DEPARTMENT OF CONSTRUCTION AND PROPERTY UNIVERSITY OF THE WEST OF ENGLAND, BRISTOL MSC CONSTRUCTION PROJECT MANAGEMENT CONSTRUCTION PROJECT MANAGEMENT PRACTICE CONTENTS

DEPARTMENT OF CONSTRUCTION AND PROPERTY

UNIVERSITY OF THE WEST OF ENGLAND, BRISTOL

MSC CONSTRUCTION PROJECT MANAGEMENT

CONSTRUCTION PROJECT MANAGEMENT PRACTICE

VIVIAN ENIYE OREMEYI ANEJUKWO

STUDENT NO: 13008660

SEPTEMBER 2013

CONTENTS

1.0 Introduction 3

1.1 Objective 3

2.0 Funding and value analysis 5

3.0 Risk management strategy 6

4.0 Organisational Communication strategy 9

5.0 The project life cycle 11

6.0 Procurement strategy 13

7.0 Conclusion 15

8.0 References 15

Appendixes

1.0 INTRODUCTION

Johnson et al defines strategy as the path taken by an organisation over a long

period of time to achieve success for the organisation through it series of well

organised decisions within a competitive environment to meet market need and

also fulfil stakeholder expectation. (Maylors, 2003) also said that to succeed in

any project you must have strategy, and having the right one guides and inform

you in the right decisions you make in delivering all your other project.

Every projects need proper planning and planning takes time, there is a reward,

because time and cost are saved and risk equally reduced, the importance of

such planning, however is that it does not depend on the complication of what

goes with such project.

Planning makes sure that organisational value and requirement of the client

are understood and well taken care of, this gives better design prevent waste,

which enables the project team deal and manage risk appropriately as it

happens, this usually cause delay in the long run and automatically increases

cost [achieving excellence in construction (AEC) guide 3, 2007]

It is very important to apply knowledge and wisdom in creating strategies that

will best manage risk, stakeholders and other part of the supply chain to benefit

project design, and in the long run contributes to the advantage of the project.

1.1 OBJECTIVES

This report proposes a plan on how University of the West of England (UWE) and

World Development Limited (WDL) can come into partnership. World

Development Limited is marketing the hotel as Radisson Blu, the project is part

of the UWE master plan to expand the campus to newly acquired land from

Hewlett Packard (HP). In October 2008 the UWE bought a land approximately

28 hectares of land (70acres) of land next to its main frenchay campus from their

neighbour Hewlett Packard. This contract between UWE and WDL will result to

change in the existing building and infrastructure, and for the change to take

place UWE decided to go into partnership with WDL, who are marketing the

Hotel as Radisson Blu

The site is a brownfield site (old HP factory), part of it was previously a burial

ground, and has borders with housing development, a ministry of defence

(MOD) complex, a canal and the university campus, there is also an unused land

to the south of the land, which also is going to be developed into a stadium by

the university of west of England and Bristol Rovers Football club.

The contract between UWE and WDL is a Joint Venture partnership UWE is the

provider of the land while the developer will source for funds to match up the

equity. A joint venture partnership is a temporary partnership that two group of

individual companies come together for a purpose of gaining mutual benefit by

sharing cost, risk and rewards, (Linton, 2013)

The hotel will provide recreational activities for the school, it is a 133 room hotel,

which will help accommodates visitors coming to UWE for the first time, will also

provide 200 car parking spaces for their guest, which will however benefit staff

and student of UWE during office hours. The school, staff, student will use the

conference / banqueting facilities to host event, parties, weddings and seminars.

This construction will bring about more vehicular access which will enhance easy

access in and out of the school. These development will improve UWE in the

university rankings, it will also attract travellers passing the M32 route to stop

over. Upon completion this hotel will be the pride of England and the world as a

whole. In summary it has social, financial and sentimental benefit this will help

create jobs for the local community which will one way or the other touch the

lives of every family. The hotel will enhance the landscape thereby promoting

tourism, it will bring commerce to the local community which will generate

revenue and automatically provides employment.

