidpackagesareawardedonafixed-pricebasisupondesigncompletion.Occasionally,aprovisionalsummaybereservedforworkinwhichthedesignisnotyetcompleted.

Figure12-3identifiesthespectrumofriskforvarioustypesofcontracts.

12.2.12 ProcurementPlanningOutputsProcurement statements define the scope of work to be performed by a particular

organizationsuchasthegeneralcontractor,architect,engineer,subcontractor,orsupplier.Foreachworkpackage,thesestatementsmayalsodefinetheboundariesandinterfaceswithotherworkpackages,anticipatedresourceorproductionrequirements,andcriteriabywhichworkprogressandvalidateddeliverablesaredetermined.

Contract administration relies on the construction project management plan and a set ofdocuments often referred to as a constructionprojectmanual,which is developed through ateam effort led by the project manager. The manual is usually prepared once the contractassignmentsareinplaceandcontainseachteammember'sresponsibilities,levelsofauthority,anddetaileddescriptionsofthesystemstobefollowedformonitoringandcontrolling,contractterms,andrequirements.

Government-funded projects often establish project goals and may dictate procurementrequirementsforbidders,suchasretaininglocalcontractorsandlaborresourcesandutilizingminority-andwoman-ownedbusinesses.Mostprocurementdocumentsprimarilyinclude:

Procurementrequirements,includingtheinvitationandinstructiontobidders;Contractingrequirements, includingtheagreement, itsforms,andconditionsof thecontract;Specifications,includingtheadministrativeandtechnicalspecifications;Constructiondrawings,illustratingthedesignandengineeringdetails;andAddendums,ifany,whichsupplementtheprocurementdocumentswithanyupdatesorchangesthatmayhavebeenissuedsincethesolicitationwasinitiated.

Changecontrolisthemeansbywhichprocurementcanbemodifiedanditisintegratedintoachangecontrolsystem.Theconstructioncontractestablishestheproceduresfortheproject'schangecontrolsystem.Standardprovisionsoftenincludecertainnoticerequirements,submittalprocedures,andreviewresponsibilitiesoftheappropriatestakeholders.Methodstoexpeditechanges in work performance include construction change directives, work changeauthorizations, field instructions/modifications, force account authorizations, andarchitect/engineer'swrittensupplementalinstructions.

12.3 ProjectProcurementManagementExecutingUsing the statements of work as a foundation, conducting procurements is focused on

soliciting and acquiring the various sellers to provide construction services for the project.Thisprocessmaybeawell-definedandregulatedgovernmentmandateoranentirelyprivateundertaking,suchassearchingtheinternetforcontractors,brieflydescribingtheprojectneeds,andsigninganagreementforservices.Executingprocurementinpublicorgovernmentsectorscanbea lengthyandheavily regulatedprocess.Regardlessof theprocurementmethodology,documents will be produced that prescribe the scope of work and form the contractagreements.

12.3.1 ProcurementSolicitation

The procurement solicitationmethod is either based on a request for quotation (RFQ) orrequest for proposal (RFP). TheRFQ process is a direct evaluation that is focused on theapparent low bidder, provided that the seller's submission satisfies the procurement andcontract requirements. An RFQ is considered a more rigid process that provides an exactmonetaryamountforaprescribedsetofdeliverables.AnRFPisabitmoreflexibleinthatitprovides a base price for the scope of work to be performed, but allows for additionaladjustmentsforscopeandcostandmaybeset toanhourlyor task-orientedbasisas the jobbecomesmoredefined.

12.3.2 ContractStatementofWorkThecontractstatementofwork(SOW)describesthefacilitiestobeconstructedinsufficient

detail to allow potential bidders to determine if they are capable of providing the requiredconstruction services. It is important to note that a performance specification statesrequirementsintermsoftherequiredresultswithcriteriaforverifyingcompliance,butwithoutstatingthemethodsforachievingtherequiredresults.Ontheotherhand,adetailspecificationspecifies design requirements, such as materials to be used, how a requirement is to beachieved,orhowanitemistobefabricatedorconstructed.ContractSOWscancontainbothperformanceanddetailrequirementsyetstillbeconsideredadetailspecification.

In addition, the SOW should describe any special requirements, including collateralservices,performancereporting,post-projectoperationalsupport,and/orspecificcontentandformatrequirements.Likewise,theSOWshouldspecifywhatisincludedandexcludedinthescopeofwork.Thismayincludeamethodsstatementforallprimaryconstructionactivities;however, this should be used cautiously to reduce risk transfer back to the owner forprescriptivedirectionofconstruction.

Typically,theA/EengagedinprojectdesigndevelopstheSOW.Incaseswhereaturnkeyordesign-build contract type is chosen, the owner will provide the functional and aestheticrequirementsofthefacilitiestheyenvisioninastatementofrequirements(SOR).Inaddition,the SOWmay solicit potential bidder input to propose solutions for certain problems. TheSOWandassociated tenderdocumentsshouldbeclearandconcise,andspecifyallcontractrequirements.

All project delivery components should be included in contracts. Even well-developedadministration processes involving procurement documents can be a primer for a legalchallenge. It is crucial that special attentionbe devoted to complete and concise documentswithahighlevelofaccuracy.

12.3.3 ProcurementDocumentsIn the public sector, processesmandate that the buyer prepares documents to support the

requestforsellerresponsesandselection.Preparationshouldincludeareviewofregulatoryprocurement requirements, the contractual interpretation of the contract documents, and theproposedprojectdeliverymethod.Areviewofthecontractorevaluationandselectioncriteriaisalsoacriticalcomponent thatneedsclarity toavoid theriskofunfairorethicallysuspect

contractorselection.Suchreviewswouldincludethefollowing:

Standardforms.Constructiontradeorganizations,professionalsocieties,andlargeownerorganizationsgeneratestandardformsforuseincontractdevelopment.Thesestandard forms help reduce the time and expense for each contract and tendersolicitation.Thesealsohelpstandardizeprocessesfromprojecttoprojectandhelpensurethequalityofthefinalagreement.Procurement documents. These documents should describe the tenderingproceduresandsellerevaluationprocessandcriteria,andconveytheinformationtobesubmittedbytheseller.Thesedocumentsshouldspecifythefollowing:

The items the buyer is expecting with the seller's response to satisfy thedeliverablesand requirements,whichcan range frompricedataonly toa largerlist of information such as drawings, product data, and preliminary bill ofmaterials (BOM); company brochures/contract history; and qualifications of keypersonnel.Theprocessthebuyerwillusetoevaluatetheseller'sresponse.Thebuyeroutlinesa brief narrative on how the bid information in the seller's response will beevaluated to determine the contract award. For RFQs, the price and bidinformation of the apparent low bid response is evaluated. For RFPs, the bidinformation for all seller responses is evaluated. Evaluation criteria are usuallylistedinorderofimportancewiththehighest-weightedcriterialistedfirst.

12.3.4 PrequalificationofServiceProvidersPrequalification or screening of potential service providers establishes a short list of

bidderswho possess the required technical and commercial capability to perform theworkpackage.Prequalifiedsellersareinvitedtosubmitaresponsetotheprocurementsolicitation.

12.3.5 NongovernmentOrganizations(NGO)SolicitationofSellerResponses

Both buyers and sellers should be vigilant in adhering to the practices and rules forconstruction procurements. The most common practice for solicitation of sellers is thedevelopmentofaqualifiedsellerslistwheretheprojectowner(buyer)reliesontheexpertiseofthearchitectorengineerforalistofqualifiedbidders(sellers).Thecriteriaforassessingbiddereligibilityforthequalifiedsellerlistsmayinclude:

Relevantconstructionexperience;Identificationofkeymembers,includingrésuméswithdescriptionsofrelevantworkexperienceandupper-levelteammembers,suchasprojectmanagers;Projecthealth,safety,security,andenvironmental(HSSE/(HSE)andsustainabilityprogramsthatindicatethecontractor'sapproachandexperiencewiththeseprojectcomponents.Insomeinstances,averificationofthebidder(seller)experiencerate

fromitsworkers’compensationinsurancecarriercanvalidateacontractor'ssafetyrecord;Description and availability of the proposed project resource elements, such asmanpower,equipment,machinery,andmaterials;Description of and experience with quality programs, including quality planning,qualityassurance,andqualitycontrol;Suretybondingthatdemonstratestheabilitytosecureconstructionsuretybondsfortheappropriateamountandcoverage;Insurancecertificatesthatmeettherequirementssetforthinthecontractdocuments;Previous contract disputes that describe any claims of the material breach ofcontract that have led to arbitration, litigation, or some other form of disputeresolutionproceedings;andRegulatory requirements that demonstrate the ability to comply with any specialregulationsfortheproject.

Although private organizations are free to proceed as they will, major owners havegovernanceprinciplesthatrequirethemtoproceedwithtransparencyandethics,thusleadingthemtomirrortheirsolicitationprocesseswiththoseusedbygovernments.

12.3.6 PublicandGovernmentSolicitationsThesolicitationofpotentialbidders(sellers) throughtheinternet isadominantsourcefor

buyers seekingqualified sellersand for sellers seekingpotentialprojects.Subsequent to thesolicitationannouncement,bidderconferences,commonlyreferredtoaspre-bidconferences,areconductedandoftenincludeatouroftheproposedsite.

Technology enables buyers to conduct procurement solicitation and contractor selectionalmost entirely through the Internet, including gathering real-time quotations from potentialsellers for their projects. The European Union (EU) procurement directives, the EUconsolidateddirectives,andEUinvoicingdirectivesofferclearguidanceforuseofelectronictoolswithin thegovernmentpurchasingsector.Similarguidanceandusedirectivesaremostoftenprescribedbythecountryoforiginfortheproject.Amajorconcernforsolicitationandbiddingprocesses in thepublicsector is thepotential forcorruptionandbribery.Theuseofgovernance principles and process audits help ensure that proper, ethical, and professionalconductiscontinuallyinplace.

Figure12-4depictsthetypicalestimatingandbiddingprocessforaconstructioncontractor.

12.3.7 EvaluationandSelectionofSellersTheprocessof selectingsellersas serviceproviders (contractors) includes the receiptof

bidsorproposalsandtheapplicationofevaluationcriteriatoselectoneormoresellersthatare both qualified and acceptable as sellers. Expert judgment plays a key role wheninterpretingsellerproposals,especiallywhenlower-tiersubcontractorsarecompetingforthe

samework scope. Special attention to detail should not be overlooked in exchange for justselectingthelowestbidprice.

When feasible, thepricedproposalsof thecontractbidders (sellers) shouldbecomparedagainst an independent estimate prepared by the owner's representative to help analyzeapparent discounts and premiums offered by the contract bidders. Evaluating the pricedproposals against the independent estimate helps ensure that the bidder has understood thecriteriaandcanrealisticallyperformthecontractworkatthestatedpriceandhasofferedafairprice.

A proposal offering an apparent discountmay be intentional underbidding by a potentialsellerto“buythejob,”oruniformlyhigherorlowerbidscouldindicatebidshoppingorotherunfairor illegalbiddingpractices.Analyzinghigher-pricedbidproposalshelpsdetermine ifthe apparent premium is worth the cost. Awarding a contract to a contractor that cannotproperly perform the work for the proposed price will likely create difficulties during thecontractexecution,andpotentiallycauseaprojecttofail.Financialmodelingmaybeusedtoassessthebidders’proposals,includingthepotentiallifecyclecosts,andasameanstocontrolany potential bias in the selection process. Upon seller selection, often varying degrees ofnegotiation takeplace todetermine theexact termsandconditionsof the seller'swork.Thisstep can be a complex, independent process involving many inputs and considerationssurroundingthescopeandpaymentterms.Decisionsneedtobemadeanddocumented,astheybecomethebasisforthecontractagreement.

The designated responsible organization (DRO) log is similar to a resource assignmentmatrix;however, rather than focusingon tasks,DROlogsprovide thecontract requirements,parameters,andobligations,whichbecomeasignificantcomponentoftheprojectmanagementplan.TheDROhelpstoconfirmthatthescopeoftheprojecthasbeencontractuallyassigned.Figure12-5illustratesthecomponentsofaDROlog,which,togetherwiththeindividualworkpackage contracts, can make up the primary output of the executing processes in projectprocurementmanagement.

12.3.8 Single-SourceProcurementIn some situations, theprocurementof constructionworkmaycome froma single source.

The level of justification to preclude competitive bidding can vary depending on theorganization's (buyer's)policies.Comprehensive justificationsare required forpublicsectorcontractswheresignificantlimitationsareimposedbytheorganizations.Singlesourcingmaybeconsideredinthefollowingcases:

Asinglebid/proposalresponsewassubmitted,Time constraints during emergency conditions prevent the use of the procurementcycle,Technicaluniquenessofrequirementspreventsnonoriginalequipmentmanufacturer(non-OEM)frombidding,andExtendedwarrantyontheproductpreventstheuseofnon-OEMcontractors.

Section 12.1 of The PMBOK®Guide provides components that can be used as sourceselectioncriteriawhenexecutingforprocurement.

12.4 ProjectProcurementManagementMonitoringandControlling

Inmonitoringandcontrolling,procurementcontractadministrationisatwo-wayprocesstoensure the buyer and seller adhere to contract requirements. Both the buyer and selleradministerprocurementcontractsforsimilarpurposes, involving itemssuchasdirectingandmanaging project work, controlling quality, controlling risks, performing integrated changecontrol,andcontrollingthefinancialmanagementcomponents.

12.4.1 ContractManagementandContractAdministrationContractmanagementisthefunctionofexperienced,knowledgeablestaffforthepurposeof

providingcontractoversightandauthoritytomanagecontractcreation,execution,andanalysisto maximize financial and operational performance while minimizing risk. It requires athorough understanding of contracting procedures, an understanding of standard contractdocuments,andexpertisewithexistinglegislationandregulations.

Contract administration can be described as the primary organizational function ofnegotiating and implementing the contractual terms and conditions of project contracts byfollowing established policies, processes, and procedures. As previously stated, contractadministration should rely on the construction project manual for controlling procurements.The contract document should be continually updated during the project, including allapproved change orders; resolved issues; and agreed-upon constraints for scope, cost,schedule,regulatoryenvironment,andquality.

12.4.2 WorkPerformanceReportingThesellerreportsonavarietyoftopicsspecifiedinthecontract,whichmayincludework

performed by its subcontractors, vendors, suppliers, and testing facilities.Onsite personnel,suchasthedesignerorconstructionmanager,submitindependentfieldreportsasrequiredbythe buyer. The criteria may include physical progress, schedule progress, earned value,material delivered on site, and resource usage. Performance reporting in many contractdocumentsiscalledprogressreporting.

12.4.3 ApprovedChangeRequestsApprovedchangeorders(changerequests)reflectagreed-uponmodificationstothecontract

scope, price, and/or schedule. Although most contract documents require changes to besubmitted in writing, the time sensitivity of construction projects often necessitates therecognition,approval,andprocessingofverbalchangeorders.Verbalchangeordersshouldbeacknowledgedby thebuyerandseller,andconfirmed througha formalwrittenchange to thecontract. A confirmation of verbal instructions (CVI) is a document frequently used in theconstructionindustry.

12.4.4 Buyer-ConductedPerformanceReviewThebuyermaydirect thedesigner or a consultant to conduct performance reviewsof the

seller'swork to address issues such as adherence to theproject schedule, thequalityof thework,andthebudget.Thedesignerisusuallyinthebestpositiontoperformsuchareview,as

thedesignerismostfamiliarwiththebuyer'sneedsandthecontractclausesthatdescribetheformatandfrequencyfortechnicalandfinancialreviews.

12.4.5 InspectionsandAuditsInspections and audits cover the processes and deliverables. In construction, such

inspectionsusuallyfocusoncompliancewiththetechnicalparametersandindustrystandardsformaterials andworkmanship as outlined in the contract documents. For example, a coresample of concrete may be taken to verify that the correct water-to-cement ratio andcompression breakage pursuant to the approvedmix design is present in the concrete slab.Audits may also involve mandatory (contractual or regulatory) audits and inspections byinsurancecompanies,financial/lendinginstitutions,governmentalorprogramadministrations,and audit organizations that adhere to International Organization for Standardization (ISO),generally accepted accountingprinciples (GAAP),or statementon auditing standards (SAS)requirements.

12.4.6 ProgressPaymentSystemThecontract typicallyoutlines thepaymentprocedures foraconstructionprojectandmay

varydependingonjurisdictionalrequirements.Eachsellerhasitsownsystemthatshouldbesufficiently flexible tomeet the buyer's requirements as to the form and timing of invoices,breakdownofcosts,supportingdocumentation,warranties,employeepayrollcertification,andsuch guarantees that all obligations of the seller, relevant to the portion of work beinginvoiced,areguaranteedtohavebeenmade.Paymentcertificatesareonemeanstoconfirmthatall requirements for an approved payment have beenmet and that work progress has beensubstantiated to support such payment. The seller should have sufficient financial resourcesandhonorthereleaseofsubcontractorpaymentsinordertoavoidpotentialpaymentdelaysanddisruption to thework progress. Continual disruption or large delays in progress paymentscouldresultinclaims.

12.4.7 ClaimsAdministrationClaimsadministrationisanimportantcomponentinallconstructionprojects,asitislikely

thattherecouldbedisputedorcontestedchanges,projectdelaysandpenalties,andriskeventsthat in some capacity impact the contractors, subcontractors, or owner. Contract provisionsincludeprocessesandproceduresforthebuyerorsellertoresolvetheseissuesand,insuchcases,describetheformalremedysuchasarbitrationorlitigation.AnnexA1ofthisextensionis devoted entirely toproject claims, includingprevention and resolution techniques.Figure12-6 depicts various techniques for effective claims administration, including disputeavoidanceanddisputeresolution.

12.4.8 RecordsManagementSystemsRecordsmanagementsystemsareasvariedastheprojectstheyserve.Suchsystemsassist

projectmanagersinretrievingandarchivingcontractdocuments.Technologyhasadvancedallareasofprojectdocumentationthroughshareddatabases,real-timedesignchanges,andmoreefficient communications.The recordsmanagement system should include all documentationand project records, including set processes for control and automation, and tools forconsolidating and incorporating information into the projectmanagement information system(PMIS).

Inadditiontoregularupdatestotheprojectplan,theprojectteamshouldbecognizantofanywritten communication for any adjustments to the contract terms and conditions.Updates toorganizational process assets (OPAs) and EEFs should address seller performanceevaluations, lessons learned,verifiedgoodpractices, andanynewperformancecriteria thatcanprovideinsightsandknowledgeforfutureprojects.

12.4.9 ProjectandContractDocumentationConstruction projects generate more documentation—technical, administrative, and

contractual—than nearly any other kind of enterprise.Most construction contract documentsrequire archiving of all aspects of the contractwork. It should be noted thatmany of thesedocumentsareconsideredtobeconfidentialaccordingtocontract.Technologyhasenabledtheconstruction industry toproducedocumentationonall aspectsof thedesignandconstructionprocess. The records management system is the database for all project records,documentation,andcontractdocuments.

Documentation on any negotiations and settlementsmay also need to be documented suchthat all contracts canbemodified to reflect the agreements and subsequent closure.When it

comes to disputed changes, the process to reach a resolution can be extensive, financiallyexhausting,andmostoftenentirelydependentonthequalityoftheprojectdocumentationandprojectrecords.

12.4.10 ProjectManagementPlanUpdatesUpdating the project management plan usually requires updating the procurement

management plan, and any contract administration documents generated through theprocurementandcontractadministrationprocess.Anyapprovedchangeorderstothecontractdocuments, including revised drawings and specifications, require the responsible projectmanagementteamtomaketheappropriateupdates,revisions,andamendmentstoallaffectedsubsidiaryplans.

12.5 ProjectProcurementManagementClosingMostcontractsareclosedattheendoftheproject;however,certaincontractsmaybeclosed

upon completion of the contracted work regardless of the time frame in relation to thecompletion of the project. Project contract closure is initiated by awritten communication,such as a notice letter or specified form submitted by the contractor (seller) advising thedesignerandowner(buyer)thatthesellerhasachievedsubstantialcompletion.

The architect or engineer of record should certify that substantial completion has beenreached, or advise the seller as to why it has not. Closure documentation prepared andsubmitted by the contractor may include all terms and conditions of the contract and theprocurementmanagementplan,including:

Materialwarrantiesandworkmanshipguarantees,Equipmentmanufacturerwarranties,Finalinspectionapprovalsfrombuyer(ownerorgovernmentauthorities),Equipmentmanufactureroperationandmaintenancemanuals,As-builtdrawings,Sign-offsheetsfortrainingofownerpersonnel,andSubcontractorsandmaterial/equipmentsupplierpaymentcertifications.

Of primary importance in the contract documentation is the seller's submission ofwarranties. The warranties can encompass the seller's workmanship as well as materialvendors’ andmanufacturers’ warranties that meet or, inmany instances, exceed the seller'swarrantyperiod.

12.5.1 PunchListWhenaconstructioncontractiscompleted,alistoftheremainingitems—aproject“punch

list”—documentsalloutstandingworkandinstalledworksthatrequirecorrectiveactiontobeperformedbythecontractor.Verificationthattheremainingitemsarecompleteandhavebeen

acceptedbythebuyeriscrucialforprojectcloseout.Thecontractorcompletesallitemsonthepunchlistwithinadefinitivetimeperiodperthecontract,priortofinalcontractclosureortheexpirationoftheconstructiondefectsliabilityperiodspecifiedinthecontract.Whenallitemson thepunch listarecompleted, thegeneralcontractor requestsa final inspection.Forsomeprojects it is often more appropriate to request final inspections for each major group ofcompletedworks.Thefinal inspectionrecord testifying thatallcontractwork iscomplete ismandatoryforapropercontractcloseout.

