BLDG 6571 - Postlec 4

BLDG 6571 Lec 4 3/7/2017
BLDG 6571 PROJECT

MANAGEMENT
Lecture 4 Project Contracting
Dr. Mona Abouhamad
BLDG 6571 Lec 4 Dr. Mona Abouhamad 3/7/2017
Dr. Mona Abouhamad 1

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Owner
Designer Constructor
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The owner, whether public or private, owns and finances the facility or
project.
Depending on the owner's in-house capabilities, they may handle all or
portions of basic planning, budgeting, project management, design,

engineering, procurement, and construction.
The owner engages architects, engineering firms, and contractors as
necessary to accomplish the desired work.

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Public owners are public bodies of some kind ranging from agencies of the federal
government down through the state, county, and municipal entities including boards,
commissions, and authorities. Most public projects or facilities are built for public use
and not sold to others.
Private owners may be individuals, partnerships, corporations, or various

combinations thereof.
Most private owners have facilities or projects built for their own use (e.g., business,
habitation) or to be sold, operated, leased, or rented to others.
1.Public Owners: Tax payers
Examples: roads, bridges, government buildings

Ensure public money is well spent, requires documentation to support all actions.
2. Private owners: home owners/multi-national companies
3. Owner representative:
Facility managers: understands goals and objectives of organization & ensure
facilities are planned to support them.
Consultant: owners not familiar with building process will not communicate their
needs clearly
Mixed motivations + unclear communication = +time, + money

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Architect: An architect is an individual who plans, programs, and designs
buildings and their associated landscaping. Sometimes the architect also

provides the aesthetics of the whole envelope or concept of the whole project.
Architect/Engineer (A/E): The architect/engineer (also known as the design
professional) is part of the business firm that employs both architects and
engineers and has the capability to do complete design work.
The construction manager is a specialized firm or organization which
furnishes the administrative and management services for on-site erection

activities and may provide the consulting services necessary and as required
by the owner from planning through design and construction to
commissioning.

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Owner
Define project
Designer Constructor
Develop Produce
Depend upon type of construction Project:

1. Commercial buildings & Residential Projects (concept )
2. Infrastructure & Industrial projects (Function)
Identify important design elements

physical context
building activities
unique image

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Trades:
Speciality contractors sub-contractors
electricians
Insulation workers
Sheet metal workers
Iron workers
Plasterers
Material Suppliers
Equipment Suppliers
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Time Objective
Cost Objective
Performance Objective (Value engineering)
Secondary Objectives
Risk sharing between the owner and the contractor.
Project requirement of staff training or transfer of technology.
Involving the contractor in the design stage to reduce construction
problems.
Involving the owner in contract management.
Choice of labor-intensive construction.
Use of local materials and resources.
Protection of the environment.

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Bid
Design Construction
Activities
Design Construction
Activities

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Design Construction
Activities
Design Construction
Activities
Design
Construction
Activities
Design
Construction
Activities

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Traditional PDS Phased Construction Fast Tracking

Design of entire project
before construction
Design of work package

before construction
Duration Longest Moderate Shortest

Management of
package interface
Frequency of change Lowest Moderate Highest

orders
Cost Control Maximum Moderate Minimum

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A lump sum value represents the total price for which a contractor offers to
complete the project works / items of work, according to the detailed plans and
specifications.
A lump-sum, or stipulated-sum, contract is one in which the contractor quotes
one price, which covers all work and services required by the contract plans
and specifications. In this format, the owner goes to a set of firms with a
complete set of plans and specifications and asks for a single quoted price for
the entire job.

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The contractor, in return, can be expected to ask for a higher markup in order
to take care of unforeseen risks.
Public contracts for buildings and housing are typical candidates for lump-
sum competitively bid contracts.
WHAT if : actual cost of the project is underestimated ?

What about an over estimate ?

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In this type of contract, the project is broken down into work items that can be
characterized by units such as cubic yards, linear and square feet, and piece
numbers (e.g., 16 window frames).
Used in projects where the type of work is known but the exact quantities of
work is uncertain.
The contractor quotes the price by units rather than as a single total contract
price.