Sometimes, project which you think will bring you a lot of profit and benefit may

sometime turn out to be a huge financial problem for the stakeholders if not

properly taken care of, therefore it is important that the proper strategy be

adopted on how to handle this kind of project.

In the feasibility analysis of this project, one can demonstrate value for money

in terms risk, how project can go according to plans and schedule and how much

it can cater for stakeholder on project ensuring every section works without any

kind dispute that is having mutual understanding applying McKinsey 7s

framework.

2.0 FUNDING AND VALUE ANALYSIS

The international project finance define project finance as the long term finance

of project base upon a loan structure where project debt and equity which were

used to finance the project are paid back from the cash flow generated by the

project. Cost management is very important in every project, it is not the

amount u invest in a project that matters but the quality of business that u invest

in that matters, however it is important that you do a cost benefit analysis to

prove this point (Atrill et al 2011). The result from the cost benefit analysis will

help determine the feasibility of the hotel project as well as the amount of

resources needed to get the required result. (Finnerty, 2013) defines project

financing as the raising of funds on a limited-recourse or a nonrecourse basis to

finance an economically separable capital investment project, where by the

investor depends on the cash flow generated by the project as the source of

funds to service their loans and to get the return of their own invested equity.

As a project manager a developer budget is needed to be presented to the client

which was done for the World Development Limited who happen to be the main

financier for the project in order to get the actual cost of a project the use of

location and tender price index using (BCIS) the total cost of the hotel came up

to £7.1million adding 30% on it and the project is finance through retained

capital loans from the bank, the request was to state if the project was viable,

the loan taken was charged 3.5% per year which it was the estimated time the

construction of the hotel will be completed. The project would start August next

year and assumption was made for the project.

Gone are those days when obtaining any kind of loan for a hotel project is

difficult, lenders are now more willing to loan to sponsor any valid hotel project

due to the new hotel success story. In this report we look at all the various

financing techniques and how funds are sourced for hotel project and what the

hotel needs to do to source for project (Abdel-Khalek et al, 2011) says technique

used for scheduling and financing differs depending on the size complexity

duration, resources and contractors requirements.

Equity and debt can be group into two group – they are institute that operates

both mortgage and Real Estate Equities and those that invest on hotel and Real

Estate, the commercial banks, life insurance companies, private credit company

and pension funds all operates both mortgage and real estate equities while real

estate partnership (RELPs), real estate investment trust (REITs), commercial

mortgage backed securities (CMBS) invest on hotels and real estate. (Ferry et

al).

Commercial bank has played an important role in the process of financing a hotel

projects, as I said earlier base on the facts that bank are willing to fund hotel

project WDL will not find it difficult getting a loan from a bank. Also UWE has a

clean slate in respect to credit ratings because of the completed student hostel.

They have good asset base to use to collect loan from the bank. And since it’s a

joint venture there is exchange of capital for shares in the company and for this

reason there is chance for the business to be successful because both the WDL

and UWE would try to put all their effort to make it succeed. UWE will get

cooperation from the city council due to success in the completion of their

student hostel which they were involved in.

There are several ways in which a hotel can raise funds by providing rooms,

banquet facilities and restaurant. We commence of a research on how funds can

be generated from hotel by projecting room occupancy for average room rates

for the hotel accommodation facilities as well as expected levels of utilization of

the revenue for food and beverages and other facilities over five years of

operation these assumed revenue were converted to assumed profit using

estimate of operating cost and the resultant profit and loss projection which are

then translated into cash flows you can now integrates the output from above

analysis into an overall project plan with necessary data from

the client, the project profitability and cash flow were modelled to describe the

types of bank loan required and the contract that would be made. A report and

a support application can be forward to any financial institution for funding.

