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PROJECT DELIVERY METHODS
ARE 413
CONSTRUCTION MANAGEMENT
CLASS- 5
ByBy
ZulfikarZulfikarAliyuAliyuAdamuAdamu
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Presentation OutlinePresentation Outline
Project Delivery Methods
Definition
Types of Project Delivery Methods
Traditional
Design- Build
Professional Construction Management (PCM)
BOT ( Build Operate Transfer)
Advantages & Disadvantages of various PDM
Summary
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Objectives of Class :Objectives of Class :
To introduce various types of project delivery methods.
To distinguish between the common project delivery methods.
To introduce different types of contract and to differentiate
between the different contracting methods.
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Project Delivery Methods : What is it ?
The term delivery method means the approachThe term delivery method means the approachused to organize the project team so as toused to organize the project team so as to
manage the entire designing and buildingmanage the entire designing and building
(design(design--build) process.build) process.
The owner needs to decide whichThe owner needs to decide whichdesigners to hire, when to hire them,designers to hire, when to hire them,
and under what type of contract ?and under what type of contract ?
The owner also needs to decide whenThe owner also needs to decide when
to hire the construction professionalto hire the construction professional
and under what type of contract ?and under what type of contract ?
Which organization gets hired first?Which organization gets hired first?
Do both organizations report to theDo both organizations report to the
owner, or does one report to the other?owner, or does one report to the other?
Project Delivery method is anProject Delivery method is anorganizational concept which assigns specificorganizational concept which assigns specific
responsibilities and authorities to people and organizationsresponsibilities and authorities to people and organizations and which definesand which defines
relationship of the various elements in construction of a projecrelationship of the various elements in construction of a project.t.
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Definitions: Project Delivery systems
A project delivery system is the method by which a constructionA project delivery system is the method by which a construction project isproject is
executed.executed.
It is the first allocation of base responsibilities between theIt is the first allocation of base responsibilities between the owner, designowner, design
professional and contractor. Thus, the project delivery system iprofessional and contractor. Thus, the project delivery system is the foundations the foundation
on which all subsequent negotiations will be based.on which all subsequent negotiations will be based.
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Types of PDM
Types of Project Delivery Methods:
Traditional
Design- Build (Turnkey)Professional Construction Management
(PCM)BOT ( Build Operate Transfer)
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The Four Phases(every project goes through)
DesignPlanning Bid Construction Occupancy
NEED
TraditionalLinear Process
Design
Planning
Occupancy
Construction
Fast-Tracking
Process
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Traditional
The owner hires a design professional who prepares a complete seThe owner hires a design professional who prepares a complete set oft ofcontract documents for the owner for a design fee.contract documents for the owner for a design fee.
The owner either negotiates a price with a general contractor orThe owner either negotiates a price with a general contractor or bids out thebids out thework.work.
The general contractor is totally responsible for delivering theThe general contractor is totally responsible for delivering the completedcompletedproject as spelled out in the contract documents.project as spelled out in the contract documents.
The general contractor may subcontract out parts of the projectThe general contractor may subcontract out parts of the project, with each, with eachsubcontractor reporting directly to the general contractor.subcontractor reporting directly to the general contractor.
The designer may be involved in overseeing the construction workThe designer may be involved in overseeing the construction workin thein thefield.field.
In this delivery method no direct, formal relationship exists beIn this delivery method no direct, formal relationship exists between thetween the
designer and the builder. They communicate only through the ownedesigner and the builder. They communicate only through the ownerr
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Traditional
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Typical Design-Bid-Build
Process(The Four Phases)
DesignPlanning Bid Construction Occupancy
NEED
Typical
Design-Bid-Build
Process
Design Team Contractor
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Advantages- Traditional PDM
Familiarity:Familiarity: Most owners, designers, and builders have workedMost owners, designers, and builders have workedunder this framework on many projects and therefore are familiarunder this framework on many projects and therefore are familiar
with the system.with the system.
Overall Job coordination:Overall Job coordination:Their control systems, documentation,Their control systems, documentation,and organizations are all set up to manage this process. Theand organizations are all set up to manage this process. The
workers, subcontractors, and vendors also understand the system,workers, subcontractors, and vendors also understand the system,
improving overall job coordination.improving overall job coordination.
