Managing construction projects

part I: control to maximize profits

Cherry Hill, N.J.

Until the Industrial Revolution, construction was more of an art than an industry. Master builders both designed and built projects, and project schedules were often measured in lifetimes, rather than years. Moro Fortress in San Juan was almost 300 years in construction. In Colonial Virginia, master builders were imported from England and spent their lifetimes working on a single plantation building. Even in the late 1800s, Philadelphia City Hall required 30 years to finish.

As modern equipment and materials became available, project schedules were compressed into a few years. In fact, although the construction phase is the most visible stage of getting a building built, most projects are in the design-and-review phase at least as long as the actual construction period.

As the building process compressed in time, the engineers and architects of projects were able to work on several projects at once. To find the time to do several projects, they gave up many of their construction duties. This evolution led into a specialization of engineering and architecture for the design phase, relegating construction.

The design disciplines have been further subdivided during the last 50 years to the point that major engineering disciplines function as separate operations under the general umbrella of “architecture.” There are many business and professional reasons for this subdivision of expertise. From the professional viewpoint, it is natural to focus on the individual's area of greatest interest and expertise. This provides the best of any one discipline available to be applied at the optimum point. The smaller groupings provide greater flexibility in weathering recessions and periods of over-supply, such as the over-supply of unrented office space in New York City.

There are a number of excellent design firms that have developed on a total-capability basis—despite the problems introduced by strong decentralization of skills. These firms, however, are not in the majority, and they will always face the problem of maintaining a large work load in order to balance areas of expertise. There is a load level beyond which the all-purpose firm becomes either non-competitive, underqualified or overpriced. The ties that bind the design team together are professionalism and money. Neither can survive independently over very many projects.

As professionals, designers are motivated by the sense of accomplishment and fulfillment that a successful design effort accomplishes. They also are building their professional reputation, with a view toward applying their skills in the future, both with the team and for the client .

From a business viewpoint, the professional relationships must be performed within cost constraints that will produce a profit, or at least cover all costs, so that the team can survive to design again.

If the design team is fortunate, the leader, who is very often the architect, represents a practical mixture of creative artistry and practical business acumen. There is a propensity for the architect to lean toward the artistic side, being counterbalanced by the hard business and professional realities of the engineering disciplines. Unfortunately, the realities of the design-team situation are usually worked out on an informal basis. The more successful teams have ground out their difficulties over many projects.

Enter the contractor

Amost all building projects are constructed by contractors who have had no role in the design phase. Most contracts are awarded by the owner either on a sealed-bid basis, negotiated basis or cost-plus-fee basis. Usually, the mode of contracting is a function of either legislative restrictions, in the case of government agencies, or prior experience on the part of industry.

While the cost of the contract is based on the design, in most cases the contractual relationship is between the owner and the contractor. This creates a triangle of interests within which an apparently fixed scope of work can become quite fluid and even a good design can be used as a whipping boy.

State laws in many of the more populated states, including Pennsylvania, New York and New Jersey, require that state and local government agencies utilize separate prime contractors to accomplish one project. Accordingly, there may be as many as five separate prime contractors, usually including: general, electrical, mechanical, plumbing and occasionally elevator contractors. The basic premise for the laws has been the idea advanced by the mechanical contractors that the public can get a better buy if mechanical contracts are not loaded with the general contractor's overhead and profit factors. The laws have withstood many attempts to change them.

Supervising the construction

Contractor supervision is key to the success of a project. These managers direct the actual field activities and often control expenditures for materials. On major projects, field superintendents are often engineers or have their own staff of engineers at the job site. Their role is to get the job done at the lowest possible cost within the budget. Most managers recognize that a shorter job is a lower-cost job because it controls the overhead factors.

Every good superintendent will recognize opportunities to produce the job somewhat differently from what the design indicates. Some of these opportunities are shortcuts that reduce the quality of the project — at least in the opinion of the designers—while others are legitimate equivalents. One example would be the use of precast roof beams, rather than cast-in-place beams. This permits special installation of equipment at a much lower cost without ultimate deterioration of the structural integrity.

The owner usually maintains some form of site representation to ensure quality. He may delegate this asignment to the design team, or he may maintain his own technical force. This decision is usually based on the owner's prior experience.

The design team may perform a quality-control role for the owner and is usually on call for interpretations of the design intent. The degree of involvement on the part of the design team is usually dictated by business considerations. The standard American Institute of Architects contract has traditionally estimated that 25 percent of the fee is for field involvement. Many owners, even after negotiating a professional fee at less than the suggested scale, expect a project-management activity on the part of the design team—in essence, the owner expects to get something for nothing, and usually gets nothing.

In a more equitable approach, some owners negotiate for a lower design fee but cut off all design services at the submission of an approved design package. Field work is then negotiated on the basis of effort required.