Appendix E gives the propose cost of construction at almost £

3.0 RISK MANAGEMENT STRATEGY

Risk Management (RM) is one of the most difficult aspect of project

management (Abrahamson, 1984). Risk can occur at any time of the design

stage, during construction, it may happen unexpectedly it could disorganise an

already made plan, the only thing certain is that the unforeseeable will occur

(Miller and Lessard, 2000). According to (Latham, 1994), no construction project

is done without experiencing risk the only solution is to manage, prevent, share,

transfer or if possible accept it. In the case of the millennium ‘wobbly’ bridge in

London during the initial design, the risk of design was not part of the ten

primary risk mentioned at the pre-contract stage, the initial price of the bridge

was £18 million after the correction cost an extra of £5million (Rawlinson,

1999).

Mitigating risk in construction project has been consider as an attempt to

achieve project objective in terms of time, cost, quality, safety and sustainability.

Risk is said to be the probability of the occurrence of a defined hazard and the

size and effect of its occurrence. Risk can be affected by both internal and

external factors, the internal factors are controlled by the project team that is

they are project oriented while the external factor cannot be controlled by the

project team, (Hammad et al 2012)

In determining the feasibility of the hotel project it is important that we examine

the risk involved at the different stages (Maylor, 2003). The procurement route

use for the design of the project will determine the type of risk to be encounter

during the project. The procurement route use for Radisson Blu hotel was design

and build and this is usually used in most big projects with different contractor

and sub-contractor employed to handle different stages of the project, so the

risk analysis will be based on those ones associated with design and build

procurement route and how they can be apply to the various stages of the

project.

The risk register is a vital project management document that describes the

status of the risk and the processes of managing risk, and it should continuously

be reviewed throughout the course of the project. Appendix C shows us the risk

assessment register for the hotel project. The project manager has to do a risk

assessment register to give to the client before the start of the project, so they

would be able to know the risk they are likely to face and show the probability

that the risk will occur and how to avoid or mitigate it. (Potts, 2003) stated that

the most important way to a successful risk management throughout a whole

project cycle on the Seven Trent Derby Sewage Works projects was the

collection of series of joint client/contractor risk register with regular updates,

so if we apply this in our Radisson Blu hotel project it will help a great deal. The

appendix C is showing their impact on the project, should in case they occur, the

consequences and the mitigation/action should in case they happen.

Geotechnical information – the more geotechnical information one has about

the subsurface of the site the more accuracy the bid would be, it is better to

invest a little money during project planning and design for the purpose of

obtaining more geotechnical information for the contractor but if less

information is given to the contractor the risk should be passed to the client and

the client should be made to pay because if the condition of the site is told to

the contractor, the bid would have been higher. But in this case the major risk

that can be encounter is the nature of the site, which is a brownfield site and

was formally been a burial ground, for this reason several remedial works have

to be carried out before construction can begin and this will waste time because

the bodies would have to be relocated, this will take time and this may affect

the budgeted cost of the project, to mitigate this is to set a realistic contract

performing time

Environmental risk – there could be environmental risk due to unforeseen

ground condition, archaeological findings which could make them employ the

services of an archaeological consultant to ensure that none of the artefact

found on the site is destroyed and this will also cost money and also increase

the total amount budgeted for the project. There could also be the issues of

finding instrument / computer / engineering component and old foundation

walls buried beneath the ground during excavation, this will also disturb work,

this risk can be mitigated by contracting the foundation works under design and

build contract JCT 98’ without quantities.

Technical Risk – due to design error, if there is mistake at the design stage and

if not noticed early this could lead to changes in the design and then repeating

the job all over again, this leads to waste, cost increase and time wasting and

sometimes causes conflicts. Work and rework cost information – it is better for

the project manager to see all the design details of the cost estimates of the job

so as to know that it is error free and also to pre-define all rates equations and

procedures. Plans and specification should also be reviewed for constructability

before contractors bid on them and if this is done by project managers it will

make construction easier, cheaper and saves time.

Natural risk – this is due to unforeseen condition, weather / climate

Market / financial risk – the risk of running out of money, most client are

concerned about the insufficiency of funds, client needs to know that changes

and cost increase are inevitable, so enough fund should be budgeted for raining

days to cater for the unexpected omissions or inevitable change. that changes

and cost recession in the economy can lead to inflation, the project could take

more than two years, so it is better to put value for money into consideration

for any project taking more than two years complete, (Atrill and McLaney, 2013),

this sometimes could result to delay or suspension of the project because any

little delay may lead to the price of building material skyrocketing which may

lead to delay due to lack of funds, u may mitigate this risk by introducing the

time value of money (TVM) This is the value of money with a given amount of

interest earned over a given period of time. It could also be said that time is

money that is money worth at present time is greater than the same amount in

the future.