12.5.2 AdministrativeCloseoutAdministrative closeout of all procurements can be an extensive undertaking once the

constructionworkhasbeenaccepted.Thisadministrativeclosure includes itemssuchas therelease of any retained funds or progress payments, insurance policy closures, activation ofanywarranties,and the issuanceofcertificatesofworkscompletedorcertificatesofproperequipment ormachinery installations.Thepresenceof anyoutstanding claimsmaypostponefinalpaymentsandpossiblythestartofwarrantyperiods.Theconstructionprojectmanagementprofessionalshouldbe intimatelyawareofallcontractualobligationsandrequirementsuntilallaspectsoftheadministrativedutyarecomplete.

Audits and procurement negotiations to settle all final contract adjustments, issues, andclaimsareusuallyanessentialpartofprocurementclosure.Therecordsmanagementsystemshould incorporateall final settlementsand recordsof theprocurementsand lessons learnedforarchivalpurposes.Themanagementofpotentialcontractdisputesisultimatelyrequiredtocloseprocurements.

Early terminations in construction arenot infrequent and canoccur at any timeduring theprojectwhencircumstancesmerit.Reasonsforearlyterminationcanbebetweentheprimarybuyerandsellerduetononperformance,orbetweenthegeneralcontractorandasubcontractorforthesamereason.Therightsandresponsibilitiesofthepartiesinthiseventareoutlinedintheterminationclauseoftheprocurementcontract.

13PROJECTSTAKEHOLDERMANAGEMENTThe PMBOK® Guide discusses stakeholders in Section 2 and Project Stakeholder

Management in Section 13. This section presents some of the most important stakeholderscommontoconstructionprojectsofdifferenttypesandsizes,andaddressestheirmanagementinthecontextofconstruction.ThefollowingPMBOK®GuideProcessGroupsareaddressedinthisKnowledgeArea:Initiating,Planning,Executing,andMonitoringandControlling.

13.1 StakeholderManagementinConstructionAcontractorusuallyexecutesconstructionprojectsforanowner,withtheassistanceofan

architectural or engineering designer as an intermediary. This groupmay be considered theprimary stakeholders. They provide resources to form the project team, which is anotherprimarystakeholder.Boththeownerandcontractorbringotherstakeholderstotheproject,asdescribedinthefollowing:

Theownertypicallymobilizesthefollowingstakeholders:

Financinginstitutions;Professionaldesignersandtechnicalconsultants,architects,andengineers;Agencyconstructionmanager(CM),CMat-fee,orCMat-risk;Inspectionthirdparties;Licensorsofproprietarytechnologyandprocessengineers;Lawyersandexternallegaladvisors;Insurancecompanies;andAdministrativeandregulatoryorganizations.

Thecontractortypicallymobilizesthefollowingstakeholders:

Subcontractors,Lawyersandexternallegaladvisors,Insurancecompanies,andEquipmentandmaterialsuppliers.

Otherstakeholdersmaybeinvolvedintheprojectduetotheirowninterests,suchaslocalcommunitiesandlaborunions.Theirinfluenceontheprojectoutcomeswillvaryaccordingto

locallegislation,culture,andcustoms,whichaffecttheapplicationofstakeholdermanagementprocesses throughout construction projects. Figure 13-1 provides a typical overview ofstakeholder relationships in construction projects. According to PMI's NavigatingComplexity: A Practice Guide [6], their interrelationships, interdependencies, and theirinteractionsareprimaryprojectcomplexityenhancers.

Someof themost common stakeholders in construction projects are the community, laborunions, insurance providers, financial institutions, and regulatory agencies as described inSections13.1.1through13.1.5.

13.1.1 CommunityMostconstructionprojectstakeplacenearacommunityandtheinteractionbetweenproject

andcommunityisusuallyhigh.Forexample,hiringunemployedworkersfromthecommunitybenefitsboththecommunityandtheproject:iteasesunemploymentandmayreducethecostofbringinginworkersfromotherregions.However,itmayalsonegativelyimpactthecommunity.Heavy traffic caused by the projectmay damage highways or cause traffic jams, leading topossible additional repair work or special work shifts.Managing the relationship with thesurroundingcommunitiesisimportantinconstructionprojectmanagement,anditsresultsmayaffect aspects ranging from environmental permits to bankability. Social responsibility isrelatedtomanagingcommunities.

Societyasawholeorganizesitselfingroups,suchasNGOs(nongovernmentorganizations),with interests ranging from environmental protection to employment of people with special

needs.Thesepublicgroupsinfluenceconstructionprojects,causingchangesthatmayresultindelaysortheoccasionalcancellationofprojects.Theabilitytocreatevideosandsharethemviasocialnetworkshasincreasedtheimpactofpublicgroupsonprojects.Insomecountries,thegovernmenthasestablishedconsultationprocesseswithstakeholdersbeforeprojectsstart,andtheresultsmayinfluencewhetherornotapermitisissued.Theprojectmanagementteamshoulddevelopanappropriateapproachtomanagingpublicgroups.

13.1.2 LaborUnionsThe project team in construction projects may be divided into two groups: the project

management team and the project execution team (seeSection9 formore information). Theproject management team, also referred to in the industry as indirect workers, mostlycomprisesskilledprofessionalswhoworkwiththeperformingorganization.Theyareusuallyviewedandmanagedindividually.Theprojectexecutionteammostlycompriseslocalpeoplewhohavevaryingtradesandskills.Theyaremanagedbothindividuallyandcollectively,andmayormaynotberepresentedbylaborunions.

Laborunionsrepresentworkersfromaspecific industryor trade.Someregionsmayhaveconstruction unions, while others may have unions for welders, civil workers, and others.Labor unions negotiate work parameters for the execution team, such as daily work hours,compensation for extra hours, transportation, catering, site conditions, and other issues.Theprojectmanagement teamshouldapplystakeholdermanagement toboththeprojectexecutionteamandthelaborunionsinordertoenhancetheprobabilityofprojectsuccess.

13.1.3 InsuranceProvidersConstruction projectsmobilize large numbers of people in the communitywho are under

contractwithspecializedcompanies;thecontractsmayincludeperformancerequirements.Thepossible impact of risk events may be high due to the nature of construction activities;therefore,insuranceisacommonpracticeintheindustry(seeSections11and12). Insuranceproviders are important stakeholders, and the projectmanagement team should be aware oftheirrequirementsbecauserestrictionsmayimpactprojectexecution.

13.1.4 FinancialInstitutionsFinancial institutions play an important role in construction projects andmay impact the

project outcomes depending on the amount of risk perceived in the project. Financialinstitutions are involvedwith the project at its earliest phases and their success is directlyassociatedwiththesuccessoftheproject.

Financialinstitutionsusuallycommunicateindependentlywithotherimportantstakeholders,suchastheowner,contractor,andinsuranceproviders,inordertomaketheirownassessmentof the project status. The reporting structure designed in the communications plan shouldprovide a complete and consistent picture of the project status. Some loan agreementsmayrequiretheowner(whomaytransfertheresponsibilitytothecontractorthroughthecontract)toissuespecificreports,whichhavetobeapprovedpriortoperiodicdisbursements.

13.1.5 RegulatoryAgenciesConstruction projects usually require permits and certifications of various types. Local,

regional,national,andinternationalagenciesissuepermitsandcertificatesandcontrolcertainaspects of the construction process. The requirements and conditions of the permits andcertificationsshouldbeadministeredinorderfortheprojecttomoveforward.

13.2 ProjectStakeholderManagementInitiatingAs construction projects are executed in well-defined geographical locations, the list of

stakeholderswill be a function of the site location, to some extent.Other stakeholderswillenter theprojectby invitationof theowner, thecontractor,or another stakeholder.Thus, theproject management team may benefit from including specific categories in its stakeholderregister. For example, generally, project stakeholders in the construction industry can beclassifiedasdirectorindirect,accordingtotheirlevelofinvolvementintheprojectexecution.

Directprojectstakeholdersarethosestakeholdersdirectlyinvolvedintheexecutionoftheprojectandinclude,butarenotlimitedto,thefollowing:

Projectsponsors,Projectowners,Architectsorengineeringdesigners,Contractors,Subcontractors,andEquipmentandmaterialsuppliers.

The needs and requirements of direct project stakeholders will often be detailed in thecontract(s),specifications,andworkstandardsemployedontheconstructionproject.

Indirectprojectstakeholdersarenotdirectlyinvolvedintheexecutionoftheproject,butcaninfluenceprojectexecution.Indirectprojectstakeholdersmayinclude,butarenot limitedto,thefollowing:

Regulatory agencies or authorities (i.e., regarding safety, occupational health, andenvironmentalissues);Professionalassociations;Generalpublic,includinglocalresidents,groups;Landownersandproject-affectedpeople;Laborunions;Localgovernmentdepartments;Media;Lobbyistorpetitionergroups;Otherconstructionundertakingsthatmightaffecttheproject;

Nationalindustryorbusinessrepresentativesandassociations;andPoliceandotheremergencyservices.

Stakeholders also differ in terms of their organization.Companies, authorities, or entitiesemploying people usually have formal internal processes for interacting with the projecttowardthefulfillmentoftheirinterests,includingdecisionmakingandcommunicating.Ontheother hand, stakeholders such as labor unions and organized communities typically haverepresentativeswhoreporttoanassemblythatisultimatelyresponsiblefordecisionmaking.Identifying those characteristics in each stakeholder is necessary to develop an appropriatestakeholderregister,andfurther,astakeholdermanagementplan.

13.3 ProjectStakeholderManagementPlanningWhile it is the role of the project management team to identify and monitor all project

stakeholdersaccordingtothestakeholdermanagementplan,notnecessarilyallofthemwillbemanageddirectlybytheprojectmanagementteam.

Somestakeholdersmayhavebeenbroughttotheprojectbytheownerorthecontractor,andresponsibility for themanagement of those stakeholdersmay fallwith one or the other. Forexample, a financing institution will usually be actively managed by the owner, while asubcontractorwilltypicallybeactivelymanagedbythecontractor.

Thecontractusuallyprovidesprovisions formanagingsomeof thedirect stakeholders. Ininstanceswhere the responsibility formanaging thosestakeholders isnotclearlyestablishedanddocumented,itshouldbedeterminedthroughadivisionofresponsibilities.Theresultingdocument may include both stakeholders that appear and do not appear in contractualprovisions.Thedivisionof responsibilities shouldbe a part of the stakeholdermanagementplan.

Constructionprojectsareundertakeninspecificlocationsandaccesstothephysicallimitsof the installation is usually easy, whichmay lead to complications with stakeholders. Forexample,theprojectownermaydecidethatit,andnotthecontractor,willberesponsibleforthe relationship with the surrounding community. However, community members orrepresentativesmay approach amember of the contractor organization, even outside of theproject site andduringnonworkinghours.The stakeholdermanagement plan should addresssituations of this sort and the project team shouldbe aware of the established approach forhandlingit.

13.4 ProjectStakeholderManagementExecutingThe creation and maintenance of relationships between the project and the stakeholders

occursduringtheexecutionphaseoftheproject,andaretypicallyatapersonallevelbetweenthe representatives of each of the stakeholders. The profiles of people representing eachstakeholder may vary considerably, so interpersonal skills play a very important role inmanagingstakeholderengagement.

Few stakeholders in a construction project have the ability to thoroughly control projectcommunicationswithanyothergivenstakeholder.Forexample,theownermaybenegotiatingthe cutting of some trees with the local community and promising not to proceed beforenegotiationsareconcluded.Meanwhile,thecontractoriswillingtoovercomebureaucracybyfilingarequestforapermittocutthosetrees.Someonewithinthecommunitymayhaveaccesstothatinformationandinterpretitasanintentionoftheownertomoveforwardregardlessofnegotiations.Situationslikethismayhindertrustbuildingandthedevelopmentofaproactiverelationshipbetweenstakeholders.

The project teammay decide to formally engage some of the indirect stakeholders via alicense agreement or other negotiated requirements document that is signed off by thestakeholders.

13.5 ProjectStakeholderManagementMonitoringandControlling

PMI'sNavigatingComplexity:APracticeGuide details stakeholder behavior.The guideproposes possible actions to monitor and control such behaviors and their effects on theproject. The complexity of a construction project may be amplified with the number ofstakeholders.

While effective interactions among stakeholders contribute to success, the diversity,influence, and number of stakeholders involved in those interactions contribute to thecomplexities encountered in the project. Stakeholders can have a significant impact on thestructural complexity of the construction project.Attempts to simplify the connections for astakeholder group without proper analysis of the existing dependencies may also increasecomplexity in theproject.Higher-complexityenvironments require theprojectmanager's fullengagementofkeystakeholders toensure successfulbusinessoutcomes.Usinga stakeholderengagement assessmentmatrix canmitigate engagement risks. It is important to develop andmaintaincommunicationsnetworkswithallkeystakeholders,andcloselymonitortheseever-changinghumanororganizationalrelationshipsforsignsofchangethatmayindicateadditionalthreatsoropportunities.

Possible actions for Monitoring and Controlling Stakeholder Engagement in constructionprojectsinclude:

Developacommonlanguageamongstakeholders.Develop and maintain a web-based communication management system to sharewith all key stakeholders to allow for collaborating and tracking of requirementsapproval.Be aware of small changes in the tone and context of communications amongstakeholderstocaptureearlysignsofpotentialissuesthatmayhaveanimpactonthefutureoftheproject.Holdworkshopsinvolvingstakeholdergroupstounderstandandresolveviewsand

opinionsregardingrequirements.Continuallyengagestakeholdersonsuccesscriteriaasthosecanchangeovertime.Identify potential biases among stakeholders, understand their motives, and thendevelopmitigationactions.Ensurethatthestakeholdermanagementplanisthekeyfocusthroughouttheprojectlifecycle.Ensurethescopeofworkincludesadequatestakeholderengagementactivities;forexample, stakeholder assessment, buy-in, management strategies, and continuousmonitoringorfollow-up.Learnandunderstandthestrategiesorobjectivesofstakeholderstoadopttherightcommunicationtechniques.Performduediligenceandcontinuallymonitorexternalstakeholders’organizationalstrategyandbehaviorsinordertopartnerwiththemeffectively.Consultandcollaboratewithstakeholders;everyoneshouldbeheardintheprocess.Partnerwith suppliers and key stakeholders to establish plans for communicationanddevelopothergroundrulesforaligningdifferentprocesses.Ensure that stakeholders, who are best placed to control risk, are assignedcorrespondingrisks.Communicate new regulatory requirements to the stakeholders for awareness andactionasnecessary.Implement stakeholderanalysisasanongoingactivity,not just at thebeginningoftheproject.Follow up with stakeholders on the success or failure of remedies and seekadditionalhelpasneeded.Bevigilantforchangesinstakeholderattitudesandactions.Diligentlymonitorandpromptlyreadprojectdocuments,andacknowledgethedatatransferorundertakeneededaction.Fosterpersonalconnectionswithstakeholdersandencouragecollaboration.Emphasizeabalanceduseoftechnologybutensurefollow-upwithrecipients.

Managingstakeholdersinconstructionprojectsrequiresconstantmonitoringandcontrollingofsomeadditionalaspects.Forexample,stakeholderrepresentativessuchaslaborunionsandorganized communities usually serve for a term and are replaced by vote, which requiresdevelopingnewpersonalrelationships.Someunwrittenagreementsmayneedtoberevisitedandthingsthatwereconsideredgrantedmayfallintouncertainty.Insomecases,itisimportanttomonitor not only stakeholders’ engagement, but also someof their internal processes anddecisions. The stakeholder list should be continuously updated during all project phases.Through appropriate risk and issue management, potential changes may be converted fromthreatsintoopportunities.

14PROJECTHEALTH,SAFETY,SECURITY,ANDENVIRONMENTAL(HSSE)MANAGEMENTWhilethePMBOK®GuidedoesnotincludeadedicatedsectiontoHSSEmanagement,itis

generally accepted as a primary component for managing construction projects. Safety andenvironmental management are not unique to construction projects andmay be independentprojects or programs within other industries. Because of the unique nature of constructionprojects, health and security considerations are generally included as part of safety andenvironmentalmanagement,allofwhichare incorporatedunder theumbrellaofHSSE.ThissectionoftheConstructionExtensionpresentsHSSEconsiderationsformanaging,assuring,andcontrollingconstructionprojects.

Notethatsomeorganizationsdonotincludesecurityinthetitleoftheintegratedmanagementsection, and refer to HSE to include Health, Safety, and Environmental Management. ThissectionincludesHSEwithinthebroadercontextofHSSEusedthroughoutthischapter.

14.1 ProjectHealth,Safety,Security,andEnvironmentManagementinConstruction

The requirements of the Health, Safety, Security, and Environmental (HSSE) planningprocessesandactivitiesare:

Owner/sponsor-enforcedregulations,Mandatedstandardsandregulations(local,state,national,orinternational),Bothowner/sponsorandinternationallyacceptedstandardsandregulations,andContractorgoodpracticesandworkingcriteria.

It is common for project sponsors or owners to invoke additional requirements, such asconstraintsspecifictothegeographicregionandapplicationareawheretheprojectisdestined(may depend on the scale, scope, and complexity of the project); specific safety andenvironmental management systems standards, where general measures may be consideredinsufficient to provide the assurance and control required; and industry-specific codes andstandards,whichdefinespecificprojectsafetyandenvironmentalperformanceandacceptancecriteria.

ItshouldbenotedthattheabsenceofaspecificHSSEmanagementprogramorsystemdoes

notnecessarilymean that the systememployedby theperformingorganization is ineffective.Likewise,havingasafetyandenvironmentalmanagementsystemorprogramdoesnotmeantheperformingorganizationwillproducecompliantproductsorwork.

Health,safety,security,andenvironmentpertainingtoconstructionaredescribedasfollows:

Health. Employee health programs are becoming increasingly important in thecorporate environment and directly influence risk and safety factors. Health andwellness programs can address not only physical health factors that enableconstructionpersonneltoperformtheirjobs,butalsowellnessprogramsthatassistinestablishingawork-lifebalanceandassistwithotherstress-inducingissuesthatmay affect mental stability and focus. Construction sites offer unique healthconsiderationssuchasachangingworkenvironment,unfamiliarlocation,transientpersonnelperformingspecificshort-orlong-durationtasks,etc.Safety. The safety of construction crews and project teams is a top challenge onconstruction projects and should be a priority in all levels of the organization.Safety behavior, ownership, and incident reduction is closely monitored andcontrolledthroughouttheprojectwiththeassistanceofseveralresources,includinghumanresources,safetyofficers,andothercorporatecomplianceagents.Security. Controlled site access is an important consideration for mitigatingunauthorized entry, theft, and vandalism. In some areas, establishing a secureconstruction zone also serves to mitigate any external threats to the constructionteamsperformingworkonsite.Environment. Understanding the environmental factors (climate, wildlife,remoteness, cultural resources, etc.) of eachunique construction location requiresanalysis and coordination during the preconstruction phases of the project.Establishing commitments, mitigations and controls, and construction impactanalyses should take place before construction begins. An environmental impactanalysis (EIA) is a commonly accepted method of discovery, analysis, andmitigation.

Project health, safety, security, and environmental management processes include allactivities of the project sponsor/owner and the performing organization. These activitiesdetermine safety and environmental policies, objectives, and responsibilities to ensure theproject isplannedandexecuted inamanner thatpreventsaccidents soas toavoidpersonalinjury, fatalities,orpropertydamage.For convenience, the term safetymanagement is usedthroughout this Construction Extension to include both safety management and healthmanagement. Project safety and environmental management interacts with all other projectmanagementprocessesandProcessGroups.

Theperformingorganization implements the safety and environmentalmanagement systemthrough the policy, procedures, and processes of planning, assurance, and control, and byundertakingcontinuousimprovementactivitiesthroughouttheprojectasappropriate.Aswithqualitymanagement,safetyandenvironmentalmanagementensuresthattheprojectmanagement

systememploysallprocessesneeded tomeetproject requirements, and that theseprocessestake safety and the environment into consideration. Project safety and environmentalmanagementconsistsprimarilyofensuringthattheconditionsofthecontract(includingthosecontainedinlegislationandanyprojecttechnicalspecifications)arecarriedouttobenefitthesafetyofboththoseworkingonsiteandinthevicinityoftheproject.Itshouldaddressboththemanagementoftheprojectandtheproductoftheproject(anditscomponentparts),includingassessing anddetermininghow thedifferent projectmanagementprocesses interact to fulfilltheneedsoftheproject,andwhetherchangesorimprovementsareneededtoaccomplishthesafetyandenvironmentalobjectivesoftheproject.Aproperandeffectiveprojectmanagementwould be incomplete without due consideration of the requirements for safety andenvironmentalmanagement. Furthermore, both project safety and environmentalmanagementshould be integrated with risk management processes in order to accomplish the statedobjectives.

Health and security have additional impacts that are commonly overlooked but equallyimportanttosafetyandenvironmentalmanagement.Delaysandmonetarylosses,inadditiontoemotionaldistress,canbesignificantfactorsinbothillnessandseriousinjuriesorfatalities.ManagingthehealthandsecurityofprojectresourcesshouldbeidentifiedandmitigatedintheHSSEplan.Forexample,planningan8-hourworkdayduringhigh-heatperiodsmaylengthenprojectdurationyetlowerriskstolosthoursduetoheatstrokeanddehydration.