This hazy area in fee scope and negotiations is probably one of the reasons why design teams have become preconstruction-oriented, often having limited field activity. Certainly, any design engineer is interested in his project, but economics dictate that interest can be translated only into a limited amount of field visits and participation, unless appropriately funded by the owner.

The cookie crumbles

At some point in the construction process—as early as the failure to deliver the formal signed contract on time—the carefully fashioned construction team begins to unravel.

The design usually comes under attack first, because the contractors carefully review all facets in the hard light of their successful acquisition of a contract. No longer suitors, they are now interested in their ability to perform. Any apparent chinks in the armor are examined, probed, and if possible, exploited. The contractor is interested in avoiding areas of potential loss or, conversely, in setting up potential reserves in cost in the form of claims, change of scope or extensions in time. Often, the contractor does not seriously claim these changes at the start but is only setting up a potential.

The attack on the design opens a rift between the design team and the contractors. The design team, either confident that it has an airtight and perfectly developed design or concerened that it may be faced with a loss of reputation (or claim by the owner) necessarily goes on the defensive. In the meantime, the project tends to be sidetracked into exchanges of talk and paperwork, rather than real work. Unfortunately, human psychology is the one common thread at this point. All feel that there is time enough to do the job and that this time lost in post-contract negotiations is really available somewhere down the line—but it usually isn't.

In this early phase of the construction, the design team is also pressed to review myriad equipment selections and shop drawings. Any delay in the review, even when occasioned by improper selection of material, is grist for the time-extension mill.

The owner, too, has a role in terms of processing contracts, making final approval of materials (if the responsibility is not delegated to the design team) and ensuring the availability of the work site. The owner also has to make these inevitable decisions based on the situations that arise—or were previously not settled appropriately. When the contractors claim delay, the design team tends to ally itself with the owner.

Choosing sides

As the construction work progresses, various suggestions for design modification inevitably are introduced. Delays for weather and labor troubles crop up. And there are numerous other things that occur to bring about change orders or changes in scope.

As these situations arise in the context of a relatively inflexible contractual relationship (between the owner and design team, as well as between the owner and contractors), polarization inevitably develops. Each major party develops its own protective shield made primarily of self-interest, though the interests of the designers and the owner generally tend to be more nearly mutual.

As a result, an adversarial role develops between these two and the contractors. In fact, the adversarial attitude is inherent even before the contractors are selected—usually it is a carryover from prior projects. The feeling of dichotomy is evident in all dealings. Almost ritualistic answers evolve in response to certain stimuli or situations. Each camp sees itself wearing a white hat. The result is that many minor incidents, which should be easily managed, are handled by the old saw “don't bother me with the facts, my mind is made up . . .”

The CM rides to the rescue

There is no cure for the problems a building project must endure. Any improvements must be based on recognition of the project as an entity, as well as based on expenditures and actions in terms of their effect on the overall project.

In private industry, one approach is to use a designer-builder team. These teams have a common business interest in efficient progress from design stage to construction stage, and the adversarial role is diminished, (though it never totally disappears). Utilities also have used this approach, which is sometimes called “turnkey.”

Government agencies, usually prevented by law from using the turnkey approach, have utilized project engineers or project managers to follow the project from budgetary estimate to initial startup and operation. In some cases, where sufficient authority is not delegated to the project manager, he at least gathers a quantity of information and becomes the information source for all project concerns. In other cases, either through personality or delegation of authority, or a combination of both, the project manager directs the course of the project throughout its life. This type of project management has saved a substantial amount of time by recognizing the opportunity to overlap or to phase various project activities. The installation of foundations while final design is continuing (dubbed “fast track” and not really a new technique) is one of the opportunities that can be utilized through project-management overview.

GSA spearheads interest

Over the past few years, the General Services Administration has spearheaded the national interest in construction management. Already using project managers, but tied through legislative regulations to competitive bidding, the GSA evolved a new role for the CM.

GSA selects a number of qualified teams that are general-contractor-oriented as potential CM's. GSA then negotiates with the selected group of the most qualified teams to pick the final CM.

This is done early in the design phase or even before the start of design. The CM then works as a member of the owner's staff during the design phase, making recommendations on construction feasibility and practicality, contract scopes, cost factors and other factors of the project. The CM provides a contractor's thinking at a point when it can still be utilized as something other than an afterthought. The CM becomes a focus of the value engineering effort and maintains an overall project schedule viewing not only the construction phase but also the design itself.

GSA has introduced a number of other policies and techniques into the project considerations, involving the CM in such new experiences as life-cycle costing, performance specifications and, where appropriate, systems building.

The facilities section of the U.S. Dept. of Health, Education & Welfare has gone even farther in its definition of the CM as a general contractor. HEW requires the CM to submit a binding “upset” price—he guarantees that the project will not cost more than this amount.