The risk of health and Safety – This is one of the major risk to be encounter on

this site, it is very important for everyone in the workforce to be made to be

enlightened about the importance of health and safety management, to see the

dangers that exist in the workplace and to be trained on how to mitigate and

avoid harm, (Fewings, 2010). To be able to reduce noise and dust, though u can

exclude people from coming into the work area but you cannot stop dust and

noise from getting to your neighbours, so to mitigate this is to inform them and

make sure they are happy with you, and to the workers on site they should wear

ear mask The CDM coordinator should make sure the site is tidy, Personal

Protective Equipment (PPE) should be won by everyone on site and exclusion

areas should be planned and set up according to the days’ of activities. But the

most important thing was for the project manager to be able send the message

across to everyone especially during pep talk.

4.0 ORGANISATIONAL AND COMMUNICATION STRATEGY

Project should be organised in such a ways that every member of a project team

should be committed to successful delivery. There must be a direct link to the

senior executive so that immediate action is taken whenever their attention is

needed. For project to be a

Employers often claim that people are their greatest asset, it is right to say

organisation should take time off to care for their human resources in order to

survive in a competitive industry (Pfeffer, 1998). The importance of organisation

and communication is now being realised and business are creating new

strategies and investing in project that will help them manage their businesses.

Good communication amongst members of a project team is very important,

there are two type of project communication, the internal which is between

members of the project team and the external which between the project team

and the external stakeholder.

The project environment include everything around it, the maps, models and

everything relating to the environment is taking place , knowing about the

peoples, their culture. Identifying what kind of project is to be carried out, is it

going to be within the organisation or outside. In the case of Radisson Blu Hotel,

the project is taking place within the organisation, the project manager prefers

to select her own team within the sponsoring organisation the aim is to involve

them in every stage of the project ensuring that all the interest of the

stakeholder balances. The major stakeholder includes University of the west of

England (UWE) and World Development Limited (WDL) while other stakeholder

are student, staff of Ministry of Defence (MOD) south Gloucestershire council

local residents Pedestrians, archaeologists and would-be investors, Frenchay

community and Bristol city council

The challenge for the project manager is bringing people from different

organisations or firms and build them into an effective team, this team building

is the most important role of the project manager. Since this organisations are

independent outside this project, this could bring conflicts since they all have

their own independent beliefs this could lead to conflicts if not well managed.

Project manager needs to be able to communicate with the different culture

involve in managing projects, the issue of trust is very important for efficiency,

there should be trust between the client and the contractors because of late

changes, claiming for extra agreed payment, and also between contractors and

supply chain over payment and quality, so that trust is built over the contract,

there should also be that culture of openness so the idea of transferring blame

to one another will stop (Winch, 2002).

The organisation and project team have less influence over the external

environment than the market environment while the element of market

environment such as competitors and suppliers will be affected by the external

environment. It is good for a project manager to be able to know about the

market so as to know how to forecast, recognise and respond to changes in the

market environment (Porter, 1980).

Finally, the way project manager manages all the stakeholder and the supply

chain without conflict, matters a lot, there are need to deal with the conflicting

requirement of stakeholder, so who do u satisfy and who do you disappoint

comes into place but one thing that must come to mind is the satisfaction of the

client, whatever decision the project managers takes should be one that would

benefit the client. One of the ways to do this is for him to consult a stakeholder

map and this is the easiest way to determine the most important stakeholder

and this done using the power–matrix system, (Johnson and Scholes, 2002) this

system separates the most important stakeholder from the least important

stakeholder, weighing them on their strength or importance in the organisation,

he then check and balance them to know who works directly with him and who

to delegate to other members of the project team. Even though the mapping its

easier but it is not efficient because it causes conflict, the least important ones

become more important later and if they were not well taken care of at the

beginning may sabotage their efforts at the end when they need them. The best

way is to consult them and engage them in every activities.