Project health, safety, and environmental management applies to all aspects of projectmanagement.Asinthecaseofqualitymanagement,thisbroadapplicationresultsinaddressingthreedistinctive(andsometimesconflicting)setsofrequirements,namely:

Mandatory statutory requirements. These requirements imposed by legislationand enforced by statutory third-party authorities in the region (geographical orotherwise)where the project is to be constructed are generally applicable to allconstruction projects regardless of application areas. Special statutory safety andenvironmental requirements are often imposed on projects in industries such asnuclear,powergeneration,oilandgas,railways,underground/mining,etc.Customerrequirements.Theserequirementsaredefinedinthecontractconditions.They specify safety and environmental requirements to be undertaken andadministered and the technical performance and acceptance criteria as defined inlegislation, statutory instruments, and project specifications. These requirementsmay also include alignment of the contractor management system with globalstandardssuchasISOorOccupationalHealthandSafetyAdministration(OHSA).Requirements of the performing organization. These requirements satisfycommercial needs (optimize profit, return on investment, etc.), fulfill socialresponsibilitycommitments,increasereputationinthemarketplace,etc.

Theseprocesses interactwithoneanother aswell aswithprocessesofotherKnowledgeAreas. Although the processes are presented here as discrete elements with well-definedinterfaces,inpracticetheymayoverlapandinteractinwaysnotdetailedhere.

14.1.1 HealthPhysicalandmentalhealthforconstructionprojectstypicallyincludesseveralpoliciesand

controlstomaintainacleanandhealthysite.Typicalchallengesfortheconstructionindustryinclude a transientworkforce and lack of site ownership byworkers performing short-termactivitiesatthesite.Somemethodsformaintainingahealthysiteinclude:

Drugandalcoholscreening,Materialsafetydatasheets(MSDS),Globallyharmonizedsystem(GHS),Dustcontrolandnoisecontrolmeasures,Onsitemedicalfacilities(includesportableequipmentsuchasaneyewashstation,emergencyshower,etc.),Fatiguemitigationplans,Workhourlimitations,Climate-specificmitigationsuchasavailablewater,warminghuts,etc.,Regularhealthcheckupsandhygienicworkconditions,andProvisionoftrainedfirstaidpersonnel(nearby,ifnotonjobsite).

14.1.2 SafetyEnsuring job site safety in the construction environment requires effective, safe work

practicesandprocedures,withapriorityfocusonhigh-consequenceandhigh-riskactivities:

Verificationandvalidationthatpersonalprotectiveequipment(PPE)isappropriateandingoodconditionfortherequiredactivity,Pre-sitepreparation(hazardanalysis,permits,sitefamiliarization,andongoinghazardtagging,etc.),Ongoingtraining,Trafficmanagement,Verificationofsafeguards,Periodiccheckingoftoolsandequipment,Standardoperatingprocedures(SOPs),Riskrecognitionandassessment,OSHAcompliance,andOnsitesafetycompliancepersonnel.

14.1.3 SecurityAsecurejobsiteallowsonlyauthorizedaccesstoconstructionzonesandmaintainssecurity

of the facility and grounds when no construction activities are under way. This can beestablishedbyuseofconstructedornaturalbarriers, technology,or thephysicalpresenceofsecuritypersonnel.Someoptionsforsecuringaconstructionworkareaare:

Badge-orsmartcard-controlledaccess,Securitygatesandfencing,Trafficbarriers,Securityguards,Remotesecurity(cameras,sensors,etc.),andSitelighting.

14.1.4 EnvironmentEachconstructionproject is typically locatedat a sitewithauniquesetofenvironmental

characteristicsthatrequireanalyzing,planning,monitoring,andcontrolling.Severalaspectsoftheenvironmentshouldbeconsidered,including:

Recycling/wastemanagement,Hazardouswastehandling,Environmentalclean-up,Noisemonitoring,Acousticcontrol,Culturalresourceplanning,Environmentalimpacts,Sitedrainage,Dustcontrol,Lighttrespass,Trafficmanagement,andGovernmentpermittingrequirements.

14.2 ProjectHSSEManagementPlanningHealth, safety, security, and environmental (HSSE) planning are overlapping and integral

efforts. The HSSE planning process is aimed at providing a safe, secure, healthy workenvironmenttopreventharmtopeopleordamagetotheenvironment.TheHSSEpolicyshoulddemonstratecommitment fromsenior-levelmanagement to thesegoalsand incubateaculturethat implements HSSE policies through all levels of the organization. Many governmentagenciesinvolvedinconstructionprojectshavewell-establishedproceduresandrequirementsthatensureHSSEpoliciesaremet.Employees,consultants,andcontractorsmayberequiredtoattendcoursesandcertificateprogramscoveringHSSEtopics.

14.2.1 ContractRequirementsSpecifications, regulations, legislation, and standards (technical or legislative) are

contractual requirements specific to construction projects. Some construction projects mayhaveadditionalrequirementsdue to theirnature,complexity,orspecific industryapplicationarea. For example, there aremandatory application-area-specific standards for constructionwithinnuclearprojects,oil andgasonshoreandoffshoreprojects, airportprojects,militaryprojects,etc.Intheconstructionindustry,theserequirementsissuedbytheprojectsponsororowner include a project scope statement, a description of the product(s) of the project, andreferencestoallapplicablestandardsandregulations.

14.2.2 SafetyandEnvironmentalPolicyThesafetyandenvironmentalpolicydiffers fromthequalitypolicy in that itdictateshow

constructionactivitiesshouldbeconductedfromasafetyandenvironmentalperspective.Thesafetyandenvironmentalmanagementpolicyalsoincludesthedegreetowhichtheperformingorganization's management is committed to social responsibility and environmentalconservation issues, and can have a major impact on the effectiveness of a safety andenvironmentalprogram.

14.2.3 SafetyMetricsWhilemanyorganizationsdeterminewhich safetymetricsaremost important to track, the

followingmetricsaregloballyrecognizedandshouldbeincluded:

Losttimeinjuryfrequencyrate(LTIFR).Referstoanoccurrencethatresultedina fatality, permanent disability, or time lost fromwork of one day/shift ormore.Injuriesarerecordedasinjuriespermillionhoursworked.Totalrecordableinjuryfrequency(TRIF).Referstothenumberoffatalities,losttime injuries, cases of substitutework and other injuries requiring treatment by amedicalprofessionalpermillionhoursworked.Serious incident frequency (SIF). Refers to the number of serious incidents(includingnear-misses)permillionhoursworked.

14.2.4 SiteNeighborhoodSafetyandEnvironmentalCharacteristicsandConstraints

The characteristics of a construction site and its surrounding environment should beidentified prior to project execution. For construction projects, the environment is theneighborhood where the project occurs, which may have constraints pertaining to safetymanagement, quality management, and environmental management. These can include theproximity of adjacent residents, configuration of project offices, layout and location ofconstruction equipment workshop, material delivery time constraints, traffic congestion invicinityof theprojectsiteduringpeakperiods,sitesecurityandaccessprotocols,andnoiserestrictions,etc.

14.2.5 TrialsandSimulationsTrials and simulations used for safety and environmental projects include simulations of

emergencyresponseprocedurestoensurethatthecontrolsdevelopedareadequatetoaddressthoseincidentsidentifiedasrequiringanemergencyresponse.Theyaredependentonindustryapplication-areaconstraintsandrequirements(mining,oilandgas,etc.).

14.2.6 CostofSafety(COS)andCostofEnvironment(COE)The cost of environmental or safety noncompliance can be detrimental to a project if

litigation,fines,orajobshutdownoccurs.Complianceistypicallymandatory.COSorCOEisdetermined by a form of cost-benefit analysis that incorporates the potential impacts ofnoncompliance on the project. An important distinction is that safety is of paramountimportance regardless of cost, and environment may have significant long-term impacts toconsider.

ExamplesofCOSandCOEthatcouldcausesignificantcostandscheduleimpactsinclude:

Hazardouswasteclean-upfromaspillorcontaminatedsoil,Environmentalclean-upofcontaminatedwatersourcesorecologicalareas,Deforestationandafforestation,Publicinfrastructuredisturbances,Communityperceptionrequiringpublicoutreachtorestore,andSeriousinjuryorfatality.

14.2.7 ProcessMappingProcessmappingiscommonlycombinedwithflowchartingto:

Maphowaparticularprocessiscarriedout,Determinehowvariousprocessesinteract,Identifyanygapsinaparticularworkitemoractivity(termed“gapanalysis”),andInclude theabsenceofcritical reviewpointsor a requireddeliverable (includingtheomissionofverificationthatworkhasbeenundertakenandisacceptable).

14.2.8 FlowchartingFlowcharting is commonly usedwith processmapping for construction projects andwith

certainprocessstatisticalanalysesandreportingmethods.Flowchartingidentifiesnon-value-addedactivitiesorfunctions,ordelaypointsintaskactivities,anddefinesparticularcontrolpoints inworkexecution (e.g., the issuanceofapermit toenterprior toenteringaconfinedspace,ortheneedtoobtainacertificateofoccupancypriortooccupyingthespace).

14.2.9 ProjectSafetyandEnvironmentalRequirementsReview

Projectrequirementsreviewincludesanassessmentanddeterminationof:

Characteristics and criteria of activities and products. The characteristics andcriteria of each activity and product(s) of the project, and how to satisfy them.Thesearesometimesincorporatedintoactivityriskassessments.Verificationcriteria.Theapplicableverificationcriteria,includingthoserequiredtodemonstrateacceptanceandperformancecharacteristicsarefulfilled.Alternativesreviewandselection.Inconstructionprojects,itiscommonforsomeactivities to be performedwith different processes or arrangements for achievingthe same result or output. This applies equally to safety management, qualitymanagement,andenvironmentalmanagement.Eachprocessrequiresspecificsafetyandenvironmentalrequirements.

Whenarequirement(standardorspecification)isdevelopedinonegeographicalregionforuseinanotherregion,itiscommonforthecharacteristicsandcriteriaofoneregiontodifferinsomedegreefromthoseinanotherlocation;asaresult,therequirementsgenerallyreflecttheconstraints of the region of origin. Situations such as these have increased significantly intoday'sglobaleconomy.Compromisemaybenecessary,andmayrequire there-qualificationoftherequirementstoensurecompliance.Thiscompromisedoesnotimplyloweringstandardsforsafetyandenvironmentalimpacts,butillustratesthatthesameendresultcanbeachievedbydifferentmethods.Thisshouldbescrutinizedcarefullysoasnottocompromisesafetyandenvironmentalstandards.Validjustificationshouldbeprovidedtoprojectsponsorsorowners,forobviousreasons.

Generally,allprocessesareanalyzedtodeterminealternativestoincreaseeffectivenessandefficiency.Examplesarecost-benefitanalysesandanalysesinwhichtime,cost,andsafetyandenvironmental considerations are balanced or even exceeded. Safety and environmentalrequirementscanbemandatoryconstraints,asnoncompliancecancausetheprojecttohaveitsexecution permits canceled, revoked, or otherwise not issued. Furthermore, a failure in anyaspectofsafetyorenvironmentalmanagementcanmanifestitselfinmoresignificantfailuresinqualityorriskmanagement.

14.2.10 HSSEManagementPlanTheprojectHSSEmanagementplandefines thestrategyormethodology tobeadoptedby

the performing organization to undertake HSSE management and fulfillment of the projectrequirements. It is a subset of the overall project management strategy, methodology, andinformation system. The project HSSE management plan is a high-level strategic planningdeliverablethatdefinestheoverallintentionsanddirectionoftheperformingorganizationasexpressedbytopmanagement,andisreviewedatvariousstagesthroughouttheproject.Itmayinclude theparticipationof theproject sponsor/owner andothermajorproject stakeholders,suchasindustryregulatorsandlocal,national,andfederalgovernment.TheHSSEmanagementplancanincludebutisnotlimitedto:

Staffing or human resources plan. This plan is a subset of the project human

resourcesplan,developedbydeterminingthevarioushumanresourcearrangements,analyzingtherisksandbenefitsofeach,andselectingtheoptimalarrangement.Theselectedoptionshouldtakeintoconsiderationthenatureoftheworkinvolvedandany required competencies; contract and legislative requirements; responsibilitiesand accountabilities; organizational structure; structures among the performingorganization, project sponsor/owner, and other project stakeholders; and even theapportioningofworksoasnottooverloadoneparticularfunction.Budget.Thebudgetisasubsetoftheprojectcostmanagementplan.Thesafetyandenvironmentalmanagementbudgetisdevelopedbydeterminingthecostsassociatedwiththedifferentapproachesenvisionedfortheworkstobeperformed(includinghuman resource arrangements), analyzing the costs associated with each, anddetermining the optimal costs and budgetary requirements for safety andenvironmentalmanagement,training,andsafetyexercises(suchasfire,evacuation,andincidentrecovery).Records and documentation requirements. The cornerstone of any safetymanagement system is the records and associated documentation generated andemployed not only as the basis to determine satisfactory or unsatisfactoryperformance, but also to determine the effectiveness of the project managementsystem as awhole. Safety and environmentalmanagement records and supportingdocumentationarealsoemployedwhenassessingcompliancewithstatutorysafetyandenvironmentalrequirementsandlegislation.Stakeholderrequirements.Theagreed-uponprojectstakeholderrequirementsarean input into the project stakeholder management plan and include projectstakeholders’requirementsforplanning,assurance,andcontrol.Reportingrequirements.Thereportingrequirementsforsafetyandenvironmentalmanagementareasubsetoftheoverallprojectperformancereportingrequirements.Reportingrequirementsshouldinclude,butarenotlimitedtoassignedmanagementstaff and resources, baseline, management planned versus actual expenditure,agreed-uponperformanceandacceptancecriteria,auditschedule,auditsundertakenversus those planned, details of audits (including periods for addressingunsatisfactory performance), details of corrective and preventive actions, andstatisticalmeasurements todemonstrateproject efficiencyandeffectivenessof theprojectmanagement system, etc. In some countries, site safety and environmentalinspections are mandatory and occur on a regular basis. In other cases, theserequirementsareimposedbyinsurancecompanies.Projectexecutionconstraints.Theproject execution constraints imposed shouldbeconsideredandmayrequireadditionalmandatoryHSSErequirements.Examplesof suchconstraintscouldbeasbestos removal,outdoorwork inextremeclimates,working with noisy machines, removing vegetation, working within a knownculturally significant resource area, working at heights, etc. At times, projectexecution characteristicsmay be dictated by the configuration of the construction

site and that of the surrounding environment. Project execution constraints caninfluence the approach or strategies adopted for health, safety, security, andenvironmental management and, therefore, form an input into the projectmanagementplan.Agreed-uponperformanceandacceptancecriteria.Thesafetyandenvironmentalperformance and acceptance criteria for all attributes of the project should befinalizedandagreeduponbytheprojectsponsororownerand,whereapplicable,any relevant project stakeholders. The criteria form the basis for the safety andenvironmentalmanagementbaseline.Project administrative and contract closure procedures. Administration andcontract closure will include collation and assembly of all pertinent safety andenvironmentalmanagementrecordsandothersupportingdocumentationnecessarytodemonstrate that the safety and environmental requirements of the project werefulfilled.Operationaldefinitions.Theoperationaldefinitionsspecifywhatsomethingisandhow it should be measured. Safety and environmental assurance and controlprocesses are frequently employed to determine howprocesses and projectworkaretobemeasured.Forexample,itisinsufficientmerelytostatethatmanagementreviewsoftheprojectmanagementsystemwillbeundertakenonceperyear,orthatsite safety and environmental inspections will be carried out as per frequenciesspecified in thecontract,or that thehazardcausedbyconstructionequipmentwillremain within the permissible limits, or that all site staff will wear personalprotective equipment. The project management team should, in relation to thesestatements,beinapositiontodemonstratetangiblythatmanagementreviewswereundertaken,orthatthespecificinspectionswerecarriedout,orthatanyoilspillsorgasemissionsweremeasured,orwhetheronlyheavyvehiclesorallvehicleswereinspected, or that all site personnel were, indeed, issued personal protectiveequipment.Communication. Safety and environmental communication cannot be overstated.This type of communication can cover a broad range of awareness and alertactivitiessuchas:

Barriers,signs,andbulletinboards;Initialintroductorymeetings,tool-boxmeetings,individualbulletinsonaspecificsubject,etc.;Safetyandenvironmentalreports,includingthoserequiredbylegislation;andPublicwarningorhazardousareas.

14.2.11 SafetyandEnvironmentalZoningandSignageGenerally,aprojectsitecanbedividedintospecificzones(e.g.,workshops,storageareas,

thedifferentareasof theconstructionjobsite, limitedorcontrolledaccessareas,etc.),with

eachhavingitsownsafetyrequirements.Thezoningofaparticularareaofaprojectsitehelpsdetermine specific safety and environmental hazards or associated risks.Consequently, suchsignagecanincludegeneralsignagetowarnofaccessrestrictionsormorespecificsignagetowarnofparticularhazards.Thisprocessutilizestheprincipleofvisualoperationsmanagement(VOM) to reinforce and repeat any specific instruction that would have been given duringsafety and environmental training and induction. It is also common to employ safety andenvironmentalsignagebanksatspecificaccesspointswhereallnecessarysignagerelatingtoaspecific areaof theproject is cited.Thesebankswouldbe subject to auditor inspectionatregular intervals to ensure that all appropriate signs are present and determinewhether anyhavebeendamagedorotherwiselostandareinneedofreplacement.

14.2.12 SafetyandEnvironmentalTrainingandInductionRequirementsTherequirementsforsafetyandenvironmentaltrainingaregenerallydividedintooneofthe

following:

Safetyandenvironmentaltraining.Safetyandenvironmentalcompliancetrainingis common on all construction projects and includesmandatory statutory trainingrequired for operating construction equipment and/or undertaking specific safety(e.g., heavy-lifting operations) or environmental tasks (e.g., sorting differentcategories of waste). It is increasingly common for all construction personnel toundergomandatorygeneralstatutorysafetyandenvironmentaltrainingbeforebeingpermittedentranceontoaconstructionprojectsite.Thisisaresultoftheincreasedoccurrence of accidents that would, under normal circumstances, be easilyavoidable.Safety and environmental inductions. Safety and environmental inductions arecommononallconstructionprojects.Generally,theyrelatetospecificconstructionactivities or tasks that are employed to address risks associated with particulartasksandthemitigationmeasurestobeemployed.Tool-box meetings. Tool-box meetings generally provide specific instructionsregardingtheuseofcertainconstructionequipmentandtools,andcoversuchtopicsassafety,operation,maintenance,etc.

Critical toanysafetyandenvironmentalprogramis theneedtoplanwhenelementsof theprogram should be implemented to address specific parts of the project. Safety andenvironmentaltrainingplanningisasubsetofthehumanresourcesplanningoutputs.

14.2.13 TrafficManagementPlanThetrafficmanagementplandefinesthecontrolstobeexercisedovertrafficinthevicinity

of the project site including, but not limited to, project site entry and egress arrangements(includingsecuritychecks),timelimitationsfordeliveries,useoftemporaryroadsforpublictraffic, weight restrictions, traffic signals and channeling of vehicles to avoid constructionworks,accessandegressforemergencyvehicles,etc.

14.2.14 EmergencyResponsePlanThe necessity for a project-specific emergency response management plan is generally

dictated by the constraints of the project, its environs, and industry application area. It isusuallydevelopedinconjunctionwithprojectsponsorsandowners.Forexample,undergroundworks (such as tunneling) have specific mandatory requirements relating to emergencyresponseneeds.Requirementsmayinclude,butarenotlimitedto,responsibilityandauthorityforkeymembersoftheemergencyresponseteam;communicationrequirements(especiallyofinitialoccurrenceofemergencyincidents,andwithemergencyservice, localhospitals,etc.);provisionofappropriateemergencyresponseequipment;andaccessandegressrequirementsforemergencyresponsevehicles(fire,police,ambulance,etc.).Emergencyresponsesshouldnot be limited to safety and environmental incidents and can also include environmentalemergency incidents, for example, the inadvertent discharge of contaminated material intowatercourses,whichcouldleadtothecontaminationofreservoirs.Inaddition,itiscommonfor application area regulators to require specificmandatory controls to be implemented aspartofemergencyresponseactivities.

It isprudent todevelopan integratedemergencyresponseplan toaddressbothsafetyandenvironmental incidents,especiallyasanemergencyincidentwilldirectlyor indirectlyhavesafetyandenvironmentalimplications.

14.2.15 PermittoWorkManagementPlanMany construction project application areas have mandatory requirements relating to

permits, for example, excavation, hot work, confined work, biohazards, etc. These permitprocedures are defined in the contract conditions, and generally reflect the safety andenvironmental checks that should be addressed before commencing specific activities.Although the permit to work management plan is a subset of the project communicationmanagement plan, the consequences of safety failures warrant its placement in this section.Thisisespeciallytruewherepartofthescopeofworkforaconstructionprojectrelatestothemitigationmeasurestodealwithcontaminationoriginatingfromadjacentindustries.

14.2.16 WasteManagementPlanTheprojectwastemanagementplan isa subsidiaryof theprojectmanagementplan.Most

construction projects will produce some degree of waste, and some projects will generatesignificantly more waste than others (e.g., office development versus infrastructuredevelopment).Projectwastemanagementgenerallyemploysthe“3Rprocess”—reduce,reuse,recycle—to address environmentalmanagement.Theprojectwastemanagement plan detailsthe controls to be applied to each particular category ofwaste, ranging fromgeneral officewaste (paper, etc.), food waste (from site canteens), sanitary waste (from site welfarefacilities), to the different categories of waste generated by construction processes(excavations,metal,packaging,lumber,etc.).

