CE168P

CONSTRUCTION METHODS AND

PROJECT MANAGEMENT
 Procurement and
Contracts Management
PROCUREMENT AND CONTRACT MANAGEMENT
CONTRACT
A contract represents a mutually binding agreement that obligates
the seller to provide something of value (e.g., specified products,
services, or results) and obligates the buyer to provide monetary or
other valuable compensation. An agreement can be simple or complex,
and may reflect the simplicity or complexity of the deliverables or
required effort.

A procurement contract includes terms and conditions, and may

incorporate other items that the buyer specifies as to what the seller is to
perform or provide. It is the project management teams responsibility to
make certain that all procurements meet the specific needs of the
project while adhering to organizational procurement policies.
Depending upon the application area, a contract can also be called an
agreement, an understanding, a subcontract, or a purchase order.
PROCUREMENT AND CONTRACT MANAGEMENT
PROCUREMENT
Procurement means acquiring goods and/or services from an
outside source

Other terms include purchasing and outsourcing

PROCUREMENT AND CONTRACT MANAGEMENT
WHY OUTSOURCE?

To reduce both fixed and recurrent costs

To allow the client organization to focus on its core business

To access skills and technologies

To provide flexibility

To increase accountability
PROCUREMENT AND CONTRACT MANAGEMENT
PROCUREMENT PROCESS

Project Procurement Management Processes and Key Outputs

PROCUREMENT AND CONTRACT MANAGEMENT
PROCUREMENT PLANNING
determining what to procure and when

SOLICITATION PLANNING

documenting product requirements and identifying potential sources

SOLICITATION

obtaining quotations, bids, offers, or proposals as appropriate

PROCUREMENT AND CONTRACT MANAGEMENT
SOURCE SELECTION
choosing from among potential vendors

CONTRACT ADMINISTRATION

documenting product requirements and identifying potential sources

CONTRACT CLOSE-OUT

completion and settlement of the contract

PROCUREMENT PLANNING
Procurement Planning Tools and Techniques

Make-or-buy analysis: determining whether a particular

product or service should be made or performed inside the
organization or purchased from someone else. Often involves
financial analysis

Experts, both internal and external, can provide valuable

inputs in procurement decisions
MAKE-OR BUY EXAMPLE
Assume you can lease an item you need for a project for
$150/day. To purchase the item, the investment cost is
$1,000, and the daily cost would be another $50/day.

How long will it take for the lease cost to be the same as the
purchase cost?

If you need the item for 12 days, should you lease it or

purchase it?
TYPES OF CONTRACTS
FIXED-PRICE OR LUMP-SUM
involve a fixed total price for a well-defined product or
service

COST-REIMBURSABLE
involve payment to the seller for direct and indirect
costs

TIME AND MATERIAL CONTRACTS

hybrid of both fixed-price and cost-reimbursable, often
used by consultants
TYPES OF CONTRACTS
UNIT PRICE CONTRACTS
require the buyer to pay the seller a predetermined
amount per unit of service

COST PLUS INCENTIVE FEE (CPIF):

the buyer pays the seller for allowable performance
costs plus a predetermined fee and an incentive bonus

COST PLUS FIXED FEE (CPFF):

the buyer pays the seller for allowable performance
costs plus a fixed fee payment usually based on a percentage
of estimated costs
TYPES OF CONTRACTS
COST PLUS PERCENTAGE OF COSTS (CPPC)
the buyer pays the seller for allowable performance
costs plus a predetermined percentage based on total costs
STATEMENT OF WORK (SOW)

A statement of work is a description of the work required for

the procurement

Many contracts, or mutually binding agreements, include

SOWs

A good SOW gives bidders a better understanding of the

buyers expectations
STATEMENT OF WORK (SOW)
I. Scope of Work: Describe the work to be done to detail. Specify the hardware and
software involved and the exact nature of the work.
II. Location of Work: Describe where the work must be performed. Specify the
location of hardware and software and where the people must perform the work
III. Period of Performance: Specify when the work is expected to start and end,
working hours, number of hours that can be billed per week, where the work must
be performed, and related schedule information.
IV. Deliverables Schedule: List specific deliverables, describe them in detail, and
specify when they are due.
V. Applicable Standards: Specify any company or industry-specific standards that
are relevant to performing the work.
VI. Acceptance Criteria: Describe how the buyer organization will determine if the
work is acceptable.
VII. Special Requirements: Specify any special requirements such as hardware or
software certifications, minimum degree or experience level of personnel, travel
requirements, and so on.