5.0 THE PROJECT LIFE CYCLE

Construction time performance (CTP) and flexibility in approach to project time

planning have proven to be associated and this brings about the question how

can we use effective planning and control to facilitate flexibility and be able to

overcome unexpected problem in construction. An investigation of a mental and

forensic health hospital and a very large freeway / bridge / tunnel, urban

infrastructure project were used as a case study to check the link between CTP

and flexibility of project time planning and found out that if both are put in same

situation of unexpected problems, if they are both subjected and encouraged by

same organisational and team competence and dedication they will both

facilitate good construction time (Walker and Shen, 2010)

A lot of studies from the UK have pointed accusing fingers to the client for being

the reason for poor cost and time prediction in construction sector and this two

are the major factors affecting the industry. (Egan, 1997), rethinking

construction states that project are widely seen as unpredictable in terms of

time and delivery and they suggested that a specific set of performance measure

should be adopted as key performance indicator (KPIs) to include time and cost

predictability. According to KPIs the ability to predict time of a project is worse

than that of cost, the cost increase during a project is usually shared between

the client and the contractor in according to their contractual agreement, that

way they share the reward equally, good or bad.

Appendix A shows the project life cycle from a client point of view begins when

an idea is created until the idea is executed and completed that is from the

inception to the commissioning. The development of the project would be

carried out in different stages and one phase connects the next and the second

phase cannot begin unless the first phase is completed, this is done to simplify

the project cycle and to make the allocation of fund easy and the project work

distinct.

The factors affecting the time taken for a project to be completed are phasing,

design, site access, site condition, market constraint/opportunities, complexity

and availability of resources and financing. As shown in appendix A, the hotel

project will take a year to be completed, starts date is August 4 2014 while the

end date is in August 4 2015 and the work program is based on a normal man

hour of 8am – 5pm every day except Saturdays and Sundays.

WORK DESCRIPTION – One of the activities in phase one is to secure planning

permission before the commencement of work, this permission is taken from

the local city council and this could take up to 8 weeks for planning application

to be processed and permission granted (Bristol city council, 2013), Maximum

of 60 days has been programmed to take care of that, though there could be

little delay at times, in this case the time allocated to other work items could be

reduced to give allowance for this delay.

Enabling works/site preparation - involves the creation or relocation of

different route to and from the site, erection of safety signage archaeological

investigation and ground investigation. Ecological works translocation of some

hedgerows to be retain, it also involves the establishment of on-site parking,

demolition of existing structure, installation of site hoarding which usually

separates construction areas public accessible areas, diversion of existing water,

gas, and electric and telecommunication services and installation of temporary

surface water management measurement measures

Construction of substructure/superstructure/M&E/external works 160 days

was allocated for the foundation, excavation below ground level and

construction of new foundation construction work for the hotel itself and every

other thing around it including the car park including mechanical and electrical

fittings and external works.

Fit out of building 25 days were allocated to fit out and this is the installations

of block wall party wall dry lining to internal wall, domestic mechanic and

electrical installations with fitted kitchen and bathroom.

Landscaping this is the establishment for green spaces within the assessment

There might be delay in some case due to planning permission not being granted

early enough to avoid this it is usually very good to add some extra days at the

inception and also to so as to cover up for this delay. One other thing that causes

delay is change of plan of the project which may affect design, time, cost and at

times causes waste of materials, to avoid this is to make financial allowance for

it when tendering for jobs. And success of the project depends also on how

efficient the project manager is, he needs to able to coordinate the contractors,

subcontractor and the stakeholder and at the same time satisfy the client.

One thing I forgot to mention during the inception stage is that you need a

consent from the highway authority to manage traffic, it may be long or short

term closure but in this case it is short term closure in order to deliver large item

of building plants and materials. To mitigate this construction materials should

be re-used and re-cycled wastages should be controlled, sensitive area should

be avoided, material delivery should be shared, in and out going traffic entering

the construction site should be closely monitored, vehicle should be arrange to

transport the construction workers, workers should be encourage to walk or

cycle.