Requirementsforwastemanagementincludenotonlyidentifyingauthorizedwastedisposalfacilities,butalsoobtaining thenecessarypermitsandauthorizations todischargewaste, the

mostcommonbeing:

Dischargeofwastewaterduringexcavationintoadjacentwatercourse,wheresomedegreeofprimary treatment is required (water treatmentplants, settlementponds,etc.) for the removal of suspended solids or other environmentally harmfulconstituent.Excavatedmaterial,wherewasteenforcementauthoritiesareempoweredtoassessthe performing organization's controls for disposal controls and waste manifestsystem;thatis,thedeterminationofhowmuchwasteisplacedinauthorizedareas.Constructionanddemolitionwastegeneratedon site,whichmay requirea formalplanfortreatmentofthedebrisandseparationforpotentialrecyclingorreuse.

With many construction projects being sited in areas that previously would have beenconsidered unsuitable, environmentalmanagement includes information on how to dealwithpossiblecontaminatedareas.Suchcontamination includesmaterialconsideredunsuitable forreuse or recycling, as well as contamination that would constitute an environmental and/orsafetyandenvironmentalhazard.Nofurtherdiscussionismaderegardingthismatterhere,asitisbeyondthescopeofthisConstructionExtensioninviewoftheinvolvementoflocal,state,andfederalgovernments;statutorybodies;andindustryregulators.Itismentionedheretomakeperformingorganizationsawarethatsuchinstancesarecommon.AdditionalinformationcanbefoundintheGovernmentExtensiontothePMBOK®Guide[7].

14.2.17 SafetyandEnvironmentalProgramsWhile the project safety and environmentalmanagement plan details how the performing

organizationwillmanagesafetyandenvironmentalissuesontheproject,theprojectsafetyandenvironmentalmonitoringandcontrolplandefinestheactualmonitoringandcontrolactivitiestobeemployedandundertaken,especially:

Itemsofworktobemonitored;Applicablereferencedocumentandacceptancecriteriatobeconsulted;Applicableverificationactivities (inspection, tests, reviews, submissions, etc.) tobeperformed,andwhensuchactivitieswillbeperformedinrelationtotheoverallprocess;Project teammember responsible for undertaking the work and each verificationactivitytobeidentified;Applicablecharacteristicsandmeasurementstobetakenorrecorded;andApplicablesupportingdocumentationtobegeneratedtodemonstratesatisfactoryorunsatisfactoryperformance.

Tobeeffective,safetyandenvironmentalmonitoringandcontrol(andverification)shouldbeintegratedintohowthephysicalworkisperformed.Thisprocessestablishescontrolpointsorgates throughout theprocess toensure that thenextworkphasewillnotproceeduntil theprecedingworkhasbeencompletedandverifiedascompleteandcompliant.

14.3 ProjectHSSEManagementExecutingImplementationandassuranceofthevariousHSSEplansoccursduringtheexecutingphase

of the project by specialized resources as the responsible entity. Applying the planned,systematicHSSEactivitiestoensurethattheprojectemploysallprocessesneededtomeettherequirements and determiningwhether these processes and their integration are effective ispartof thisresponsibility.Evaluatingtheresultsof theHSSEmanagementonaregularbasisprovidesconfidencethattheprojectwillsafelyandenvironmentallysatisfytherelevantHSSEstandards.Without this assurance,projectsnot incompliancecan incurdevastating financialandlife-threateningconsequences.

14.3.1 ProjectHSSEAssuranceTheHSSEplandetailshowthehealth,safety,security,andenvironmentalcomponentswill

behandled.HSSEexecutiononconstructionprojectsincludesassuringcompliance,analyzingresults, and evaluating effectiveness of the plan. These activities provide the means torecognizenoncomplianceorvariancefromtheprojectrequirements.

HSSEassuranceinvolves:

Applyingtheplanned,systematicsafetyandenvironmentalactivitiestoensurethattheprojectemploysallprocessesneededtomeetrequirements;Determiningwhethertheseprocesses(andtheirintegration)areeffectiveinensuringthat theprojectmanagementsystemfulfills the requirementsof theprojectand theproductoftheproject;andEvaluatingtheresultsonaregularbasistoprovideconfidencethattheprojectwillsatisfytherelevantsafetyandenvironmentalstandards.

14.3.1.1 SafetyandEnvironmentalAuditsAudits involve undertaking structured and independent review to ensure that project

activitiesoftheperformingorganization(s)complywiththeprojectrequirementsandthatsuchactivitiesaresuitabletofulfilltherequirementsoftheproject.

Safetyandenvironmentalauditsoftheprojectproduct(s)arecalledtechnicalorcomplianceaudits. For example, road safety audits assess the measures implemented for trafficmanagement,whichincludeanevaluationofresultsoroutputsofactivitiesascomparedtotheperformanceandacceptancecriteriadefined in technical safetyandenvironmental standardsandspecificationstodeterminefitnessforthepurposeintended.

Audits can also be undertaken for the project management system as a whole or forindividual component parts (procurement management system, design management system,construction management system, or commissioning management system, etc.). Audits alsoassesscompliancewithstatutoryandlegislativesafetyandenvironmentalrequirements.

Integrated audits are commonly adopted to provide a more accurate measure of theeffectiveness of a specific work area in fulfilling project requirements. For example, the

incorporation of the applicable requirements (such as those for quality, safety, andenvironmentalmanagement),sometimesalignedtoglobalstandardsasISOorOHSA,areusedto assess the effectiveness of the controls employed on a project as a whole rather thanindividually.

14.3.1.2 SafetyandEnvironmentalHazardRiskAnalysesSafetyandenvironmentalhazardriskanalyses isasystematicreviewofeachconstruction

process,activity,orworkelementtoidentifythepotentialsafetyandenvironmentalhazardsforprojectpersonnelaswellasotherswhoarepresentonthesiteassociatedwiththeactivityorprocess.Theseanalysesarepartoftheriskidentificationprocessandarenormallycarriedoutby specific and knowledgeablemembers of the projectmanagement team of the performingorganizationwiththeassistanceofkeyconstructionsupervisors.

14.3.1.3 SafetyandEnvironmentalAssuranceMeasurementsSafety and environmental assurancemeasurements are the result of performing safety and

environmental assuranceactivities that are fedback into thePlanningProcess foruse in re-evaluatingandanalyzingtheperformanceoftheperformingorganization,andthestandardsandprocessesemployed.Assurancemeasurementsarealsousedasanindicatorofareasthatmayneedfurtherinvestigation.

14.4 ProjectHSSEManagementMonitoringandControllingThe HSSE monitoring and control describes how the project management team will

implementthenecessarycontrollingactivitiesoftheperformingorganization.Themonitoringandcontrolmaycontainormakereferencetospecificprocedurestobeemployedtoensurethecomplianceoftheworkthatiscarriedout,including:

Determining and applying measures for monitoring the achievement of specificproject results throughout the project to determine whether they comply with thesafetyandenvironmentalrequirements,andIdentifyingunsatisfactoryperformanceand identifyingways toeliminatecausesofunsatisfactorysafetyandenvironmentalperformance.This includesfailureson thepartofplanningandassurance.

14.4.1 KeyPerformanceIndicatorsTheHSSEmanagementplanincludesgenerallyacceptedkeyperformanceindicators(KPI)

formonitoringandcontrolling,including:

Losttimeinjury(LTI),Totalrecordableinjury(TRI),Workedhours,Nearmisses(NMs),

Unsafeactsandcondition(UA/UC),andSeriousincidentsfrequency(SIF).

14.4.2 Heinrich'sAccidentTriangleFirst developed in the 1930s, Heinrich's Accident Triangle (Figure 14-1) illustrates the

generallyacceptedconceptsurroundingunsafebehavior.Thefigureshowstheprogressionandcorrelationofunsafeactstoeventualfatalities.Forevery30,000unsafebehaviors,3,000nearmisseswilloccur,30lostdaysofwork,and1fatality.Thisconceptunderlinestheimportanceofreportingandcorrectingunsafebehavior.

TheNationalSafetyCouncildefinesthefollowingterms:

Accident.Anundesiredeventthatresultsinpersonalinjuryorpropertydamage.Incident.Anunplanned,undesiredeventthatadverselyaffectsthecompletionofatask.Nearmiss. An incident where no property was damaged and no personal injurysustained,butwhere,givenaslightshift intimeorposition,damageand/orinjuryeasilycouldhaveoccurred.

14.4.3 AccidentInvestigationIt is important thateachaccidentor incident is reported immediatelyand itscause(direct

and/orindirect)isinvestigated.Acompletereportshouldbemadestatingwhathappenedandwhy to ensurepreventive and corrective actions are implemented.The insurance companiescoveringtheresultinglossesusuallyrequirethesereports,buttheyarealsovitalformeasuring

and improving theperformingorganization's safety and environmental performance. In somecases, the reports are required by law enforcement agencies or government labor agencies.TheseinvestigationreportsmayrequirecascadingchangesinSOPsorimplementationplans.

14.4.4 DefectRepairReviewAlthoughdefect repairwouldgenerallybeconsideredanattributeofqualitymanagement,

thereviewofdefectswithregardtoanypotentialsafetyandenvironmentalissuesiscommon.Defect repair review can commonly be addressed bymeans of the nonconformance controlprocess.

15PROJECTFINANCIALMANAGEMENTProjectFinancialManagementdetermineshow theprojectwill be financed, including the

processestoacquireandmanagethefinancialresourcesfortheproject.Itismoreconcernedwith revenue sources and monitoring net cash flows for the construction project than withmanagingday-to-daycosts.Whileconstructionprofessionalsareskilledin thetechnicalsideof theirwork, theyoften lack financialmanagementknowledge andunderstanding.Researchhas shown that project managers in construction need to know financial managementfundamentalsinordertobetterunderstandandnavigatethefinancialdecisionsthatarepartofevery construction project. This section presents important considerations on financialmanagement relative to privately funded construction projects. Government or publicconstruction fundingmayvaryby thecountryand jurisdictionwhere the financial solution isbeingconsidered.

15.1 ProjectFinancialManagementinConstructionFinancing of construction projects may be considered from different perspectives: the

owner's perspective with due considerations for its interaction with other organizationsinvolved in the project, or from the construction contractor's perspective.The owner of theconstructionprojectmaybelongtothepublicorprivatesector;constructionprojectsmaybesmall- tomedium-size, large, ormegaprojects; and the type of financingmay have long- orshort-term effects. Each of these aspects impacts financing arrangements and constructionprojectfinancesolutionsadoptedfortheproject.

Withintheorganization,financialmanagementisconcernedwiththeefficientandeffectivemanagement of funds in such a manner as to achieve organizational objectives. Financialmanagement includes the planning, monitoring, and controlling of the financial monetaryresourcesoftheorganizationandisoneofthemainfunctionalareasdirectlyassociatedwiththetopmanagement.

In traditionalconstructionprojects, theowner typicallypaysfor thecostof theprojectbymeans of periodic (usually monthly) progress payments. In this scenario, the contractorfinances the initial costs of set-up and possibly a couple of initial months of work. Manycontractorsareabletoundertaketheseexpensesorobtainashort-termloantocoverthisinitialperiod. In other cases, the owner or sponsor provides initialworking capital by paying thecontractor an initial advance,which represents a percentage of the approved budget that isdiscountedatthesamerateinmonthlytake-offs.Thedetailsofthisarrangementarestatedin

thecontract.

More recently, however, the construction industry is facing increasing requirements tofinancetheentireprojectasaresultoftheuseofdifferenttypesofprojectdeliverymethods(BOT,DBOO,DBOM,etc.)andpublic-privatepartnership(PPP)projectfinancing.Thistrendmandatesthecontractor,whooftenleadsaconsortium,beconversantwithandknowledgeableaboutthesubjectandgeneralfinancialmanagementtechniques.

Financialmanagement isdistinctlydifferent fromcostmanagement,which relatesmore tomanaging the day-to-day costs of the project for labor and materials. In this section, thediscussionislimitedtofinancingthecostoftheconstructionprojectitself,althoughlong-termfinancingmayincludebothconstructionandoperation,suchisthecaseinPPPprojects.

It should be noted that through the construction project's life cycle, the projectmanager'sresponsibilities for financial management may be broken down into four broad areas:accounting for financial resources of theproject,managing costs andprofits,managing cashflows,andmaking financialdecisionsorproviding thenecessaryverified information to theprojectsponsorformakingsuchdecisions.

Financialmanagement introducesadditionalstakeholderssuchasmanagementaccountants,certified public accountants (CPAs), certified financial analysts® (CFA®) charter holders,sureties,insurancefirms,banks,projectinvestors,managementconsultants,etc.

15.2 ProjectFinancialManagementPlanningProject financial management planning is the initial phase of financial management of

constructionprojectsthatidentifiesandprovidesallfinancialrequirementsfortheprojectandassigns project roles and responsibilities, reporting relationships, etc., for the project.Financial planning is no different from standard project planning: tasks are identified, andrequirementsarequantifiedandplacedonatimescale.Resourcesarealsorequiredtoensurethatthefinancialtasksarecompletedontime.

15.2.1 SourcesofFundsforConstructionProjectsThe funds for a traditional project are often obtained from a company's central financing

system,whichmaybeacombinationofborrowingfromfinancialinstitutions,retainedprofits,and financial reserves. The financing costs are normally charged as interest to the project'scostaccountforconstructionprojects.

Intheinstitutionalsector,fundsfrequentlycomefromdonors,throughgovernment,orfromothergrants.Governmentfundingissecuredthroughaprocessthatrequiresprojectapplicantstoprovidecomprehensivedocumentation.Criticalinputisreviewedto:

Verifydefinitionandclarifyscope,schedule,andbudget;Assessprojectobjectivesandbenefits;Justifythereturnoninvestment;

Establishcorrelationtobusinessstrategicplans;Validatetheabilitytoperformeffectiveprojectmanagement;andDeterminerealisticmilestonestomeetscheduledatesandassetgoals.

Competitionforfundingcanbesignificant.Obtainingcontractswilldependonthequalityofapplications,aswellastheapplicant'srecordofcompletingprojectswithinparametersandindemonstratingtheusefulnessoftheasset.

Forprivatelyfundedprojects, therearemanypossiblesources,suchascommercialpaperbackedbyabankorcreditfacility,bankloans,publicdebtofferings,privateplacementsintheU.S. and international markets, syndicated commercial long-term loans, government entityloans,etc.Insomecases,fundingmayoccurincrementallyindifferentphasesof theproject.Thefinancialplanandtheoverallprojectplanshouldconsiderthefundingmilestonesof theproject in order to maintain the momentum and the continuation of the project. Finaldeterminationof funding sourcesdepends in largeparton theproject's creditworthinessandproject sensitivity to changes in interest rates. In almost all of these types of projects, theparticipantsacquiresomeequityintheproject.

On project-financed projects (see Section 15.2.5, Construction Project Finance andCorporateFinance),aninitialinvestmentisrequiredbeforebeingabletodrawaloan.Costsfortheinitialstudyoftheprojectfromthefeasibilityanalysistothefinaldevelopmentofthebusinessandfinancialplanning,whicharesubmittedtoeventuallenders,areusuallycoveredbycompany/ownerequity.

Financetechniquesmaydifferbycountryorregion,typeofproject,owner,andtotalfundingsought.Nevertheless,thefollowingaresomeofthemostcommonlyusedfinancetechniquesinprivatelyfundedconstructionprojectsintheglobalconstructionindustry:

Traditional. Projects have traditionally relied upon well-known project financetechniques,suchasfundingbytheownerorganization'sexistingfunds,andequityordebtmadeavailablebycommercialbanks.

Senior debt. Senior debt refers to debt that is in first-lien position. In cases ofdefault,seniorlendershavepriorityinrecoupingtheirinvestment.Construction loan.Construction loan isdebtgranted to theowner to finance theprojectconstruction.

Subordinateddebt.Asubordinateddebtisaloanorsecuritythatisnotreimbursedininstancesofdefaultuntilseniordebtholdersarepaidinfull.Mezzaninefinancing.Mezzaninefinancingtakestheformofsubordinatedloansasa short-termproject financing solution that ispaidbackafter the seniordebt.Forexample, real estate developers draw upon mezzanine loans for supplementaryfinancingdevelopmentprojects.Asset backed securitization (ABS) financing. This financing method collectsfundsfortheconstructionoftheprojectbymeansofissuingbondsandasset-backed

securitiesinthefinancemarket,usingthefuturecashflowtheprojectcangenerateasaguarantee.Project finance bonds. A project bond issued by a company is a debt tradabledocument where the issuer (in this case, the organization executing the project)agreestorepaythebondholdertheamountofthebondplusinterestonfixedfutureinstallmentsdates.Miscellaneous financing methods. Other types of financing methods involvingbondissuanceasameanstofundstatecapitalprojectsaregeneralobligationbonds,revenuebonds,andcertificatesofparticipation.Project leasing. The organization performing the projectmay lease vehicles andequipmentasawayofraisingfinance.Alandorfacilitymayalsobeleasedasanalternativetotheacquisition.Contractual (vendors/contractors finance). A contractor, subcontractor, orequipmentandmaterialssuppliermayofferfinanceaspartofthebid(asawaytosecurethecontract).Forexample,anequipmentsuppliermaybewillingtotakethefinancialriskofofferingaloan(sellingoncredit)oraleaseofequipmentasawaytoincreasesalesoropenuptonewmarkets.Preconstruction sales in real estate construction projects. For-sale real estateconstructionprojectdevelopersmaysellpropertiespriortoconstructioninordertofinanciallysecuretheirproject.Insuchcases,lendersmayrequireapercentageoftheprojectbepre-soldinordertoapprovetheconstructionloan.Factoring. Sometimes a business may find immediate short-term financing bysellingitsreceivables(e.g.,invoices)toaspecializedthirdpartyentityknownasa“factor”(usuallyabankorfactoringcompany)thatchargesacommission.Otherpossiblesourcesoffunds.Projectfundingmayalsobefoundincommercialpaper backed by a bank, credit agency, ormultilateral development bank; publicdebt offerings; private placements in the local and international markets; andsubsidies.

15.2.2 Short-TermFinancialFluctuationsTheconstructionprogressofworkmayexperienceshortfallsinfinancialresourcesorcash

flow both from the owner's and contractor's perspectives. In some cases, the followinginformalmethodsareusedtoconfronttheseshort-termfinancialfluctuationsintheconstructionindustry:

Overdraftfacilities.Banksmaypermitwithdrawalsfromacompanybankaccountinamountsexceedingtheavailablefunds.Usuallythewithdrawalperiod,maximumamount,financialcost,etc.,arepreviouslyagreeduponwiththebank.Lines of credit. A line of credit consists of an agreed-upon amount of moneyavailable on an as-needed basis to be borrowed at any given time at a variableinterestrateusuallyaccruedmonthly.

Paymentdelays. In some cases, the ownerwill shift financing expenses to otherparties of the project (contractor, subcontractor, suppliers, etc.) to overcomemomentaryshortfallsinfinancialresources.Cost in excess of billings (underbilling) and billings in excess of costs(overbilling).Thisaccountingconceptlinkedwiththeconstructionprogressofworkand invoicing may create cash flow shortfalls. In such cases, the owner mayadvanceamounts tocontractors lookingforagain in lowerfinancingcostssharedbybothpartiesthroughprioragreement.Ownerresources.Ownersthatmanagerecurringprogramsofcapitalprojects,suchasgovernmentagencies,mayprovideadditional funding from reserveaccounts toensureprojectswithforecastcostoverrunscanbecompleted.

15.2.3 EconomicEnvironmentTheeconomicenvironmentisanexternalfactorthatisoutsidetheprojectmanager'scontrol.

Despite this, the projectmanager should be aware of all risks emerging from the economicenvironment and should ensure that the financial plan is updated periodically to allow forthem.Factorsmay includepolitical, regulatory, social, andeconomic issues suchas countryrisk,currencyfluctuations,laborrelations,changesinlegislation,etc.,whichcanincreaseordecreasethecostoftheproject.

15.2.4 AnalyticalTechniques,FeasibilityStudy,andSensitivityAnalysisForlong-termprojectsfinancedbythecontractor,astudyshouldbeconductedtodetermine

iftheprojectcouldbeprofitablewithinthegivenparameters.

Cash flow measurement is a prime way of determining the viability of a project.Construction projects rely on cash inflow to balance the costs incurred in order to keepfinancingcoststoaminimum.Agoodpracticeistoperformasensitivityanalysis—awhat-ifanalysisofprojectedperformance—toassessalternativesbasedonchangingonevariableatatime toobserve theresult. In finance,especiallyasassociatedwithnetpresentvalue(NPV)andinternalrateofreturn(IRR),thistermhasaspecificmeaningandisalsocommonlyusedinprojects.

Itshouldbenotedthatcashinflowpredictionsareoftenhamperedbythevaluationofworkin progress. At any given time, the project under execution will have uncompleted workpackages not yet invoiced. The valuation of this work, or work in progress, should beperformedinaconsistentfashionforeachprojectandacrossallconstructioncontractsfortheorganization.

15.2.5 ConstructionProjectFinanceandCorporateFinanceAlternatives may be used for the financial planning of a construction project, namely,

corporate financing by means of the company balance sheet or project financing byincorporatingtheprojectintoanewlegalandeconomicentitycreatedadhoc.

Corporate finance uses the company assets and cash flows to guarantee the constructionloan, while project finance is the structured financing of a specific project using equity ormezzaninedebt.Withprojectfinancing,thevariousstakeholdersseekanequitableallocationof the project's risks. The project financing solution is much more costly than corporatefinancing as it implies higher lenders’ risks transferred as higher financial costs, additionallegalandinsurancecontractcomplexity,andgreatercostsofmonitoringtheprojectprogress.