The CM firm does not fit the same pattern for all owners. A number of specialized firms have been organized for the specific purpose of construction management assignments.

The contractor CM

When the contractor for a project is also the CM, he is usually an experienced general contractor. He brings much to the project in terms of real understanding of the way a contractor should approach the project, as well as cost estimating experience. He is aware of potential labor problems and can provide meaningful ideas about practical construction.

A number of major contractors perform the majority of their work on a negotiated-fee basis as CM's in the construction phase. They offer the additional advantage of having sub-contractor relationships and credibility with subcontractors. They are experienced in buying out a job, and the better firms have available experienced management personnel.

Unfortunately, some firms that would like to enter the construction management field because it is less uncertain have a limited amount of management and can ill afford to share or sell what they have to others. Further, unless the CM contractor is particularly well-rounded, as the more capable ones are, his outlook will be that of a general contractor—without a full awareness of the requirements of the mechanical and specialty contractors.

Another problem shared by almost all general contractors acting as preconstruction project managers is their lack of experience as consultants. The consultant-client relationship requires a certain skill not usually developed during the construction stages. Many experienced construction men find themselves uncomfortable in the consultant role. Others are worse than ill at ease—they are almost ineffectual. Further, many of the experienced construction manager contractors depend on engineers and architects for references—therefore their livelihood. This, combined with a lack of expertise in actual design process, may limit the managerial scope of the CM contractor in the preconstruction phase.

A number of different types of consulting firms that specialized in project management have moved into construction management. Some started about 10 years ago in specialized consulting for scheduling; others were generalized consultants working with contractors in such fields as organizational techniques or management-by-objective.

The consultant as CM

Most successful CM consultants have a substantial background in engineering, often having started either in estimating, scheduling or design. This background gives them a good understaning of the design process. Their experience in working with professional a/e's and owners is an asset in managing the preconstruction phases. In some instances, owners have delegated the entire manager process, including putting together the design team or at least recommending the team to be selected, to the project managers. Needless to say, this substantially increases the managers’ effectiveness.

These firms tend to be less knowledgeable in such areas as cost estimating and construction feasibility, but this is mitigated by their consulting experience. This experience makes it possible for them to recognize situations that are sometimes accepted as commonplace by the contractor CM.

In the construction phase, CM consultants tend to be very effective in such specialized areas as scheduling and visibility of results for management. But they are hampered by their lack of working contact with contractors and subcontractors, which can cause problems if the owner wants the CM to break down the project into many small contracts. The few organizations, who have been successful in this field, have built up successful contractor credibility.

Design team owner as CM

In many talks on the topic, Walter A. Meisen, GSA's Deputy Director for Construction Management, has chided design professionals, “Don't tell me what you could do in the field of construction management—I am here to tell you that you haven't done it in the past, and we have to look elsewhere for this type of support.”

There are many reasons why the design team should be able to handle the management of the project in the field, but there are easily as many reasons why the design team is psychologically incapable of it in most instances. The problem of managing the design itself is often beyond the abilities of the design team because they are designers rather than managers. Even those a/e firms that recognize the CM field as one in which they choose to practice have organized separate CM groups rather than attempt to utilize their standard functional design groups.

Owners of one-time building projects make poor construction managers because of their lack of expertise and also lack of objectivity. Those who build many projects often have their own project management group available. Most who work in this fashion separate the project management group from the functional or production areas to insulate the project managers from in-house pressures.

In many cases, the best mixture is that of in-house project managers and an outside construction management team that is well qualified to manage a particular project on a project-by-project basis.

Better projects with CM

Improved project management—whether it is called construction management or by another name—should be welcome to design engineers in the mechanical and electrical disciplines. The project manager will be reasonably objective and in a position to insist that the engineering disciplines have a participation in the planning and scheduling of the design stages. He is also in a position to see that the engineers’ views on alternatives are given proper weight rather than allowing selection of system components on the basis of a less complete evaluation.

But with objectivity can come restraints. If the project manager is properly qualified, he should understand enough about the design process to insist on reasonable time frames, and he should be a firm taskmaster.

The engineering disciplines accept this type of project management with aplomb, but many architectural professionals resist what they see as an attempt to manage their creativity. Actually, the project manager manages only the portion of the process that can be managed, which tends to be administrative in nature. A comprehensive project management treatment in these areas, however, will point out the balance of time available for creative design—often resulting in a better opportunity for the architectural design to get the time it needs.

One major industrial firm undertaking a program of installing better project management procedures and techniques indicated that they were doing so not because they were doing less than a good job at present but because they recognized that they could do a better job in the future. With this type of positive thinking, project management can be a plus for all members of the design and construction team.

Reprinted by permission from Actual Specifying Engineer.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

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