Owner can get aOwner can get a firm fixed pricefirm fixed price for the project before any workfor the project before any workbegins. The owner knows before construction begins what the costbegins. The owner knows before construction begins what the costof the project will be.of the project will be.
Opportunity to get goodOpportunity to get goodprice competitionprice competition from the open market.from the open market.
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Pros and Cons of the Traditional Approach
AdvantagesAdvantages DisadvantagesDisadvantages
Price competitionPrice competition The approach takes a long time .The approach takes a long time .
Total cost is known beforeTotal cost is known before
construction startsconstruction startsDesign does not benefit fromDesign does not benefit from
construction experienceconstruction experience
WellWell--documented approach useddocumented approach used
in most government projects donein most government projects done
for public worksfor public works
Conflicts between owner & G.C.Conflicts between owner & G.C.
and betweenand betweenAlEAlE & G.C.& G.C.
Changes may lead to disputes andChanges may lead to disputes and
claimsclaims
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Design-Build
In this approach, a single organization is responsible for perfoIn this approach, a single organization is responsible for performingrmingboth design and construction .both design and construction .
Within the designWithin the design--build organization, parts of the design may bebuild organization, parts of the design may besubcontracted to specialist consultants.subcontracted to specialist consultants.
Being responsible for both design and construction, the designBeing responsible for both design and construction, the design--buildbuild
contractor carries most of the project risks, and this can meancontractor carries most of the project risks, and this can meanadditional cost to owner.additional cost to owner.
The owner's role in this approach is minimal and is only to exprThe owner's role in this approach is minimal and is only to express hisess hisor her objectives and specifications precisely before detailed dor her objectives and specifications precisely before detailed design isesign isstarted.started.
Historically, the designHistorically, the design--build approach has been used on large,build approach has been used on large,privately funded, industrialprivately funded, industrial--sector projects. Recently, however, thissector projects. Recently, however, this
approach has begun to be used on commercial building projects, sapproach has begun to be used on commercial building projects, someomepublicly funded.publicly funded.
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Design-Build
Design-Build
Firm
Owner
Subcontractors and SuppliersDesigners and Consultants
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Design-Build
OWNEROWNER
DESIGNDESIGN--BUILDBUILD
FIRMFIRM
design
subcontractors
suppliers
construction
subcontractorsdesign
subconsultants
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Typical Design/Build Process
(The Four Phases)
NEED
Design
Planning
Occupancy
Construction
Typical
Design/Build
Process
Design/Build
Team
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Design-Build Advantages Good communication occurs between the design team and theGood communication occurs between the design team and the
construction team. Allows for constructability analyses and valuconstruction team. Allows for constructability analyses and valueeengineering.engineering.
This collaboration allows the project to be easily fastThis collaboration allows the project to be easily fast--tracked,tracked,
cutting down on the designcutting down on the design--build time for the project.build time for the project.
Good cost estimating and scheduling should occur throughout theGood cost estimating and scheduling should occur throughout theentire project.entire project.
LongLong--lead item identification and ordering should also be able tolead item identification and ordering should also be able to
proceed smoothly.proceed smoothly.
In general, this arrangement allows easier incorporation of chanIn general, this arrangement allows easier incorporation of changesges
due to changed scope or unforeseen conditions than in the otherdue to changed scope or unforeseen conditions than in the other
arrangements, since the coordination is to occur within the samearrangements, since the coordination is to occur within the same
company.company.
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Pros and Cons of the Design-Build ApproachAdvantagesAdvantages DisadvantagesDisadvantages
Single point of responsibility forSingle point of responsibility for
ownerowner
New learning curve for ownersNew learning curve for owners
Reduced conflict. Less adversaryReduced conflict. Less adversary
relationshipsrelationshipsA/E doesnA/E doesnt work directly fort work directly for
OwnerOwner
Time can be reduced if the designTime can be reduced if the design--
build company overlaps design andbuild company overlaps design and
constructionconstruction
Cost may not be known until the endCost may not be known until the end
of designof design
Coordination between design andCoordination between design andconstructionconstruction
New learning curve for ownersNew learning curve for owners
Easier implementation of changesEasier implementation of changes DesignDesign--build company may reducebuild company may reducequality to save cost Constraints with publicquality to save cost Constraints with public
lawslaws
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How Are Design-Builders
Organized?