Atacorporate level, financing isusuallyperformedusingamixofcorporatedebt (bondsand notes) and existing funds. Individual projects may not be considered at the corporatefinance level and may involve different financing arrangements. For example, performingproject financing in large infrastructure projects consists of the equitable allocation of aproject'srisksamongprojectstakeholders.Thus,inprojectfinancing,thosestakeholderswhoprovidetheseniordebtplaceasubstantialdegreeofrelianceontheperformanceoftheprojectitself.

15.2.6 LegalEntityDefining the most appropriate and advantageous legal form of the venture depends on

internal and external factors of the business, namely, type of project, type of organizationsinvolved, risk and liability allocation, and bankability. Partnership, corporation, trust, jointventure, or combinations thereof are special purpose vehicles (SPVs) currently used as thelegalformofthespecificeconomicentitythatperformstheproject.

SPVs are legal entities created for a special financial limited purpose: acquiring and/orfinancing of a construction project and/or operation. SPVs are specific and unique to eachproject, depending on the legal and financial agreements between stakeholders and type ofproject.SPVsarecomplexcontractualarrangementswhereanumberofdifferentpartieswithdifferentobjectivesfindanappropriatemannertofulfilltheirneeds.AnSPVisusedtoraisefundsundercheaperconditionsbymeansofasophisticatedfinancialstructureseparatefromtheparentcompany'sbalancesheet.

15.2.7 ContractRequirementsForcontractor-financedprojects,thecontractmaycontainimportantclausesthatrestrictthe

contractor'sabilitytoobtainfavorableterms.Sincethistypeofprojectisoftenawardedafteraproposalprocess, theremaybeanopportunityforthecontractortonegotiatemorefavorableterms.

The contract and the project plan help define requirements for the financing needs ofconstruction projects. The contractual terms of payment from the client are an input inascertainingthefinancialneedsofaproject tohelpestimate thecashflow,whichinfluencestheprojectfinances.

15.2.8 FinancialImpactRiskFactorsA proper financial plan allocates risks among participants, investors, customers, and

interested third parties. Some of the risks that influence obtaining favorable financing arecompletionrisk;costoverruns;andregulatory,political,andtechnologyrisks(seeSection11on Project Risk Management). Further, it is not uncommon for a financial and insuranceinstitutiontoaskforacompleteriskanalysisoftheproject'spotentialenvironmentalimpactsin order to ensure that funds will be adequately applied to minimizing impacts due to theprojectenvironment.

15.2.9 TaxPlanningasaFinancialFactorAn important factor to consider in the financial planning of the project is that in many

countries interest is tax deductible while dividends to shareholders are not; this factorencouragesfinancialleverageovertheuseofequity.

Manylong-termmajorprojectsmayprovidetaxbenefitsthatshouldbeaccountedforwhileworkingontheproject'sfinancialplan.

In some countries, lease finance or leasing, as discussed in Section 15.2.1, provides taxbenefits. A study on the advantages of tax depreciation and other taxable revenuesmay beneededtocreatethemostefficienttaxationstructurefortheproject.

15.3 ProjectFinancialManagementMonitoringandControlFinancial control ensures that bonds are reduced when necessary, calls for funds from

project partners are made as needed, and all insurance and bank withdrawals/deposits areperformed at the appropriate times. Financial control and cost control should be executedeffectively to ensure all items are within budget and the financial cash forecast. Effectiveproject financialmonitoring and control is better achievedwhen a project produces regularprogressreports.

15.3.1 ProjectAccountingSystemsThe project accounting system should be similar in structure to the WBS, showing the

breakdownof the totalproject inmorecontrollablemodules.Asstated inSection7.2.7.2, acostbreakdownstructure(CBS)issometimesdevelopedasamappingtoolbetweentheWBSandCOAtoaidinreportingcosts.ACBSlinkscostactivitiesinanestimatetotheCOA.AWBSisproject-specificwhileaCBSisorganization-specific.

On small- to medium-size projects, the breakdowns can be kept on simple spreadsheet-generated S-curves. Accounting systems are usually more sophisticated for large projects.Financial control is exercised by closely monitoring actual spending and revenue againstbudgetandcashflowforecasts,adjustingeithertheworkmethodsorproblemareaswherethismechanism shows deviations. It is imperative to keep proper financial records, includingrecords of income, expenses, and all other financial transactions for the project. It is goodpractice for the project manager to check that all financial information is recorded andreportedappropriately.

15.3.2 FinancialInternalandExternalAuditsInternaland/orexternalauditsensurecorrectaccountingmethodsandfinancialpracticesare

being maintained. These audits are often helpful to the project manager in uncoveringotherwise unseen problems. External audits are often a statutory requirement of the localgovernmentoraremandatoryunderthefinancingconditionsarrangedwithlenders.

These audits focus primarily on the basic financial statements of the project, such asstatementofincomeorrevenueandexpenseaccounts,statementofretainedearnings,statementof cash flows, work-in-progress schedule, supplemental schedules, contact retention status,etc. Periodic financial audit reportsmay also containwarnings of over investment on fixedassets,poorcreditarrangements,andimproperuseofprojectfunds.

15.3.3 CashFlowAnalysisRegularlyupdatingalloftheactualfinancialandcostdataprovidesanup-to-datefinancial

information system from which the project manager analyzes trends based on uniquecharacteristicsoftheproject.Fromthesetrendsandpastactualdata,theprojectmanagercanrevisetheforecastfortheremainingduration.Poorinventoryandcashflowmanagementmayseriouslyhamperconstructionprojectsuccess.

15.3.4 FinancialReportsForprojectsthatneedfullfinancing,managementandanylendersinvolvedrequireperiodic

financial reports.Whenprojectscomprise some formofconsortiumorpartnership,periodic(often monthly or quarterly) meetings are typical, during which project leaders present thestatusoftheprojectandforecastitsfuture,includingthestateofitsfinancialhealth.

Cost and financial reporting in construction projects has different purposes: internalreporting to managers for day-to-day cost planning, monitoring, and control (progress andperformance reports); internal reporting tomanagers to support strategic planning (financialreports); external reporting to owners and other parties on a partnership arrangement; andexternalreportingtofinancialinstitutionsfulfillingfinancialagreementreportingcovenants.

15.3.5 ProfessionalExpertise:ProjectMonitor,Lender'sEngineer,Investor'sEngineer,orTechnicalAdvisor

The use of professional expertise such as accountants, legal advisors, insurance andinvestmentbrokers,orotherswhowilladviseonissuesrelatedtomonetarypolicies,investorrelations, the stock market, wills, trusts, funds, etc., may add considerable value towardavoidingfinancialpains.

Project monitors, the project's design architects and engineers, lender's engineers, orinvestor's engineers verify the physical status ofwork throughout the construction stage andperiodicallyreportthequantumoffinanceactuallybeingcontributedandusedontheprojecttoensureagainstmisuseoffunds.

15.3.6 Ex-PostEvaluationsEx-postevaluationsaremethodologiestoassesstheeffectivenessoftheprojectandtheaims

fulfillment.Theresultcomparestheproposedbenefitandtheachievedbenefit,suchasnetcashflow,IRR,fee,andothers’financingparameters.

ANNEXA1MANAGINGCLAIMSINCONSTRUCTIONAclaimisademandforsomethingdueorbelievedtobedue,usuallyasaresultofachange

in basis in the project execution; a variation or deviation in risk allocation; an action,direction,orrequestedchangeorderagainsttheagreed-upontermsandconditionsofacontractor a part of the construction,which has failed or is not performing properly and cannot beeconomicallyresolvedbetweentheparties.Claimscanalsoariseduetocontractomissions,unclearlanguage,andconsequentialmisinterpretations.Inconstruction,thedemandisusuallymade for additional compensation for work deemed to be outside of the contract, or anextensiontothecompletiontime,orboth.Thereareanumberofsituationsforclaimstotakeplaceandtheseshouldbeviewedfromtwoperspectives:thepartymakingtheclaimandtheonedefendingagainstit.However,thedistinctionbetweenaclaimandachangeistheelementof disagreement between the parties as to what is due. If agreement is reached, the claimtransitionstoanapprovedchangerequestor,asmorecommonlyreferredtoinconstruction,anapprovedchangeorder,whichmodifiesthecontract.Intheabsenceofanagreement,theclaimmayproceedtoformalnegotiation,mediation,arbitration,orlitigationbeforeitisresolved.

Litigationinmostcountriesistheworstalternative,followedcloselybyarbitration,butmaybetheonlywayinwhichaclaimcanberesolved.Itisfarbettertoresolvetheclaimsituation,even if theproposedresolution isnot themostadvantageous to thedisputingparties, than tohopeforamorefavorablejudgmentthroughlitigation.Often,claimsarethoughtofintermsofacontractormakingclaimsagainstanownerorotherprimepartyandbysubcontractorsagainsta contractor, but claims can also originate with an owner who believes that a contractrequirementisnotbeingmetorcompletedontimeorinsomeformhascausedunduedamagestothestakeholder.Unresolvedissuescanescalateintoaclaimandultimatelyadisputeamongthecontractualstakeholders.

Althoughagreed-uponchanges to thecontractdocumentsoccur frequently,disputesamongthestakeholdersofaprojectalsooccur frequently, so thecontract should includeclauses topreventclaimsandtomanageandmitigatetheireffects.Specialattentionshouldbepaidtothemanagementofprojectagreementsinordertomitigatepotentialdisputesthatcouldarise.Aninternationalprojectinvolvingpartiesfromdifferentcountriesraisesthepossibilityofclaimsanditisnecessarytoestablish,veryearly,thelegalconventionsandcommonrulesforagoodworkingrelationship.Claimsmanagementdescribestheprocessesrequiredtopreventclaims,tomitigatetheeffectsofthosethatdooccur,andtomanageclaimsquicklyandeffectively.Thisannex presents an outline for claims management, including appropriate dispute resolutionmethods. It is intended to stimulate a careful approach to contract preparation, contract

management,projectdocumentation,andexpeditiousresolutionofclaims,whenapplicable.

A1.1 ClaimsManagementintheConstructionIndustryGenerally, a construction claim is not necessarily a negative endeavor and does not

necessarilyreflectabadproject;itistheadministrativeprocessinwhichtosettleafinancialor cost disagreement and sometimes involves the contractual time for completion.When abuyerandsellercannotreachanagreementoncompensationorcannotagreethatachangehasoccurred,acontractualdisputemayresult,whichmayhaveanegative impacton theprojectand the relationship of its participants. Nowhere else is the motto “time is money” moreprevalentthanintheconstructionindustry.

A1.1.1 TheConstructionEnvironmentIsComplexPractically all project work performed involves an agreement or contract among the

organizational participants. The organizational influences and project life cycles are atestamenttotheintegrationcomplexity.Forexample,theintegrativenatureoftheseprojectsisunderstoodbyanewroadwaythatdisruptsexitingtrafficflow,crossesexistinginfrastructure,passes through thenaturalenvironment, requires theacquisitionofproperty,andevenforcestherelocationofcommunities.Considerthethousandsofcomponentsthatmakeupafinishedtower, the transitionbetween thesematerials, and the fact that they all areprocured throughwritten contract documents. To a further extent, construction may involve the unforeseenelements encounteredwhen constructing amarine harbor, dredgingwaterways, or tunnelingthroughmountainsorbeneathexistinginfrastructures.Alloftheseelementsdictatethescopeofaprojectthatisinitiatedinresponsetotheneedsandrequirementsofthestakeholders.Itisforthisreasonthatspecialattentionshouldbepaidtothemanagementofthoseagreementsinordertomitigateanypotentialdisputesthatmayarise.

A1.1.2ClaimPreventionasaPriorityConstructionactivitiesaregenerallycarriedoutincomplex,highlysensitive,andchanging

environments.Perfectconditionsandcontrolarenearlyimpossibletoobtain.Clearly,thebestway to prevent claims is to eliminate the unknown areas to maximize what is known, andresolvechangestoavoidpotentialdisputes.Thus,theemphasisisonkeepingissuesinfocus,prioritized, and resolved and to prevent them from becoming claims. Construction projectmanagementprocessesandproperlydocumentedoutputsoftheseprocesseshelpconsiderablytowardmitigationofamajorityofpossibleclaims.Further,researchhasshownthatcontractsbased on sound and proven principles, internationally established contract guidancedocuments, and formalized construction project management methodologies lead to aconsiderablereductioninclaims.Adefinedmechanismforclaimresolutionshouldbepresentinthecontractagreementalongwithprioritizationforresolution.

Having a well-developed plan is critical—one that provides for flexible implementationconsistentwith the plan aswell as thorough communicationswith all stakeholders. Lack offollow-through, random changes to performance or schedule, unknown conditions, resource

problems,andslowdecisionmakingareallfactorsthatcannegativelyaffecttheproject.Earlyrecognitionofpotentialproblems,andopencommunicationsregardingpossiblealternativesorchangestotheplancreateacollaborativeenvironmentinwhichclaimsarelesslikelytooccur.

Beingproactive,suchaskeepingprojectdocumentsinorder,traceable,andretrievableinatimelymanner, is a sound approach toward claims prevention and is the least invasive andleastcostlyrouteinresolvingpotentialclaimsandcontractdisputes.Thepracticesdescribedinthisannexcanmitigateandofteneliminatetheoccurrenceofclaims.

A1.2ClaimsManagementPlanningThe rise of a claim, its documentation, and its development by a plaintiff can be very

expensive.Similarly,thedefenseoftheclaimcanbeequallyexpensiveandbotharewithoutanyguaranteesofafavorableoutcome.Therefore,fromthestakeholder'sperspective,thegoalforclaimsmanagementistopreventclaimsentirelyand,ifnot,toresolvethemattheearliestopportunityfortheleastcostandleastdisruptiontotheproject.Todoso,oneshouldfirstbeable to recognize potential claim situations, either contractual or performance-based.Recognizingpotentialclaimsituationsstartswithsufficientknowledgeoftheprojectscopeandcontract requirements. This awareness helps identify the potential risk that may arise withchanges in scope or a potential modification to the contract. The environment of potentialclaimsbeginswith theplanningprocesses,notonly in theProjectProcurementManagementKnowledgeAreabutalsoinProjectRiskManagement,ProjectStakeholderManagement,andProject Communications Management. These influences form the basis for an agreementbetweenparties as the seller andbuyer.The interpretationof thecontractdocuments fromalegal perspective is beyond the scope of this Construction Extension but is a necessaryrequirementforcontractualstakeholders.In-houseorretainedprofessionalresourcesskilledinlaw and legislation are common in design and construction. Outputs, particularly from theplanningprocesses,mayproveinvaluabletothelegalprofessionalsifandwhentheirservicesareneeded.

Having a thorough project management plan is a fundamental component and the mostimportant factor in claim prevention. A clear and carefully described scope of work, areasonableschedule,anappropriatemethodofprojectexecutiontailoredtothetypeofproject,and an acceptable degree of risk involved contribute to the elimination of claims. Anassessmentoftheconstructionworksencompassingallrequirementsoftheprojectplanshouldbesatisfiedinconjunctionwiththemajorstakeholderstotheprojectplan.Up-frontpartneringand team-collaboration opportunities are techniques that build consensus and collaborationamongtheteammembers.Thesetechniqueshelpreducetheperceptionofdistrustandimprovetheinterfacesthatmayhaveaneffectontimelydecisions,bothatthesiteandatadministrativelevels.

A well-written contract with fair contract terms provides a basis for minimizing claimswhen it comes to scope changes and unknown site conditions, force majeure delays andfortuitousevents,andtimelyreportingandfair-noticeprovisions.Havingadetailedreviewofthedispute resolutionclausesbeforeaddressingadisputecanhelpalleviateuncertaintyand

ambiguityonthesemattersandkeepthedisputefromescalatingtoafullclaim.Legaladvisorsmayalsobecalledupontohelpinterpretcontractuallanguagethatmaybeambiguous.

Claims can be minimized by the use of a risk management plan that allocates the riskbetween the parties on the basis of which one has the most control over the risk factorinvolved.Unfairlyshiftingthemaximumamountofriskandtheabilitytocontrolthatrisktoacontractor is an invitation to claims.Theup-frontunderstandingof regular scheduleupdatesandincorporatingdelayactivitiesasagreedbetweentheownerandthecontractorcontributessignificant importance inaddressingtimeimpacts.ProjectIntegrationManagementaddresseschange control alongwith thegenerally recognizedgoodpractices formanaging changes. Inaddition,constructionchangesandtheperceptionofachangeorchangedconditionrequireaneffectivestrategytoavoidhardlinedpositions,whichonlyservetoescalateaclaimsituation.The change control process should designate levels of authority for the decision-makingprocess,andforincorporatingalleffortstoeliminateorreducethepotentialforadispute.

A1.2.1PlanningActivitiesforClaimPreventionAllcontractdocumentsshouldbewritteninclear,unambiguousterms.Pre-tendermeetings

betweenstakeholderspriortocontractfinalizationhelptoclarifythedetails,requirements,andexpectationsfortheproject.Declarationsfromthecontractingpartiesregardingbidquantitiescanalsopreventclaimsarisingfromprojectscope.Further, requirements forcost, schedule,scope, and specifications should be clearly stated, reasonable to accomplish, and mutuallyagreeduponbystakeholders.Effectiveandqualitativereviewsbyallpartiesincreaseclarityaroundtheschedule,plannedwork,progress,andas-builtprojectdocumentation.

The use of a constructability review can avoid field errors and unnecessary changes inconstruction methods, all of which can lead to claims. This review, along with effectiveproceduresforadditionalqualificationsandclarifications,isvitallyimportant.Therequestforinformation(RFI)procedureisacommoncomponentforclarifyingtheintent,designdetails,orinstructionsfortheconstructioncontractor.

Contracts requiring designer and owner approval for shop drawings, materials forconstruction, RFI responses, and similar documents should contain a clause that states areasonabletimeframeforaresponsetobegiven.Ifthisdeadlineisnotmet,thecontractormayunintentionallybe impactedandmayhavegroundsforaclaimforextracontract timeand/oradded costs. The general and special conditions along with project performance reportingrequirements describe other process and system tools that contribute to effectivecommunicationandreportingonprojectprogress,events,andadministrativeprocesses,suchaschangeorderlogs,changeorderproposals,submittaltracking,andprogressmeetings.Many,if not all, of theseprojectdocuments and toolsmaybe associatedwith a future claim; thus,prescribing clear expectations of their use can helpwith documenting factual circumstancesandconditions.

Prequalificationofdesignersandcontractorshasthebenefitofdealingwithexperiencedandqualifiedorganizations that are less likely to enter into awishful contractual relationship topursue claims, thus reducing or avoiding the risk of a situation that could quickly and

frequently be driven to frantic claim activity. These organizations usually have a higherstandardofprofessionalconductandoneinwhichthefocusisonresolvingsituationsthatleadtoclaims.Severalofthecontractdeliverymethodsaregearedspecificallyforthispurpose.

A1.2.2ProjectPartneringProjectsthatuseaprojectteamcollaborationtechniqueforproject-specificpartneringare

often less susceptible to claims because of the mutual dedication and commitment thatpartnering promotes. Processes and systems can be established that lead to bettercommunication,timelyturnaroundofsubmittals,promptdecisionmaking,andoftenapracticalformofissueescalationwhenapotentialsituationisdiscovered.Partneringcanbeacontractrequirement;however,itismostoftenanoptionalprovisionforthecontractorandtheowner.Partnering strives to optimize thewritten and unwritten commitments of the stakeholders toreachanearlyunderstandingofhowtoconductbusinessprofessionallyandwithinacodeofconduct, thusmakingcommittedefforts towardproject success (seealsoFigureA1-1). Thistechnique is considered an alignment of the project management Knowledge Areas andrelationshipsamongtheprimarystakeholders.Thefollowingaresomeofthebeneficialdriversforaneffectivepartneringrelationship:

Settinghighstandardsfortheprojectteam,Advocatingcontinuouspartneringeffortsthroughprojectcompletion,Activeandpersistentparticipationinthepartneringobjectivesandprocesses,Improvingmanagementprocessesandsystems,Keepingcommunicationsproject-focused,andMaintainingtheprinciplesandeffectivehabitsofalignment.

Good practices and sound business habits of partnering are vital to its success. Thefollowingmaybeconsideredcomponentsofthepartneringteam'sbusinessplan:

Focus and forecasting. Focus on “what” has to happen to deem a projectsuccessful. This may require forecasting potential risks and opportunities, alongwithappropriateactionplans.Systemsandprocesses.Adjustandmonitorneworexistingbusinessandtechnicaladministrative processes to improve systems, response times, and communicationefforts.Professionalism.Emphasizeprofessional conduct andbehaviors;demonstrate justandfairpractices;createapositive,proactiveculture;andcontroltension-reactionsituations.Resolutionsandconfrontation.Establishaframeworkandproactiveprocessesforevaluating project issues in order to avoid a dispute that could jeopardize thepartneringfoundation.Createanissueelevationandresolutionsysteminvolvingtheexecutive or sponsor participants or utilizing an independent neutral to assist inreachingresolutions.