6.0 PROCUREMENT STRATEGY

The aim of procurement strategy is how to achieve the best result combining

risk, quality and time and funding for a project and this solely depends on how

best a client can manage this. The type of procurement used depends on the

scope of work proposed, and how the risk is to be shared, how to place the

responsibilities for is to be designated, and how to coordinate and on what

criteria is the price going to be awarded. The choice of the form of contract

cannot be determined until the procurement method and type of contract has

been settled, (Lupton, et al, 2007).

The main reason for the choice of a procurement route is the need to obtain

overall value for money in the whole life of the building, this include

maintenance and operations. It is good to promote early involvement of all the

team members and to advise them on how to build the design of the ongoing

maintenance of the project, design, maintenance and construction should not

be separated from each other.

The UK government through the OGC (office of the government commerce) took

a numerous step to improve their performance the aim is to integrate the client,

contractor and the stakeholder and also the need to provide a consistent

measurement of value for money. UK government policy states that large

scheme for project worth £20 million and above should be procured by one of

the three procurement rate the PFI, Prime contracting and design and build (AEC

GUIDE 2007).

Traditional method of procurement is not suitable for this kind of project

because the Client have total control over the design through the help of the

consultant. The contractor does not have anything to do with design, time

required for the project to be completed is higher than any other procurement

method, the PFI (public finance initiative) is forming public private partnership

(PPP) by funding public infrastructure project with private capital and since

UWE/WDL is not a public project, the PFI procurement route is not suitable.

Prime contracting is equally not adequate for this kind of project due to its frame

work, prime contracting is commonly in cases where the project is time driven

and the client does not have any idea of how to go about it at the start of

construction, the client is not usually sure of the price at the start of the project.

I will recommend design and build for a project like this because it justifies value

for money and it is the most suitable procurement route when compared to

others. Employers has no direct control over the contractor’s detailed design.

The overall time for the project is shorter, the contract cost is known from the

outset, can only change design with condition and the most important one of

them all is that it’s a low risk procurement option for the client in respect to cost

and time though there could be a little risk relating to design and quality.

7.0 CONCLUSION

From all I have discussed it can be seen that the Radisson Blu hotel would be

ready for use before two years and the return of investment could be achieved

after four years of commissioning, as far as the project manager is able to

coordinate the contractors, subcontractor, supply chain and most especially all

the stakeholder at the same time satisfying the client with the appropriate

procurement route, to the preferred source of funding and with the risk

management option applied I think the project would be a success.

8.0 REFFERENCES

Abdel-khalek, et al (2011) Financing-Scheduling Optimization for Construction

Projects by using Genetic Algorithim World Academy of Science, Engineering

and Technology 59 2011. Available (online) from

http://www.waset.org/journals/wasset/v59-57.pdf. [Assessed 12 September

2013]

Adams, D. and Watkins, C. (2002) Greenfield, Brownfield and housing

development 1st Edition Oxford: Blackwell

Atrill, P. and McLaney, E. (2011) Accounting Finance for non-accounting

specialist 7th Ed. Essex: Pearson

Clamp, H., Cox, S., Lupton, S. (2007) Contract law: Which Contract Which

Procurement Method? 4thEdition Available (online) from

www.thends.com/topics/ContractsLaw/article/whichProcurementMethod.asp

[Assessed 19 September 2013]

Fewings P. (2013) Construction Project Management: An Integrated Approach

2nd Edition: Routledge

Hinchey, J. (2005) Ten Ways Owners can Mitigate or Avoid Risk in Construction

[online] www.kslaw.com/library/publication/hinchey_ten_ways.pdf [Assessed

15 September 2013]

Maylor, H. (2010) Project Management. 4th Edition Harlow: Pearson

Walker, D., Shen, Y (2002) Project Understanding Planning Flexibility of

Management Action and Construction Time Performance. Construction

Management and Economy, 20(1) pp34-38 [online] Routledgen