Integrated DesignIntegrated Design--Build FirmBuild Firm
Contractor as leadContractor as lead
A/E as leadA/E as lead
Joint VentureJoint Venture
Developer as leadDeveloper as lead
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BOT (Build Operate Transfer)
The term BuildThe term Build--OperateOperate--Transfer (BOT) was first coined by ExTransfer (BOT) was first coined by Ex--
Prime Minister of Turkey,Prime Minister of Turkey,TurgutTurgut OzalOzal in 1984in 1984
Essentially in a BOT project delivery method, a private entity,Essentially in a BOT project delivery method, a private entity,
usually a consortium is responsible for financing, construction,usually a consortium is responsible for financing, construction,
operation and maintenance of the facility for agreed durationoperation and maintenance of the facility for agreed duration
known as Concession period and at the end of the period, transfeknown as Concession period and at the end of the period, transfersrsthe ownership of the facility to the government.the ownership of the facility to the government.
A BOT mechanism is a complex structure comprising multiple,A BOT mechanism is a complex structure comprising multiple,
interinter--dependent agreements among various participants.dependent agreements among various participants.
The concession agreement is between the government and theThe concession agreement is between the government and the
concessionaire. The concession agreement is regarded as theconcessionaire. The concession agreement is regarded as the
heartheart of a BOT projectof a BOT project
Examples of BOT ProjectsExamples of BOT Projects
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Examples of BOT ProjectsExamples of BOT Projects
BOT Contractual StructureBOT Contractual Structure
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BOT Contractual Structure
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BOT (Build Operate Transfer)
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BOT Advantages The private sector invests directly in the development of infrasThe private sector invests directly in the development of infrastructure,tructure,
thereby reducing public debt, balancing the budget deficit, anthereby reducing public debt, balancing the budget deficit, andd
reduced role of public sector. Financing mechanism for infrastrreduced role of public sector. Financing mechanism for infrastructureucture
The private firms are more efficient, hence project or service cThe private firms are more efficient, hence project or service can bean be
delivered at lower costdelivered at lower cost
BOT projects create business opportunities for the local privatBOT projects create business opportunities for the local privatee
sector, create employment avenues as well as attract substantiasector, create employment avenues as well as attract substantiall
foreign direct investmentforeign direct investment
BOT projects help in facilitating transfer of technology by intBOT projects help in facilitating transfer of technology by introducingroducing
international contractors in the host countriesinternational contractors in the host countries
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BOT Disadvantages
BOT is not a easy method and requires high capability ofBOT is not a easy method and requires high capability of
promoters.promoters.
Not suitable for smaller projects. Victorian Government ofNot suitable for smaller projects. Victorian Government of
Australia has suggested that projects with a value of less thanAustralia has suggested that projects with a value of less than
Australian dollar $15m are unlikely to gain benefits from BOTAustralian dollar $15m are unlikely to gain benefits from BOTdelivery method.delivery method.
The success of BOT project depends upon successful raising ofThe success of BOT project depends upon successful raising of
necessary finance.necessary finance.
Transaction costs are high, they amount to 5Transaction costs are high, they amount to 5--10% of total project10% of total project
costcost
BOT projects are successful only when substantial revenues areBOT projects are successful only when substantial revenues aregenerated during the operation phase.generated during the operation phase.
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Professional Construction Management
In this approach, the owner appoints a PCM organization (also knIn this approach, the owner appoints a PCM organization (also known asown as
construction management organization) to manage and coordinate tconstruction management organization) to manage and coordinate thehe
design and construction phases of a project using a teamwork appdesign and construction phases of a project using a teamwork approach.roach.
The design may be provided by specialist design firms and in soThe design may be provided by specialist design firms and in some casesme cases
by the PCM organization.by the PCM organization.