Leadership, roles, and authority. Clearly define the various roles andresponsibilitiesofprojectparticipants,especiallythe“go-to”individuals.Establishchangeorder approval levels anddecision-making authority.Leadby consistentlydemonstrating and acknowledging teamwork, project accomplishments, and teamresolutions.Feedback. Do not wait until project completion to see how well things went.Instead, periodically measure the partnering efforts, provide opportunities foreveryone to respond, take actionwhere needed, and continually seek to improvefrom lessons learned. See also Figure 4-2 that illustrates a form of teameffectiveness.Partnering teams and expansion. Hold regular core management team (CMT)partneringmeetings.Provideanenvironmentconduciveforthefield,administrative,andline-levelteamstopracticepartnering.Intime,theseteamsmaybeexpandedtoexposemoreindividualstothepartneringefforts.Routine and consistent engagement of management. Conduct routine andconsistent engagementofmembersof seniormanagementwhoare responsible fordispute resolution and the overall team working relationships. The executive orsponsor teamshouldnotbeallowedtoslideby;rather,holdthemaccountableforsupporting the partnering efforts and seek their advice. Advise other directstakeholdersthatyouarepartnering.

A1.2.3SpecificClaimLitigationPreventionTechniquesThe construction industry has made great progress in creating proactive alternative

techniquesforresolvingclaimsandcontractualdisputes.Itshouldbenotedthatcontractsoftenstipulateaminimumperiodforamicableresolutionbetweenthepartiesasaprerequisitetothe

formal litigationprocess.Someof themoreprevalent techniques thatcanbeusedduring theprojectandpriortoclaimlitigationinclude:

Disputeresolutionboard(DRB).ProjectsthatarelargeandcomplexcanestablishaDRBattheoutsetoftheproject.TheDRBiscomprisedofapanelofindependentneutralsthatdonothaveafinancialorbusinessrelationshipwiththestakeholdersofaproject.TheDRBservesinanadvisoryroletothecontractualpartiesbyattendingregular progress meetings and offering suggestions and comments, not only onnormaloperationsbutalsoonpotentialclaimsituations.Inotherformats,theDRBcanactasanarbitrationpaneloveranydisputesthatariseduringtheprojectsothatpotentialclaimsareturnedintochangesoraredismissedforgoodreasonbeforetheprojectcloses.Independentneutral.Onsmallormoderatelysizedprojects,stakeholderscanopttosharejointlyinthecostofanindependentneutralwhocanactasatechnicalorconstructionadvisortothestakeholdersandprojectmanagementteam.Thisneutralparty, sometimes referred toasan independentprojectadvisor (IPA),cananalyzethesituationandproviderecommendationsforfair resolutions, includingtimeandcostimpactassessments.Inaddition,thisindividualcanofferexpertadviceintermsof project management processes and practices where project teams areencountering difficulty and conflict. On larger projects, multiple independentneutralsmay form an advisory team to help interpret technical problems, suggestalternatives, and provide advice for problem solving and decision making onchangerequests.Interventionpartnering.Similartotheindependentneutral,apartneringfacilitatorwhoisskilledindisputesandmediationcanbebroughtintofacilitatetheresolutionof pending claims. This can also be used as an alternative dispute resolutionprocess.Thisprocess involvesbringinginother independentexperts toassess theproject,evaluatetheclaims,andassistthestakeholdersineffectivelycompletingtheprojectandfurthermitigatingconsequentialimpactsandprojectdelays.Mediation.While this ismost often implemented at the close of a project whenclaimsareoutstanding,nothingprecludestheuseofmediationtechniquesduringtheproject.Often,mediationisoneofthefirstalternativestolitigationandisaneffortmade by stakeholders to achieve an equitable settlementwith the help of skilledprofessionals.

A1.2.4JointRecognitionofChangesandDocumentationThe preferred practice for reducing potential claims is for the parties to recognize that a

changehasoccurredandthatbothpartiesarerealisticinassessingthepotentialcostandtimeimpacts.Aclearchangeorderprocessshouldbeimplementedandincorporatedinthecontracttomanageboth in-scopeandout-of-scopechanges.Thischangeprocess requires timelyandappropriatedocumentationthatcanleadtoquickacknowledgmentofachange.Poor,untimely,or inadequate documentation will only prolong an argument between the parties. Good

documentationisalsoaprimarycomponentfordefenseofclaims.Thetoolsandtechniquesforperformance reportingareeffectivemechanisms that lead togooddocumentationand factualanalysis, which are essential to timely and successful claim resolution. It matters that theintentionofeitherpartyisnottodamagetheotherparty,whichonlyleadstofurthernegativeimpactsonprojectcompletionandcosts.Also, theprojectmanagement informationsystems,configurationmanagement,changemanagement,andworkauthorizationsystems,whichcollectanddistributeinformation,allcontributetotherecognitionanddocumentationofchangesandchangerequests.

The factsand truthfulness indatacollectionand reportingare important.Withcurrentandemerging technologies (e.g., building information modeling [BIM], dashboards, photo andvideo,andimmensedatastoragecapacityandretrieval),thecapabilitytoshareandexchangefactual project data is almost limitless.The results of effective and timely claimpreventionyieldapprovedchangerequestsforcompensationorrequestsforextensionsoftime,orboth,whicheliminatesclaims.Disputesandfightingthroughlitigationarenotinthebestinterestofeither party. Stakeholders who have successfully prevented or resolved potential claims,without the added time and expense of experts and attorneys, generally develop anappreciationfortrustedrelationshipsandarespectforoneanother.This,inturn,canleadtofuturecollaborativeworkingrelationshipsandprojects.

A1.3ClaimsManagementMonitoringandControlIt is rare that a stakeholder plans for a claim or contract dispute. For the most part,

stakeholders are optimistic toward their contracts and seek to avoid claim situations. In theeventthataclaimsituationarises,thestakeholdershouldbepreparedtoidentifythesituationin a timelymanner and be forthright in its evaluation to determine if the potential claim isjustified. Owners should require a project management plan that details systems, policies,processes, procedures, and documentation. Such a procedure, if followed diligently, makesdocument processing effective and efficient and has proven tomitigate delays and decreasedisputesandsubsequentclaims.

A1.3.1ClaimsIdentificationandInitialJustificationManyclaimsaretheresultofanunresolvedrequestforachangeorder,conflictingcontract

documentinterpretation,orchangedorunknownconditions.Acontractthatisnotadministeredinatimelymannercausestimeandcostimpactsontheproject.Projectperformanceisanotherareawhereclaimsmayariseduetoeitherthequalityofworkperformedortheprogressoftheworknotbeingobtainedtomeetthecontractcompletiondate.

Regardlessoftheoriginofthepotentialclaim,theclaimsidentificationprocessshouldstartwithaclearlyunderstoodprojectscopeandcontractandincludeawrittendescriptionoftheclaim, time and cost impacts, prompt payments, capability gap analysis, expert judgment,documentation,pendingclaimfile,andstatementofclaimasfollows:

Projectscopeandcontract.Thescopeofworkoutlinedinthecontractincludesall

plans,specifications,referencedcodes,industrystandardpublications,regulations,and jurisdictional laws. The contract generally includes the terms and conditionsthat apply to the work, provisions relating to changes, changed conditions,appropriatenoticerequirements,andadministration.Strictadherencetothecontractcanbeverydifficultifonedoesnotfullyunderstanditsrequirements.However,astrict or difficult to followcontact doesnot excusenoncompliance.Seeking legalcounsel or expert judgment to assist with the interpretation and requirements isproactive and timewell spent.The contract consists of the provisions relating tochangesandnoticeprovisions.Inmanycases,claimsnotmadeinatimelymannercouldbecomeinvalid.Description of claim. This is a written description of the work believed to beoutsideofthecontract,whereitoccurred,andwhenittookplace,includingcontractspecification references that support the requestedclaim.A justification statementdescribingthebasisfortheclaimandreferencingthecontractsectionthatsupportsthe contention should be included. The claim should document the activities thatwereaffectedbythesituation,includingtheresourcesthatmayhavebeenimpacted,and address the project schedule and any additional contract time required toperformextrawork.Contemporaneousdocumentationshouldberecordedpromptlyat the timeof theoccurrence andcover all aspects that support the claimand thecontractprovisions.Timeandcostimpacts.Shouldtheclaimimpactthecontracttime,arecordofwhenthe alleged extra work commenced or will commence, and when it ended or isestimated to end, should be documented. The current project schedule baselinebecomes one of the primary project documents/records, which demonstrates theimpactontheproject.Timeextensionclaimsthatresultfromdelaystotheworkduetoeventssuchasunusualweather,strikes,orother forcemajeure itemsoutsideofthecontractor'scontrolmaybevalid,althoughtheymightnotbecompensable.Alltimeextension requestsand time impactanalysesshouldbe reviewedpromptly inordertoavoidclaimslaterofconstructiveacceleration.Constructiveaccelerationisgenerallydefinedascompellingacontractortocompleteitsworkontimedespitelegitimate, documented requests for time extensions. This type of claim mostfrequentlyoccurswhenowners ignore timeextension requests,deny themoutrightwithoutrespectfulanalysis,orrefusetoengagewithcontractorsoversuchrequests,resulting insubstantiatedcost impacts for thecontractor.When thesedelayclaimsarenotdealtwithinaneffectivemanner,theworkingrelationshipisimpactedinanegativemanner.

The owner team should have the ability to analyze and resolve delay claims.Likewise,ownersshouldensurethattheirprojectstaffdealswiththetimeextensionrequestspromptly,objectively,andinaccordancewiththetermsandconditionsofthecontract.Costimpactsarethemostcommontypeofclaiminvolvingthepaymentor lack thereof for claimedextraworkor changed conditions thatmade theworkmoredifficult andcostly toperform.Accuracy in time reportinganddocumenting

theactualchangedconditionwithsupportingdocumentation isakey to identifyingandjustifyingtheclaim.

An initial quantificationof the value of cost damages shouldbemade.To furtherelaborate, the types of time impacts are often described as critical/noncriticaldelays, excusable/nonexcusable delays, compensable/noncompensable delays, andconcurrent delays. Sellers should comprehend these types of delays and buyersshould recognize the differences so as to augment the discussions and betterunderstanddelayconsequencesinrelationtotheoverallprojecttimelines.

Analyzing time and cost overruns often requires a technical forensic analysis thatcan withstand formal dispute resolution forums, such as litigation or arbitration.Generally,forensicanalysisspecialistsarebroughtinforseveralreasons:theneedtochooseamethodologyanddevelopaforensicscheduleanalysisthatwillstandupunder scrutiny, the need to provide an objective expert opinion, and the need tosupportnegotiations.Promptpayments.Construction ismostlydoneona cost-reimbursablebasis: thecontractorfinances theconstructionofpreviouslyagreed-uponpartsof theprojectandispaidwhenpartsoftheworkareaccepted.Dependinguponthecontractterms,contractors may be able to seek routine reimbursements for work successfullycompletedduring thepreviousperiod.Projectowners (especiallypublicowners)shouldestablishsystemsfortheprompthandlingofcontractorpaymentrequestsinorder toprevent lateorslowpayments.Afailure todosomaysubjectowners tolegal penalties or slow payments, which may adversely impact a contractor'sfinancialabilitytoproceedwiththeworkasplannedandleavetheownerexposedto claims of owner interference with the work. Many public work projects aresubject to statutorypromptpayprovisions, andowners,designprofessionals, andcontractorsshouldbeconversantwiththem.Capability gap analysis. Schedule review, delay analysis, and time extensionissues, especially on large, complex construction projects, can be difficult tointerpret. If theowner'sproject teamdoesnothave thecapability to reviewCPMschedules, time extension requests, and delay claims, the owner should engage aprofessionaltoperformthesefunctions.Ifboththeownerandthecontractorteamshave competent, professional construction project managers with a mutualunderstanding of the contract requirements, it is more likely that time extensionrequestsanddelayclaimscanberesolvedonthejobsitethroughnegotiation.Thus,thelikelihoodoftime-relateddisputescouldconsiderablydecrease.Expertjudgment.Dependingontheprojectdeliverymethodemployed,theownermay seek advice from one or more of the contract stakeholders as to whether aclaim is valid. This may be the designer of record or the construction manager.Seekingtheadviceofoutsidelegalcounselisalsosuggested.Itisoftenworthwhileto reach a consensus among several people as to whether or not the situation inquestionmeritsclaimstatus.Insomesituations,suchaswithpotentiallyexpensive

or technically challenging claims, legal advisors and/or construction consultantsexperiencedwithclaimsmaybeconsultedforexpertopinions.Documentation.Oneofthemostimportantfactorsintheclaimprocessistheneedforproper,timely,andthoroughsupportingdocumentation,suchasphotographsandvideos of the work in question, relevant contract sections and drawings, andnarrativestatementsofpersonsinvolvedinorassociatedwiththeworkthatisbeingclaimed. Any correspondence, instructions, approved design details, or shopdrawings related to the claimare also considered to be supportingdocuments. Inaddition,as-builtscheduleinformationforthetimeandworkdaysforperformanceof the claim should be noted. Moreover, the contract documents may requireseparate cost accounting for claimed extra work. See also Section 10.2.1 forgenerallyrecognizedacceptablepracticesforprojectdocumentation.Pendingclaimfileandstatementofclaim.Asagoodpractice,itemsidentifiedaspotentialclaimsshouldbekept in theirownseparate files thatcontainall relateddocumentation,includingcorrespondenceandcontractreferences.Thisensuresthatrelevantinformationanddocumentsarecollectedandretainedinanaccessiblefileordatabase.Withoutthisproactiveapproachfororganizingandindexing,managingthehundreds to tensof thousandsofprojectdocumentswillbecomeanextremelyexpensive component of qualifying and proving the claim. Based on thecircumstancessurroundingthepotentialclaimandthroughaninitialclaimanalysis,astatementofclaimcanbepreparedinaccordancewiththeprocessandproceduressetforthbythecontract.

A1.3.2ClaimsQuantificationOnceanissuehasbeenreviewedandinternallyjustifiedtohavemeritasapotentialclaim,

a decision should bemade to determine if a claim is trulyworthy of pursuit. An adequateassessmentshouldbemadeof thepossiblestakeholderconsequences,positiveandnegative,whenaclaim is tobe submitted.Thenext step is toquantify thepotential claim in termsofadditional compensation, a time extension to the contract completion, or both. Claims oftentendtocreatebarriersforpromptresolutionduetothedifferencesinthecostandtimeimpactperspectives between the stakeholders. Nevertheless, there are proper and logical ways ofdetermining thecostof theextraactivity,addedwork,orconsequentialdamages in termsoftime and money. The process is best served by using a cause-and-effect approach thatspecificallyidentifiesthecause,thecircumstancessurroundingit,anditseffectonthespecificworkitemandpossiblyotheritemsthathavebeenindirectlyaffected.Certainclaimscanhavean effect on other aspects of the construction project, making such works more costly andcausingdisruptiontoworksequencingordelayingactivities.Totheextentthattheseindirecteffectscanbejustifiedandquantified,theyarepartofthetotalimpactoftheclaim.

Thestatementofclaimformsthefoundationforfurtheranalysisandquantification.First,aspecific component of the contract prescribes cost items that can or cannot be claimed bymeans of a thorough contract and legal counsel review. Jurisdictional or international laws

regarding reimbursementmay also affect the claim elements related to cost reimbursement.Second, project time and cost records should be analyzed for factual and substantiateddocumentation. Careful control and management of project documents cannot beoveremphasized should a claim be destined for remedy via a judicial court system. Allstakeholder documents and records, including corporation records, may be discoverablethroughthecourtoflaw.Theadditionaleffectonorconsequenceofthebalanceofthecontractworkcausedbytheclaimedactivityshouldbetreatedinthesamemannerasdatacollectedforthe claimed activity itself.Careful and explicit documentation should bemaintained to fullysupportthesetypesofactivityimpacts,includingtheuseoftheprojectscheduletodemonstratetheclaimimpact.Contemporaneousdocumentationfaroutweighsdocumentscreatedafter thefact.Withtheincreasinguseofnewtechnology,theabilitytocaptureandindexreal-timedatashouldnotonlymake substantiating theclaimmoreefficient,but also serve tomorequicklydisproveorsupportallegedclaims.

Documentationshouldincludethefollowinginformation:

Quantitymeasurement. Actual quantities of the claimed work are measured intermsof cubicmetersof concreteor earth,weightof steel, or linearmeasuresofpiping and units of electrical work.When disagreements arise, agreement of thespecified quantity is one of the first aspects to review. In addition to materialquantification,detailedactivitycosttrackingcandocumentallresource(laborandequipment) hours expended on the claimed item. Actual labor hours can bequantifiedfortheextraworkorforthedisruptionofotheractivities.Itisimportantthatthisquantificationbeaccuratelyperformedandtreatedasaseparatelineiteminthe cost reportingmechanisms.With effective labor tracking, thequantificationofextraworkhoursisstraightforwardandisafarmoreeffectiveandcrediblemethodfor substantiating actual costs than an after-the-fact, subjective description orestimationoflabor.Further,notallextraworkcanbequantifiedbyunitweightormeasure,sothedifficultyorcomplexityofworkperformanceisbestdocumentedbyatimeandmaterialprocess.Costquantification.Costquantificationcoversthecostofthelabor,material,andequipmentinvolvedintheclaimedworkandmayinvolveestimation.Costrecords,whereavailable,provide thebasisof the actual cost. If not, the cost is estimatedusingcurrentapplicable rates.Additionsforoverheadandprofitarecommonandusuallyproperandshouldbeconsideredpartofthechange.

Thehomeofficeoverhead(HOOH)isanindirectcostduetoaprojectdelayandisone of the more difficult impact costs to demonstrate and justify. Judicial courtshave gone back and forth on this justifiable cost to the point that many buyersattempttodisallowitinthecontractgeneralandspecialconditions,butnotalwayssuccessfully.Sometimestheclaimedworkhasaneffectonotherprojectworkandhome office operations that can result in additional cost. Usually, this cost isestimated,sincethecause-and-effectrelationshipisnotobvious.Often,though,thejustification for this indirect cost is difficult to prove to the satisfaction of the

opposing party. In some situations, given quantifiable work performance, ameasured-mile-cost approach is used. In this comparative analysis approach, theactualcostsandworkeffortsforasimilar,unaffectedworkarerecordedandusedtodeterminethecostimpactofdisruptedandimpactedworkactivities.Inadditionto direct project costs, the project owner can also be impacted by a delayedoccupancy.Thecontractorcouldbeaffectedbyunavailabilityofcontractlaborandequipment resources to perform work on other projects, or by additional orextendedgeneraladministrativecoststomanagetheproject.Mostcontractsincludealiquidateddamagesclause,shouldtheprojectnotbecompletedwithinthecontractrequirements.Althoughdifficult todemonstrateandprove, thecontractorcanalsobe hurt by projects that limit its ability to perform other projects, current orprospective,andthesedamagesaresometimesclaimedaslostopportunitycosts.Scheduleanalysis.Thereareanumberofscheduleanalysistechniques.Someoftheavailable computer programs can help with this analysis but can also make itovercomplicatedandcancreateillusionaryeffects.Forensicscheduleanalysisisatechnical discipline distinctly separate from project planning and scheduling. Itsmethodscanbemanipulatedanditsunderstandingandpracticesgowellbeyondtheskills of a common project scheduler. Considerations for the schedule analysismethodology include the timing of the analysis, whether it is prospective orretrospective, and whether its basic method is observational(interpretation/evaluation) or modeled (simulations with different scenarios).Further definition and description of these methods is beyond the scope of thisextension,but this information is available fromspecific industryprofessions thatofferdetailed time-impact-analysisguidesandpractices.Expert scheduleanalystsaremostoftenengagedtoperformthistypeofwork.

One of the most common ways of assessing the schedule effect of changes andclaimsistocomparetheas-plannedschedulewiththeas-builtscheduleinordertosupport time extension requests. Other forensic schedule analysis techniques,several of which are commonly referred to as time impact analysis (TIA)techniques,eachwithitsownadvantagesanddisadvantages,include:

Impactedas-planned,what-if;Collapsedas-built(sometimescalled“but-for”analysis);As-builtanalysis;Contemporaneousperiodanalysis(sometimescalleda“window”analysis);Contemporaneousdetailedas-built;Summaryandfragmentcomparisons;andAs-plannedvs.as-built.

Since time management practices can vary widely, the preferred practice is tosupport the actual activity eventswith consistent schedule documentation throughmonitoringandcontrollingduringprojectexecution.Theprevalenceofdailydiaries

becomesakeycomponentinsubstantiatingworkprogressanddelaydisruption.Thediscussion of Project Schedule Management in Section 6 provides examples ofschedulestatusandupdatingtechniques.Theeffectonthecriticalpathoftheprojectschedulecanbedifficulttoisolatebecauseofallofthefactors,oftensimultaneous,thataffectconstructionschedules.Suchdelaystotheprojectmaybeduetoowneractions or inactions, such as late or partial access towork areas, information, ordecisions. Further, when both parties cause delays, a separate analysis may berequired for each case in order to properly allocate project delay responsibility.ThePracticeStandardforScheduling[8]andCPMSchedulingforConstruction:Best Practices and Guidelines [9] can serve to enhance the time managementpracticesthatarecriticalwithintheconstructionindustry.Contract law precedents. There are times when it is appropriate to seek legaladvice.Relevantcaselawcanalsoprovideguidanceastowhatmayormaynotbeincluded in the claim or how the claim may be evaluated in a court of law.Soliciting this expert judgment is a good practice and should be initiated beforespendinglargesumsofmoneytopursueaclaim.Itisnoteworthythattheopinionsfrom legal advisors and forensic experts are very different: attorneys tend to beadvocates for the client, with no obligations to be objective, whereas forensicexpertshaveobligationstoprovideobjective,fair,andaccurateanalysis,whichismorelikelytoprevailindisputeforumsthansubjectiveeffortstojustifyoneside'sposition.Fullydocumentedclaim.Acompleteclaimdocumentpresentsthequantificationofthe cost impact, the time extension request, and all supporting documentation.Usually, the contract outlines the submission procedures for claims. In certaingovernmentcontracts,claimsmayneedtobecertifiedbyaseniorexecutiveofthebusinesswhohasauthoritytomakesuchcertification.Thisdocumentcanprovideanoutlineoftheclaim,alongwiththespecificcoststhatarebeingclaimed.Theclaimdocumentmaybecometheworkingdocumentthattheopposingpartyusestodefineitsdefensepositionoracquiescetotheclaimedcosts.Theclaimincludesalldirectcosts or damages resulting from the claimed situation, including the supportingfactors used in the cost and time calculation. Also, indirect costs are oftenquantifiedinasimilarmannerasthedirectcostswhenjustifiedbytheeffectsoftheclaimonotheraspectsof theconstructionproject.Properdata tosupportquantitycalculations are required, including time records showing the extent of laborinvolved,equipment/machineryusage,wagerates,equipmentrates,andinvoicesformaterials that are included in the fully documented claim. Any time extensionrequestshouldbefullydescribedandpresentedinaformofscheduleanalysis.