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Unit-price quotations are based on the guide quantity specified. If a small
quantity is specified, the price will normally be higher to offset mobilization

and demobilization costs.
Larger quantities allow economies of scale, which reduce the price per unit.
That is, if 100 square feet of masonry brick wall is to be installed, the cost per
square foot would normally be higher than the cost for 5,000 square feet.
In developing the unit-price quotation, the contractor must include not only
direct costs for the unit but also indirect costs such as field and office
overheads as well as a provision for profit.
one disadvantage of the unit price contract form is that the owner does not
have a precise final price for the work until the project is complete.

BLDG 6571 Lec 4 3/7/2017
Dr. Hesham Osman
Negotiated contracts are most commonly used in the private sector, where the
owner wants to exercise a selection criterion other than low price alone.
allows the use of phased construction in which design and construction
proceed simultaneously. This allows compression of the classical design-bid-

build sequence.

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Cost + Fixed percentage:
Recommended when project involves new technology and/or
owner requires project to be completed within a short time.
The owner assumes all risks
Can be abused by contractor

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Cost + Fixed Fee:
the contractor will have some incentive to complete

the job quickly since its fee is fixed regardless of
the duration of the project.
The owner still assumes the risks of cost overrun
while the contractor may risk the erosion of its
profits if the project is dragged on beyond the
expected time.
usually established as a percentage of an originally
estimated total cost figure. This form is commonly
used on large multiyear industrial plant projects.
Cost-Plus Variable Percentage Contracts

Further encourage contractor to spend less, allocates
considerable risk for cost overruns to the owner, but

also provides incentives to contractors to reduce costs
as much as possible.

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Cost + Guaranteed Maximum Price:
Puts a cap to project cost, the contractor bares any additional
increases.
When the project scope is relatively well-defined, the owner
can ask the contractor to take the risk of guaranteeing a

maximum ceiling/limit for project cost (occasionally time, as
well)
Cost + Guaranteed Maximum Price:
A good estimate of the target is necessary. Plans, concept drawings
and specifications must be sufficiently detailed to allow

determination of a reasonable target.
The incentive to save money below the target provides an
additional positive factor to the contractor.
Contractor assumes risk of guaranteeing a maximum ceiling/limit
for project cost.


BLDG 6571 Lec 4 3/7/2017
Dr. Hesham Osman
Risk to owner
Dr. Hesham Osman

BLDG 6571 Lec 4 3/7/2017
Hegazy, Tarek. Computer-Based Construction Project Management: Pearson
New International Edition. Pearson Higher Ed, 2013.

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BLDG 6571 Lec 4 3/7/2017

BLDG 6571 PROJECT

BLDG 6571 Lec 4 Dr. Mona Abouhamad 3/7/2017

Dr. Mona Abouhamad 1

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Depending on the owner's in-house capabilities, they may handle all or

portions of basic planning, budgeting, project management, design,

The owner engages architects, engineering firms, and contractors as

necessary to accomplish the desired work.

BLDG 6571 Lec 4 Dr. Mona Abouhamad 3/7/2017 4

Dr. Mona Abouhamad 2

Private owners may be individuals, partnerships, corporations, or various

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1.Public Owners: Tax payers

Examples: roads, bridges, government buildings

Mixed motivations + unclear communication = +time, + money

BLDG 6571 Lec 4 Dr. Mona Abouhamad 3/7/2017 6

Dr. Mona Abouhamad 3

Architect: An architect is an individual who plans, programs, and designs

buildings and their associated landscaping. Sometimes the architect also

Architect/Engineer (A/E): The architect/engineer (also known as the design

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The construction manager is a specialized firm or organization which

furnishes the administrative and management services for on-site erection

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Dr. Mona Abouhamad 4

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Depend upon type of construction Project:

2. Infrastructure & Industrial projects (Function)

Identify important design elements

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Dr. Mona Abouhamad 5

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Performance Objective (Value engineering)

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Dr. Mona Abouhamad 7

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Dr. Mona Abouhamad 9

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Traditional PDS Phased Construction Fast Tracking

Design of work package

Duration Longest Moderate Shortest

Frequency of change Lowest Moderate Highest

Cost Control Maximum Moderate Minimum

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