With a high level of coordination between the participants, innoWith a high level of coordination between the participants, innovativevativeapproaches of overlapping design and construction (i.e., fastapproaches of overlapping design and construction (i.e., fast-- tracking)tracking)
can be adopted.can be adopted.
The PCM organization aims at holding a friendly position similarThe PCM organization aims at holding a friendly position similar to thatto thatof the consultants in the traditional approach.of the consultants in the traditional approach.
The services offered by the PCM organization overlap those tradiThe services offered by the PCM organization overlap those traditionallytionally
performed by the architect, the engineer, and the contractor.performed by the architect, the engineer, and the contractor.
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Professional Construction Management
This may include:This may include:
management and programming of design;management and programming of design;
cost forecasting and financial arrangements;cost forecasting and financial arrangements;
preparation of tender documents; tender analysispreparation of tender documents; tender analysis
and selection of contractors;and selection of contractors;
selection of methods of construction;selection of methods of construction;
planning and scheduling construction works;planning and scheduling construction works;
materials procurement and deliverymaterials procurement and delivery expeitionexpeition
Although this approach is likely to prove marginally more expensAlthough this approach is likely to prove marginally more expensive thanive than
the traditional approach, it offers greater guarantee of performthe traditional approach, it offers greater guarantee of performance andance andthe potential to avoid time overruns and to reduce the cost of cthe potential to avoid time overruns and to reduce the cost of claims.laims.
The payment to the PCM organization is usually a fixed fee or aThe payment to the PCM organization is usually a fixed fee or a
percentage of the total project cost.percentage of the total project cost.
Use of PCM approach, should be considered when there is a need fUse of PCM approach, should be considered when there is a need for timeor timesaving and flexibility for design changes, and the owner has inssaving and flexibility for design changes, and the owner has insufficientufficient
management resourcesmanagement resources
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Professional Construction ManagementPCM Agency with GC
Owner
A/E
AgencyCM
Designers and Consultants
GC
Subcontractors and Suppliers
OWNEROWNER
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Construction Management: Agency Form
ARCHITECTARCHITECT
OWNEROWNER
Architects
design
consultants
subcontractors
LIMITED
CONSTRUCTION
ADMINISTRATION
CMaCMa
DETAILED
CONSTRUCTION
COORDINATION
FEASIBILITY
+COST DATA
materials suppliers
GENERALGENERAL
CONTRACTORCONTRACTOR
DESIGN
DATA
Source: Modified AL( 1998)
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4141PCM Advantages & Disadvantages
Advantages over traditional A/E construction administration:Advantages over traditional A/E construction administration:
CM with a construction background may be BETTERCM with a construction background may be BETTER
QUALIFIEDQUALIFIED
CM provides greater QUANTITY of construction phaseCM provides greater QUANTITY of construction phaseservicesservices
CM often assumes greater DEGREE of control overCM often assumes greater DEGREE of control over
contractorscontractors
limitations: thelimitations: the professionalprofessional oror agentagent CM:CM:
DOES NOT guarantee construction cost or timeDOES NOT guarantee construction cost or time
DOES NOT perform any work or contract with the tradeDOES NOT perform any work or contract with the trade
contractorscontractors
IS NOT RESPONSIBLE for their performanceIS NOT RESPONSIBLE for their performance usually DOES NOT assume responsibility for safetyusually DOES NOT assume responsibility for safety
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Pros and Cons of the PCM ApproachAdvantagesAdvantages DisadvantagesDisadvantages
Utilization of construction skills at allUtilization of construction skills at all
stages with no conflict among participantsstages with no conflict among participants
Higher owner involvement andHigher owner involvement and
responsibilitiesresponsibilities
Independent evaluation of cost andIndependent evaluation of cost and
schedule to the best owner interestschedule to the best owner interest
Need skilled construction managersNeed skilled construction managers
Time could be much lessTime could be much less PCM fees (up to 4%)PCM fees (up to 4%)
Principals such as "value engineeringPrincipals such as "value engineering
could be applied in all phasescould be applied in all phases
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CONCLUSION
Types of Project Delivery Methods
Traditional
Design- Build
Professional Construction Management (PCM)
BOT ( Build Operate Transfer)
Advantages & Disadvantages of various PDM