A1.3.3ClaimsResolutionEven with a concerted effort to prevent claims, they still may occur. There may be an

understandable disagreement as to whether or not the claim in question is a change to thecontract, or whether the claimed amount of compensation or time requested is actual or

perceived.When a claim situation arises to the point of a contract dispute, a step-by-stepprocessissetinmotion.Mostallformalcontractscontainaprescribedclaimprocessthatwilldictate themethod of resolution. It is axiomatic that the longer this process takes, themoreexpensive and disruptive it is to both parties. Therefore, the goal is to settle these issuesquicklyandatthelowestlevelofauthorityintheorganizationaspractical.Theprocessbeginswithnegotiation,perhapsinvolvingsomelevelofseniormanagementthathascontractualandfinancialauthority.Subsequently,theclaimmovesalongtomediation,arbitration,orlitigation,dependingupontheremediesaffordedbythecontract.Alternativemethodsofresolutionhavebeen increasingly used because of the potential proliferation of claims and the expense oflitigation.Thesealternativemethods,referredtoasalternativedisputeresolution(ADR),mayincludemediation,arbitration,mini-trials,DRBs,orotherglobalalternatives.

Examplesofthemethodofresolutionforacontractdisputeare:

Expert judgment. Stakeholders and construction personnel are served well byseekingadvicefromexpertsintheareaofconstructionclaims.Theseprofessionalscan often quickly assess the potential claim using the documentation and provideinformation regarding itsvalidity,existingdocumentation tosubstantiate it,andanorder of magnitude in terms of cost and effort to fully document and pursue theclaim.Theseprofessionalsoftenworkdirectlywithoneparty'sattorneytocombineboththetechnicalandlegaladvice.Thecontractremainstheultimatebaselineandmeansforresolution.Negotiation. The first and best step to resolution is good faith negotiation. Anysettlement is a good settlementwhen it comes to avoiding litigation.Evenwith asoundclaimandlegaljustification,thelitigationoutcomeinone'sfavorisnotasurething.Sometimesthenegotiationneedstobeelevatedtoahigherlevel,butitstillisanegotiationbetweenpartiestryingtofindanequitablesolution.Estimated cost of resolution. When the initial attempts at negotiation fail, it isprudent for eachof theparties toestimate thecostof carrying thedispute further.Mediators are costly (but can be cost-effective) and some arbitration cases canapproach the expense of litigation given the amount of discovery involved. Anestimate of these costs can help in deciding the benefits of pursuing a claim.Sometimesthecostofpursuingordefendingtheclaimcanbeconsideredatrade-offandusedaspartofthesettlementfundstoresolvetheclaimpriortolitigation.Claimassessmentsorexpertreports.Professionalconstructionconsultantscanbehiredtoassesstheissueand,insomecases,provideanexpertreportoutliningthecost, time,andbusiness impactof thepotentialclaim.Theconsequential timeandcostimpactonotheractivitiesasaresultoftheextraordelayedworkisimportantinformation that should be evaluated in terms of potential recovery. Someassessmentsmayrevealdocumentationdiscrepanciesandproblemsself-inflictedbythestakeholder,whichmaypreventafullrecovery.Insomecases,anexpertreportmaybeobtainedtocorroboratethetechnicalaspectsoftheclaim.Alternativedisputeresolution(ADR).Thesemethodsareconsideredalternatives

tolitigationinacourtoflawandmostoftenarefarlesscostly:

Mediation is an effort by the stakeholders to achieve an equitable settlement byuseofaskilledprofessionalmediator.Mini-trialsanddisputeresolutionboard(DRB)arepartofasettlementprocessinwhichthepartiespresentsummarizedversionsoftheirrespectivecasestoapanelof officials who have authority to settle the dispute. The process does not takeplace inside a courtroom, but rather it is held at one of the representing legalcounseloffices.Arbitration is justonestepshortof litigationand the judicialcourtsystem.Thistechnique utilizes a trained professional or a panel of professionals (e.g.,constructionexperts,attorneys,orex-judges)toactasthejudgeandjurytolistento stakeholder arguments and testimony, assess factual and expert exhibits, andissueajudgment.Internationalconstructioncontractsbytheirnaturehavespecialconditions and specific treatments for this ADR. Most contracts will alsoprescribe adherence to the use of standard contract forms and the rules ofarbitrationgovernedbyinternationalcourts.

Litigation. Litigation is the result when all previous attempts at settlement havefailed.Construction lawsuits are commonly complex for juries to understand andoften take a long time to present. Litigation is considered a last resort and isexpensiveintermsofcostandupsettotheorganizationsinvolved.Partiesenteringintolitigationshouldbesurethatthisistheonlywaythedisputecanberesolved.Equitablecontractadjustment.Usuallyintheformofachangeorderorcontractmodification,anadjustment to the finalcontractamount ismadeasa resultof themonetary settlement. The process of allocating this amount is usually an internalaccounting function and varies depending on the type of public or privatestakeholders involved. In caseswhere the contract cannotbeclosedbecauseof apendingdispute,thecontractcanbecloseduponresolutionofthedispute.

Regardlessoftheprescribedresolutionmethod,settlementshouldalwaysbeanoptiontothepartiesandtheyshouldremainopentothisdialogue.Therearemanyrecordedlegalcasesinwhichthesellersandbuyershavefacedjudgmentsthatwerenotintheirfavor.

A1.3.4ContractLawInterpretationForsellersconductingbusinessacrossinternationalborders,anawarenessofcontractlaw

precedents can be particularly important in learning how contract legal challenges may bedecided.Inacommonlawsystem,lawisinterpretedandthus“written”byjudgeshearingthecases.Decisions become the “rule of law” for all future cases that are factually similar. Incivilorcodifiedlaw,thelawiswrittenintostatuteorcodebooksandisstrictlyinterpretedbythecourtsof thatcountry.Stakeholders involvedinconstructionprojectsacross internationalbordersareencouragedtobecomefamiliarwiththeseprecedentsoracquiretheproperlegalrepresentationofthatcountry.

A1.3.5BidProtestsThe number of bid protests has been gradually increasing due to the increasing size of

projects in the public sectors; the varying contract delivery methods; and perceiveddiscrepancies,subjectiveevaluations,andsometimesunfairselection.Bidprotestsmostoftenoriginatefromtheprocurementsideofpubliccontracting.Someindustryexpertspoint to theease inwhichaprotestcanbemadedue tochanges insomegovernmentpolicies thatallowprotestsforcertaintypesofcontractprocurements.Protestingisonething—winningaprotestis another. Contractors invest large sums of money in preparing contract proposals. Whenagencies do not follow the procurement criteria ormake arbitrary contractor selections, thepromotionof fairness is challenged.However,other industryexperts claim thatprotests canpromoteaformofvoluntarycorrectiveactionbyagenciesinthepubliccontractingarena.

A1.3.6EthicsinConstructionIt isunfortunate thatunethicalproblemsexist inboth thecorporateandoperational levels

withintheconstructionindustry.Fromfalsifyingqualitycontrolreports,toinappropriatelabormark-upsondirectcostcontracts,toknowinglyenforcinganunfairriskorsiteconditiononacontractor, ethical issues in construction are an ever-present situation. Many organizationshavecreated, adopted, andcontinue tousecodesof ethics.However,havinganethicscodedoes not necessarily mean that the organization's entire personnel and business practicesuphold ethical standards.With the advent ofmore transparency between buyers and sellersthroughtechnology,ethicalbehaviorcanbeimproved;however,organizationsshouldcontinuetofocusonthefactorswithintheircontrol.ThePMICodeofEthicsandProfessionalConductforprojectmanagerpractitionersisagoodplacetostart.

APPENDIXX1CHANGESFROMPREVIOUSEDITIONOFTHECONSTRUCTIONEXTENSIONTOTHEPMBOK®GUIDEThe following is a summary of changes made to the Construction Extension to the

PMBOK®Guidesincethepreviousedition.

X1.1 StructureandApproachThemostvisiblechangemadetothiseditionoftheConstructionExtensionistheuseofa

new structure and approach to extensions to thePMBOK®Guide. Previous editions of theConstructionExtension,aswellasallotherPMBOK®GuideextensionsproducedbyPMI,provided, essentially, a section-by-section commentary on or additions to the content of thePMBOK® Guide. For example, Section 10.4 of the PMBOK® Guide – Third EditiondiscussedtheManageStakeholdersprocessasitappliedto“mostprojectsmostofthetime,”then the Construction Extension to the PMBOK® Guide – Second Edition providedadditional guidance on that same topic as it related to construction projects or to theconstruction industry. Inmany instances,noadditionalguidancewasrequired,so thesectionsaidsimply,“seethePMBOK®Guide.”

Thedisadvantagesofthisschemeweretwofold:First,thecontentoftheextensionwastieddirectly to the structure of thePMBOK®Guide, so the extension could only discuss topicsalready found in thePMBOK®Guide. Thewriters of the extension had difficulty includingindustry-specificcontent thatdidnothaveanequivalent in thegenericguidancefound in thePMBOK®Guide. Second, thePMBOK®Guide is revised on a regular schedule—every 4years—andastheextensionwastiedtoaspecificeditionofthePMBOK®Guide thismeantthat the extension became obsolete as soon as a new edition of thePMBOK®Guide waspublished.

This new edition of the Construction Extension to the PMBOK® Guide takes a newapproach.First,whilethisnewdocumentstillactsasanextensiontothePMBOK®Guide, itis not directly tied to a specific edition of thePMBOK®Guide, though it assumes that thepractitionerisusingafairlycurrentedition.TheConstructionExtensionisstillintendedtobeusedinconjunctionwiththePMBOK®Guideandisnotastand-alonedocument.

Second, the newConstruction Extension is principles-based rather than process-based.

Discussion of specific processes, including inputs, tools and techniques, and outputs, is notincluded in this document. Instead, the new extension focuses on the principles behindmanaging construction projects. The extension is still organized similarly to thePMBOK®Guide, with a chapter for each of the PMBOK® Guide Knowledge Areas (scope, cost,scheduling, etc.), but with a discussion of how the practitioner will manage a constructionprojectwithinthatKnowledgeArea.

X1.2 TechnicalContentThe most significant updates include emerging industry trends and the supplemental

Construction Extension chapters that do not appear in thePMBOK®Guide (see SectionsX1.2.1andX1.2.2).

X1.2.1EmphasisonEmergingIndustryTrendsTheemergingissuesidentifiedduringthereviewandupdateoftheConstructionExtension

includedemphasisonqualityassuranceandqualitycontrol,environmentalissues,andprojectdelivery methods. Emphasis toward the global aspects of the construction industry hasintroduced new considerations for theConstruction Extension. International standards arenowmoreprevalentandthereachoftheirapplicationacrossborderscreatesnewchallengesandconsiderationsfortheconstructionindustry.

A recognizable issue that was not specifically addressed through this extension is the“green”constructiontrendsthatareinfluencingthewayprojectsareconceptualized,designed,andconstructed.ThisemergingtrendhasthepotentialforaddingmanynewelementstofutureupdatesoftheConstructionExtensionandisrecognizedherebutnotspecificallyaddressed.

The last emerging trend that was recognized is the human element and the demand forconstructionindustryresources.Astheindustrymarketexpands,theavailabilityandskillbaseoftheresourcesrequiredtomanageandexecuteconstructionprojectmanagewillinfluencethewayprojectsareorganized,planned,andconstructed.Thiswillalsocreatenewelementsforthe Construction Extension in future updates that better address this human resourcecomponent.

X1.2.2SupplementalConstructionExtensionChaptersTheConstructionExtensioncontainsthefollowingchaptersthatdonothaveequivalentsin

thePMBOK®Guide:

Chapter14—ProjectStakeholderManagementChapter15—ProjectHealth,Safety,Security,andEnvironmental(HSSE)ManagementChapter16—ProjectFinancialManagement

ThepreviousConstructionExtensionincludedachapteronProjectClaimsManagement.Inthis edition, the topic is covered in Chapter 12 and Managing Claims in Construction is

includedinAnnexA1.

APPENDIXX2CONTRIBUTORSANDREVIEWERSOFTHECONSTRUCTIONEXTENSIONTOTHEPMBOK®GUIDE

X2.1 CoreCommitteeThefollowingindividualsweremembersoftheCoreCommitteeresponsiblefordraftingthe

extension,includingreviewandadjudicationofreviewerrecommendations.

JeffreyS.Busch,PMPHernánD'Adamo,MPM,PMPNirajManiar,PMP,PMI-SPCaseyMartin,AIA,PMPFabioTeixeiradeMelo,PMPKarlF.Best,PMP,CStd,PMIStandardsSpecialist

X2.2 ReviewTeamThe following individualsweremembers of the review team responsible for review and

contributiontowardspecificsectionsoftheextension.

AlbertL.Barco,PE,PMPPanosChatzipanos,PhD,Dr.EurEngJeremyM.Fortier,PMP,CHCKellyC.Griffith,PMPMuhammadAslamMirzaJosephN.Salameh,PMP,MscPMPedroMaria-Sanchez,PMP,RMPFrankJ.Stevens,MBA,PMP

X2.3 SubjectMatterExpertReviewersThefollowingindividualswereinvitedsubjectmatterexpertswhoreviewedthedraftand

providedrecommendationsthroughtwoSMEreviews.

NokhezAkhtar,MPM,PMI-SPMohammedFaiqAl-Hadeethi,PMP,MSc

LuisArtola,PMP,RMPAlbertL.Barco,PE,PMPTaniaReginaBelmiro,PhD,PMPChrisCarson,PMP,CCMPanosChatzipanos,PhD,Dr.EurEngItalodeA.Coutinho,MSc,PMPHenriqueDinizS.Silva,MScDebraDonovan,PMP,P2RPEuniceDuran,MAP,PMPAndresM.Espinosa,PMP,MEngRodrigoF.doEspíritoSanto,PMP,IPMA-CFranciscoMartinsFadigaJr.,PhD,PMPJeremyM.Fortier,PMP,CHCMauricioE.Garay,MSc,PMPPiyushGovil,B.E.,PMPRoopeshGoyal,PMPSherifHashem,PhD,PMPAkramHassan,PhD,PMPHenryHattenrathTonyJacob,PMP,PMI-PBAGauravJain,PMPBriceR.Johnson,MSM,PMPHagitLandman,MBA,PMPPaoloLongobardi,MBA,PMPMarioAlbertoLópezGómez,PMP,PMI-RMPRobertMajamaa,PMPPeterBerndtdeS.Mello,PMP,PMI-SPFredMikanovicMuhammadAslamMirzaNathanM.Mourfield,MBA,PMPDivyaNambiar,PMP,LEEDAPBD+CS.HosseinH.Nourzad,PhD,PMPDenisM.O'Malley,PE,PMPLambertOfoegbu,MSc,OPM3MarkL.Ogg,PMP,CCCAYvanPetit,PhD,PMPPatrickL.PettiettePalaniVelRajan,PMPM.K.Ramesh,BE,PMPTracyL.Randazzo,AIA,PMPCamiloRobayoAbello,PMPLuigiRosa,MS,PMPTVSeshaSai,PMP,B.Tech

HectorF.Salazar,PMP,PEErnestSetó,PMP,PMI-RMPRogérioDornelesSevero,PMPKeithSmith,PMPJunghyeSon,PhDFrankJ.Stevens,MBA,PMPChrisStevens,PhDLangeswaranSupramaniam,MSc,PMPMuhammadUsmanHabibJuanVerástegui,PMP,MBADaveViolette,MPM,PMP

X2.4 PMIStandardsMemberAdvisoryGroup(MAG)The following individuals are members of the PMI StandardsMember Advisory Group,

whoprovideddirectiontoandfinalapprovalfortheextension.

LaurenceGoldsmith,PMPHagitLandman,MBA,PMP,PMI-SPYvanPetit,PhD,PMPChrisStevens,PhDDaveViolette,MPM,PMPJohnZlockie,MBA,PMP,PMIStandardsManager

X2.5 PMIProductionStaffDonnGreenberg,Manager,PublicationsRobertaStorer,ProductEditorBarbaraWalsh,PublicationsProductionSupervisor

APPENDIXX3MOSTCOMMONCAUSESOFRISKSINCONSTRUCTIONPROJECTSSome typical key risks and potential sources of risks in construction projects can be

identified according to the following indicated categories. This list is not intended to beexhaustivebutratherinformative;therearemanyotherwaystoclassifyrisksforidentificationpurposes specific to the project. Performing organizations should develop their own listappropriateforthetypeofprojectinwhichtheyengage.

X3.1 Design/TechnicalRisks:Inadequateandincompletedesign;Incompleteknowledgeoflocalsiteconditions;Inaccuratetechnicalassumptions;Insufficienttechnicalbackgroundandexperienceonspecificprojecttypeandlocalcharacteristics;Incorrectselectionofequipment,materials,andbuildingtechniques;Incorrectgeotechnicalandfoundationestimationsandstructuraldesign;Unavailabilityandincorrectcapacityofutilityservices;Errorsandomissionsbyconsultants;Lackofspecializedtechnicalconsultantsoncriticalaspectsoftheproject;Over-involvementoftheownerindesign;Continuouschangestotheprojectscope;Delaysinobtainingclientconcurrence;Designscopeexceedingavailablebudget;Uncertaintyinthetotalcostestimateduetouncertainquantitiesandunitpricesduringtheplanningandinitialdesignphase;andIncompleteprojectcostestimateandinaccurateprojectschedule.

X3.2 ConstructionRisks:

X3.2.1Contractors,Subcontractors,andSuppliersContractorand/orsubcontractorcapability,Inefficientcoordinationofprojectplans,Unavailabilityofsufficientandskilledhumanresources,Unavailabilityintimeofspecialmaterialsandconstructionequipmentandequipmentbreakdowns,Equipmentcommissioning,Unsuitableequipmentandmaterials,Lowlevelofcompetencyinmanagement(especiallysubcontractors),Incompleteknowledgeandtrainingonspecificconstructiontechniques,Constructionoccupationalsafety,Lackofenvironmentaltrainingandknowledgeofworkersonsite,Restrictedworkhours,andHealthandsafetyregulationsandresponsibilities.

X3.2.2TechnicalFactorsChangesinworkorders,Lowlevelofdocumenteddetaildesign,Lackofscheduledinstructionsanddrawingdocuments,Gapbetweentheoryandactualquantitiesofwork,andUnexpectedcostsoftestsandsamples.

X3.2.3SiteandLayoutConditionsSiteaccess,Sitesecurity,Availabilityofresources,Availabilityandcapacityofutilityservices,Resourceoverloading,andInterferencebetweentaskfronts.

X3.2.4PhysicalFactorsGeologicalandgeotechnicalconditions,Sufficientandrepresentativegeotechnicalandgeologicaltestsandsamples,Groundwaterlevel,

Topography,Unforeseensubsurfaceconditions,andUnexpectedclimateconditionsnotcoveredunderforcemajeure.

X3.2.5SecurityFactorsCorruption;Assault,vandalism,sabotage,andtheft;andIntrusionandillegaloccupancyofsite.

X3.2.6ContractualFactorsInaccuratecontracttimeestimates;Insolvencyofcontractor,subcontractor,orsupplier;Inadequatechangeordersprocedure;Changeordersnegotiation;Unexpectedworkandextras;Delayeddeliveriesanddisruptions;Delayedpaymentoncontracts;Vendorappraisals;andRelianceonasinglesource.

X3.2.7PerformanceFactorsDefectivework;Unskillfulness;Negligenceandmaliciousacts;Labordisputes;Unsuitablematerials;Constructionproductivity(laborandequipment);Accidentsandinjuries;andCriticalleadtimes.

X3.3 ExternalRisks:X3.3.1ContractualFactors

Tightprojectschedule,Client'squalityandperformanceexpectationshigherthandocumented,

Weakdefinitionanddocumentationofprojectobjectives(cost,schedule,scope,quality),Overlookedornewpowerfulandinfluencingstakeholders,andInfluencinglatechangesinstakeholders’requirements.

X3.3.2ForceMajeureFactorsMarketchanges,Economicandpoliticalinstability,Changesinregulations,Laborstrikes,Adverseweather,Naturalcalamities,andActsofGod.

X3.3.3SocialFactorsCompetinginterestsbetweenprojectandlocalcommunities,Workingpatternslinkedtolocalculturalandreligiousfactors,Cultureandhabits,Neighboringcitizensrejectingtheproject,andNongovernmentorganizations(NGOs)andenvironmentalorganizationsopposingtheproject.

X3.3.4PublicInvolvementPublicperceptiondistortedbymedia,Publicexposure,andCitizeninterest.

X3.3.5EnvironmentalFactorsUnexpectedadditionalenvironmentalregulations;Environmentalimpactstatementorassessment;Historicalandartisticpatrimonyandarcheologicalpatrimonyprotection;Anthropologicalorbiologicalinterest(protectionofendangeredspecies,flora,andfauna);andHazardouswaste,noise,contamination,andemissions.

X3.3.6PoliticalVisibility,andRegulatoryFactors

Authoritieswithjurisdictionandvulnerabilityofpoliticalsupport;Regulatoryinstitutions,government,andadministration'sstatutoryrequirementsorclearances;Changesinlaw,procedures,subsidies,policiesandregulations,orprojectpriorities;Complexadministrativeapprovalprocedures;Obstructionofapprovals;Bureaucracy;Environmentalpoliticalpressures;andPoliticalsensitivityandclimate.

X3.4 OrganizationalRisks:Culture;Attitudes;Disagreementaboutobjectives;Insufficientresources;Inexperienced,inadequate,orundertrainedstaff;Internalapprovalcomplexities;Inconsistentcost,time,scope,andqualityobjectives;andChangestoprioritizationofexistingprogram.

X3.5 ProjectManagementRisks:Incompletestakeholderidentification;Overloadedteamprojectportfolio;Insufficientresourcesassignedtothemanagementoftheproject;Insufficienttimetoplan;Unanticipatedprojectmanagerworkload;Inexperienced,inadequate,orundertrainedstaff;Projectteamstability(lackofprojectteamcontinuity,highrotation);Resourceavailability;Inadequatechangerequestprocedure;Communicationbreakdownwithinprojectteam;andProjectpurposedefinition,needs,objectives,costs,anddeliverablesthatarepoorlydefinedorunderstood.

X3.6 BusinessRisks:X3.6.1FinancialandEconomical

Fundingandfinancing,Inflationratevolatility,Currencyexchangeratefluctuations,Nationaleconomicgrowthandrecessions,andLoaninterestrates.

X3.6.2Planning,Monitoring,andControllingNumberofkeyprojectsponsorsfordecisionmakingandmanagement,Contractorselectionprocedure,Designerselectionprocedure,Selectionofinsurance,Prioritiesoftheproject,Controlofkeyissuesoftheproject,andProjectmanagementinformationsystems.

X3.6.3LandandProperty,StatutoryClearance:Landacquisition;Cleartitletolandwithappropriatezoning;Expropriation;Rightsofway;Delayinlandaccessagreements;Damagetoneighboringproperties;andClearancefromregulatoryinstitutions,government,andadministrations.

APPENDIXX4ADDITIONALREFERENCESX4.1 AdditionalReadingAACE International. Forensic Schedule Analysis Recommended Practice No. 29R-03.Retrievedfromhttp://www.aacei.org/toc/toc_29R-03.pdf

Bentley Systems and Dodge Data & Analytics. 2013. SmartMarket Report. Informationmobility: Improving team collaboration through the movement of project information.Retrieved fromhttp://www.smartmarketbrief.com/reports/Bentley_Information_Mobility.pdf

Burtonshaw-Gunn,S.2009.RiskandFinancialManagementinConstruction.Sacramento,CA:Gower.

California Department of Transportation (CALTRANS). 2007. Project CommunicationsHandbook. Sacramento, CA: Office of Project Management Process Improvement.Retrievedfromhttp://www.dot.ca.gov/hq/projmgmt/guidance.htm

CaliforniaDepartment of Transportation (CALTRANS). 2012.Project RiskManagementHandbook: A Scalable Approach. Retrieved fromhttp://www.dot.ca.gov/hq/projmgmt/guidance_prmhb.htm

Chemical Engineering. Chemical Engineering Plant Index. Available fromhttp://www.chemengonline.com/.

Coombs, T., & Holladay, S. 2012. Managing Corporate Social Responsibility: ACommunicationApproach.Hoboken,NJ:Wiley-Blackwell.

Cooper, D., Grey, S., Raymond, G., & Walker, F. 2005. Project Risk ManagementGuidelines:ManagingRisk inLargeProjectsandComplexProcurements.WestSussex,England:JohnWiley&SonsLtd.

Dainty,A.,Moore,D.,&Murray,M.2006.CommunicationinConstruction:TheoryandPractice.London,UK:Taylor&Francis.

Emmit, S., & Gorse, C. 2003. Construction Communication. Oxford, UK: BlackwellPublishingLtd.

EngineeringNewsRecord.HistoricalCostIndicesandQuarterlyCostReports.Retrievedfromhttp://www.ENR.com.

EPC Engineer. n.d. FEED—Front End Engineering Design. Retrieved fromhttp://www.epcengineer.com/definition/556/feed-front-end-engineering-design

European Commission. Corporate Social Responsibility. Retrieved fromhttp://ec.europa.eu/growth/industry/corporate-social-responsibility/

Hendrickson, C., & Au, T. 1989. Project Management for Construction: FundamentalConceptsforOwners,Engineers,Architects,andBuilders.EnglewoodCliffs,NJ:PrenticeHall.

InternationalFederationofConsultingEngineers(FIDIC).1997.RiskManagementManual.Geneva:Author.

International Federation of Consulting Engineers (FIDIC). 2009.RiskManagement. FiveKeyAreasofRiskinConsultants’Appointments.Geneva:Author.

PreProcess, Inc. Front End Loading Definitions. Retrieved fromhttp://www.preprocessinc.com/files/documents/d1e7f3b0c6b37fd00bb626587a147c88.pdf

Project Management Institute. 2009. Practice Standard for Project Risk Management.NewtownSquare,PA:Author.

Project Management Institute. 2010. Construction Project Scheduling and Control –SecondEdition.NewtownSquare,PA:Author.

ProjectManagement Institute.2010.Practice Standard forProjectEstimating. NewtownSquare,PA:Author.

Project Management Institute. 2011. Aspects of Complexity: Managing Projects in aComplexWorld.NewtownSquare,PA:Author.

Project Management Institute. 2013. The Standard for Portfolio Management – ThirdEdition.NewtownSquare,PA:Author.

Project Management Institute. 2013. The Standard for Program Management – ThirdEdition.NewtownSquare,PA:ProjectManagementInstitute.

ProjectManagementInstitute.2014.ProcurementProjectManagementSuccess.NewtownSquare,PA:Author.

Project Management Institute. 2015. Collaborative Project Procurement Arrangements.NewtownSquare,PA:Author.

Project Management Institute. 2015. Project Management for Supplier Organizations.NewtownSquare,PA:ProjectManagementInstitute.

Public-PrivatePartnershipforInfrastructureResourceCentre.Concessions,Build-Operate-Transfer (BOT) and Design-Build-Operate (DBO) Projects. Retrieved fromhttp://ppp.worldbank.org/public-private-partnership/agreements/concessions-bots-dbos

Richardson'sCostData.CostData.Retrievedfromhttp://www.Costdataonline.com.

Ross, A., & Williams, P. 2013. Financial Management in Construction Contracting.Hoboken,NJ:Wiley-Blackwell.

Smith,N.,Merna,T.,&Jobling,P.2006.ManagingRiskinConstructionProjects.Oxford,UK:BlackwellPublishers.

Washington State Department of Transportation. 2014.Project RiskManagement Guide:GuidanceforWSDOTProjects.Olympia,WA:Author.

Wikipedia. Front-end Loading. Retrieved from http://en.wikipedia.org/wiki/Front-end_loading

Wikipedia. Special Purpose Entity. Retrieved fromhttp://en.wikipedia.org/wiki/Special_purpose_entity

Yescombe,E.2002.PrinciplesofProjectFinance.Amsterdam:AcademicPress.

X4.2 OrganizationalWebsitesAmericanInstituteofArchitects(AIA)http://www.aia.orgAmericanSocietyofCivilEngineers(ASCE)http://www.asce.orgAmericanSocietyofMilitaryEngineers(SAME)http://www.same.orgArchitecturalEngineeringInstitute(AEI)http://www.AEI.orgAssociatedGeneralContractors(AGC)http://www.agc.orgConstructionFinancialManagementAssociation(CFMA)info@cfma.orgConstructionIndustryInstitute(CII)https://www.construction-institute.orgConstructionManagementAssociationofAmerica(CMAA)http://cmaanet.orgConstructionSpecificationsInstitute(CSI)http://www.csinet.orgDesign-BuildInstituteofAmerica(DBIA)http://www.dbia.orgEuropeanCouncilofCivilEngineers(ECCE)http://www.ecceengineers.euInternationalFacilitiesManagementAssociation(IFMA)http://www.ifma.orgNationalAssociationofHomeBuilders(NAHB)http://www.nahb.orgNationalInstituteofBuildingSciences(NIBS)http://www.nibs.orgRoyalInstituteofBritishArchitects(RIBA)http://www.architecture.comRoyalInstituteofCharteredSurveyors(RICS)http://www.rics.orgStructuralEngineersAssociationInternational(SEAOAC)http://www.seaint.orgU.S.GreenBuildingCouncil(USGBC)http://new.usgbc.org

X4.3 NationalandInternationalStandards

(Austria)ONORMB1801-1:2009ProjectAndObjectManagementinConstruction(India)BISIS15883-1:2009ConstructionProjectManagement(UK)PD6079-4:ProjectManagement—Guide(ISO)ISO10845(8parts)ConstructionProcurement(ISO)ISO22263:2008OrganizationaboutConstruction

References[1] Project Management Institute. 2013. A Guide to the Project Management Body ofKnowledge—FifthEdition.NewtownSquare,PA:ProjectManagementInstitute.

[2]ProjectManagementInstitute.PMICodeofEthicsandProfessionalConduct.Availablefromhttp://www.pmi.org/codeofethicspdf

[3] ProjectManagement Institute. 2006.Practice Standard forWorkBreakdown Structures(WBS)—SecondEdition(Reaffirmed).NewtownSquare,PA:ProjectManagementInstitute.

[4]ProjectManagementInstitute.2013.Thehighcostoflowperformance:Theessentialroleofcommunications.PMI'sPulseof theprofession:In-depthreport.NewtownSquare,PA:ProjectManagementInstitute.

[5]ProjectManagement Institute.2009.PracticeStandard forRiskManagement.NewtownSquare,PA:ProjectManagementInstitute.

[6]ProjectManagementInstitute.2014.NavigatingComplexity:APracticeGuide.NewtownSquare,PA:ProjectManagementInstitute.

[7] Project Management Institute. 2006.Government Extension to the PMBOK®Guide—ThirdEdition.NewtownSquare,PA:ProjectManagementInstitute.

[8]ProjectManagementInstitute.2011.PracticeStandard forScheduling—SecondEdition.NewtownSquare,PA:ProjectManagementInstitute.

[9]ProjectManagementInstitute.2014.CPMSchedulingforConstructionBestPracticeandGuidelines.NewtownSquare,PA:ProjectManagementInstitute.

GLOSSARY1. CommonAcronyms

ADR alternativedisputeresolution

AEC architectural,engineering,construction

ASI architecturalsupplementalinstructions

BIM buildinginformationmodeling

BOM billofmaterials

CAD computer-aideddesign

CBS costbreakdownstructure

CCD constructionchangedirective

CCT constructioncollaborationtechnologies

CM constructionmanager(constructionmanagement)

CM/GC constructionmanager/generalcontractor

CO changeorder

COP changeorderproposal

COR changeorderrequest

CSF criticalsuccessfactor

CSR corporatesocialresponsibility

CWP constructionworkpackage

DB design-build

DBB design-bid-build

DBOM design-build-operate-maintain

DBOO design-build-own-operate

DBOT design-build-operate-transfer

DRO designatedresponsibleorganization

EIA environmentalimpactassessment

EPC engineering-procurement-construction

EPCI engineering-procurement-construction-installation

EPCM engineering-procurement-construction-management

FEED front-endengineeringanddesign

GAAP generallyacceptedaccountingprinciples

GMP guaranteedmaximumprice

HAZOP hazardandoperabilityanalysis

HSE health,safety,andenvironment

HSSE health,safety,security,andenvironment

HVAC heating,ventilation,andairconditioning

HOOH homeofficeoverhead

ICT informationandcommunicationtechnology

IFC issuedforconstruction

IPA independentprojectadvisor

IPD integratedprojectdelivery

ISO InternationalOrganizationforStandardization

KPI keyperformanceindicator

MACC maximumallowableconstructioncost

MTO materialtake-offs

NGO nongovernmentorganizations

OEM originalequipmentmanufacturer

PESTLE analysisofpolitical,economic,social,technological,legal,andenvironmentalfactors

RBS riskbreakdownstructure/resourcebreakdownstructure

RFI requestforinformation

PPP public-privatepartnership

PMIS projectmanagementinformationsystem

PMO projectmanagementoffice

SAS statementsonauditingstandards

SPV specialpurposevehicle

TIA timeimpactanalysis

TQM totalqualitymanagement

VE valueengineering

WBS workbreakdownstructure

2. DefinitionsActivityWeights.Avalueassignedtoactivities,oftenintermsofworkerhours.

Alternative Dispute Resolution (ADR). Methods, other than litigation, for resolvingdisputesincludingarbitration,mediation,andmini-trials.

Bankability.Thedegreetowhichaprojectiseligibletobefundedbyfinancialinstitutions.

BeneficialOccupancy.Theprocedureforwhenthebuyer(owner)occupiesormakesuseofanypartoftheworkpriortosubstantialcompletion.

BrownField.Aconstructionprojectcarriedoutwithinanexistingfacilityortherenovationofanexistingfacilityitself.

CostBreakdownStructure(CBS).Aworkbreakdownstructure(WBS)preparedforuseincostmanagement.

ChangeOrder(CO).Anapprovedchangerequest.

Charrette.Anycollaborativesessioninwhichagroupofdesignersdraftsasolutiontoadesignproblem.

Commissioning.Theprocessofverifying,innewconstruction,allorsomeofthebuilding'ssubsystemstoachievethebuyer'sprojectrequirementsasintendedbythebuildingownerandasdesignedbythebuildingarchitectsandengineers.

Consortium.Agroupofcompaniesformedtoundertakeajointproject.

Constructability.Theease,safety,economy,andclarityofconstructionofaproject.

Constructability Review. A review performed by personnel with expert knowledge ofprojects for purposes of assessing or determiningwhether thework can be performedwithavailable,whetherspecialistsarerequired,or(whetheranalternativedesignisrequired.

Constructioncollaborationtechnologies(CCT).Softwareapplicationsusedtocentralizeprojectdatastoragethatcanbeaccessedbyauthorizedprojectteammembers.

Contemporaneousdocumentation.Actual project invoices, daily job site reports, plans,specifications,oranyothertypeofdocumentinwhichactivitiesarerecordedatthetimetheyoccur.

ContractDocuments.Documentsthatconsistofanagreementbetweenowner(client)andcontractor that include conditions of the contract, drawings, specifications, and otherdocumentslistedintheagreement.

Contractor. An individual or a company (commonly referred to as the seller) that isresponsibleforprovidingalloftheresourcesnecessarytomanageandperformtheworkinthecontractdocuments.

Corporate Social Responsibility (CSR). The voluntary initiative and actions that acompanyundertakestofulfillobligationstostakeholders(communities,environment,society,andemployees)beyondwhatmayberequiredbyregulations.

Design-Bid-Build(DBB).Design is completed by a professional architect or engineer; aconstructioncontractisawardedaftercompetitivebids.

Design-Build(DB).Acontractingmethodwherethecontractorisresponsibleforallaspectsofthedesignandconstructionoftheproductinthecontractdocuments,includingmanagementand design services; preparation and execution of construction documents; and construction,testing,andcommissioningoftheproduct.

Design-Build-Operate-Maintain (DBOM). Similar to DBOO except that the designbuilderhasnoownershipoftheproject.

Design-Build-Operate-Transfer(DBOT).SimilartoDBOOexceptthatthedesignbuilderwilloperate thefacilityforaperiodof timeandthentransferownershiptoanotherentityorpublicsector,forexample,highwaytollsthataretransferredtothestate.

Design-Build-Own-Operate (DBOO). Similar toDB except that the contractor designs,constructs and operates the facility without transferring ownership to another entity or thepublicsector.

Discovery(Information)A termused in the legal and corporate industry referring to thesteps involved in distilling evidence pertaining to a court- or dispute-related matter orcompliancedirective.

FEED.Front-endengineeringanddesign.Basicengineeringthatcomesaftertheconceptualdesignorfeasibilitystudy.

Fixed-PriceContract.Atypeoffixed-pricecontractwherethebuyerpaysthesellerasetamount(asdefinedbythecontract),regardlessoftheseller'scosts.

ForceMajeure. Events not reasonably anticipated such as acts ofGod, strikes, or otheruncontrollableevents.

GeneralContractor.Acontractorwhodoesnotspecializeinonekindofwork.Oftenusedtorefertotheprimarycontractorwhoemploysspecialtysubcontractors.

Green Field. A construction term usually associated with an entirely new constructionprojectseparatefromexistingfacilities.

HazardAnalysis.Areviewofallthesafetyhazardsthatmaybeencounteredinaproject.

HazardandOperabilityAnalysis(HAZOP).Ariskassessmentmethod.

HomeOfficeOverhead (HOOH). A term used by a contractor seeking recovery of itshomeoffice administration costs associatedwith a particular project that has been delayed.The administration costs associated with a contractor's home (corporate) office's indirectexpensesandaportionoffixedcostsassociatedwithaspecificproject.

IndependentNeutral.Anindependentprojectadvisorbroughtonbythecontractingpartiesduring the construction project to assist in resolving ongoing changes, disputes, andconstructionproductivityproblems.

Information and Communication Technology (ICT). Tools acting as integrators oftelecommunicationsandinformationtechnology(IT).

Integrated Project Delivery (IPD). A project delivery method that integrates people,systems, business structures, and practices into a construction project contract process thatcombines the expert knowledge and skills of participants to optimize efficiency through allphasesofdesign, fabrication,construction,andprojectcost/scheduleandoften including thewastereduction.

Joint Venture. A partnership of two or more engineering, construction, manufacturing,trading,orinvestmentcompanies,oftenoflimitedduration.

Liquidated Damages. A requirement in contract documents for the buyer's recovery ofestimated expenses from the seller that result from the seller's delay in meeting contractperformancemilestones.

LumpSumContract.Acontractbasedonafixed-priceamountfortheworkinthecontractdocuments(seealsofixed-pricecontract).

NonconformanceReport. A report detailing the failure tomeet specifications and oftenrecommendingamethodofcorrection.

Owner.Thepersonorentitythatownstheproductoftheconstructionprojectandtowhomthatproductwillbehandedoveratthetimeofitscompletion.

Partnering (alliance). A long-term relationship between an owner and anengineer/contractorinwhichthecontractoractsasaparttheowner'sorganizationforcertainfunctions.

Partnering (intervention). A form of alternative dispute resolution utilizing independentexpertstoanalyzeallrelatedprojectdocumentsofthedisputingpartiestopresentfindingsandmakearecommendationforsettlements.

Partnering(project-specific).An informalagreementofallmajorentities inaproject toworkcloselyandharmoniouslytogether.

PrimeContractor.Acontractorholdingacontractdirectlywiththeowner.

ProgressCurves.Aplotofaproject'sprogressshowninpercentcompleteversusamountoftime,whichisusedtodisplaystatusandtrends.

ProgressPayments.Amethoddefinedincontractdocumentsthatspecifiesthepaymentstobemadethatcorresponddirectlytotheseller'smonthlyprogressofwork.

Project Financing. The long-term financing of construction projects based upon theprojectedcashflowsoftheproject.

ProjectSpecifications. The engineering and architectural plans andwritten requirementsforaproject.Similartostatementofwork(SOW).

Public-PrivatePartnership(PPP).Amedium- to long-termapproach toprocuringpublicprojects(orservices)betweenapublicauthorityandprivateparty,wherethelatterassumesamajorshareofthefinancial,technical,andoperationalprojectrisks.

PunchList. The work items that are identified during a final inspection that need to becompleted.

RequestforInformation(RFI).Typicallyacommunicationusedbyacontractortorequestinformationorclarificationfromthedesignerorowner.

Resource Breakdown Structure (RBS). A hierarchical representation of resources bycategoryandtype.

StatementofWork(SOW).Anarrativedescriptionofproducts,services,orresultstobedeliveredbytheproject.

Subcontractor. A contractor who is holding a contract with a prime contractor (alsoreferred to as a first-tier subcontractor) or is holding a contractwith a subcontractor to theprimecontractor(i.e.,lower-tiersubcontractor).

SubstantialCompletion.Acontractmilestonethatisachievedbytheowner'sacceptanceoftheproductconstructedbytheprimecontractor.

Sustainability.Theability touseanddisposeofnatural elements, suchaswater and rawmaterialsand resources, inaway thatguarantees that futuregenerationswillhaveaccess tothosesameelements.

Tendering. In procurement, the acquisitionof services orworks froman external source.The process of making an offer, bid, or proposal, or expressing interest in response to aninvitationorrequestfortender.

Tool-boxMeeting.Aregularmeeting,restrictedtoaspecificsubject,offieldsupervisorsandworkerstoreviewimportantworkissues,particularlythosepertainingtosafety.

Trades. Workers in the various construction disciplines, such as carpenters and

ironworkers.

Turnkey. A type of design build project where the design builder does all functionsincludingstart-upbeforeturningtheprojectovertotheowner.