Sample Statement of Work (SOW) Template

SOLICITATION PLANNING
Solicitation planning involves preparing several documents:

Request for Proposals: used to solicit proposals from

prospective sellers

Requests for Quotes: used to solicit quotes for well-defined

procurements

Invitations for bid or negotiation and initial contractor

responses are also part of solicitation planning
SOLICITATION
Solicitation involves obtaining proposals or bids from
prospective sellers

Organizations can advertise to procure goods and services in

several ways
- approaching the preferred vendor
- approaching several potential vendors
- advertising to anyone interested

A bidders conference can help clarify the buyers

expectations
SOURCE SELECTION
Source selection involves:
- evaluating bidders proposals
- choosing the best one
- negotiating the contract
- awarding the contract

It is helpful to prepare formal evaluation procedures for

selecting vendors

Buyers often create a short list

CONTRACT ADMINISTRATION
Contract administration ensures that the sellers performance
meets contractual requirements

Contracts are legal relationships, so it is important that legal

and contracting professionals be involved in writing and
administering contracts

Many project managers ignore contractual issues, which can

result in serious problems
CONTRACT CLOSE-OUT
Contract close-out includes
- product verification to determine if all work was
completed correctly and satisfactorily
- administrative activities to update records to reflect
final results
- archiving information for future use

Procurement audits identify lessons learned in the

procurement process
CONTRACT CLOSE-OUT
Contract close-out includes
- product verification to determine if all work was
completed correctly and satisfactorily
- administrative activities to update records to reflect
final results
- archiving information for future use

Procurement audits identify lessons learned in the

procurement process
Three Major Stages
of a Project
THREE MAJOR STAGES OF PROJECTS
Pre-construction stage is the planning stage a construction
project before the actual construction begins. These services
are often referred to as precon.

Construction stage is the stage where the actual project is

executed. This is the most critical stage of the project.

Postconstruction stage is the last stage of the project. This

is after the project has been handed over to the client. The
stage where all contracts to subcontractors are closed. Often
called as the postcon stage.
PRECONSTRUCTION STAGE
Being the planning stage of the project cycle, some of the
most important activities during preconstruction. Some of
these are:

Detailed Schedule and Cost Breakdown

Risk Management Plan
Materials and Methods Approval
Procurement of Services, Goods
Project Quality Plan
Value Engineering
Site Logistics Plan
Traffic Management Plan
RISK MANAGEMENT
PROJECT RISK

Project risk is an uncertain event or condition that, if it

occurs, has a positive or negative effect on one or more
project objectives such as scope, schedule, cost, and quality.

A risk may have one or more causes and, if it occurs, it

may have one or more impacts. A cause may be a given or
potential requirement, assumption, constraint, or condition
that creates the possibility of negative or positive outcomes.
PROJECT RISK MANAGEMENT
PROJECT RISK

A cause may be a given or potential requirement,

assumption, constraint, or condition that creates the
possibility of negative or positive outcomes.

For example, causes could include the requirement of an

environmental permit to do work, or having limited personnel
assigned to design the project. The risk is that the permitting
agency may take longer than planned to issue a permit; or, in
the case of an opportunity, additional development personnel
may become available who can participate in design, and
they can be assigned to the project. If either of these
uncertain events occurs, there may be an impact on the
project, scope, cost, schedule, quality, or performance.
PROJECT RISK MANAGEMENT
RISK MANAGEMENT PLAN

Risk Management Plan is the process of defining how

to conduct risk management activities for a project. The key
benefit of this process is it ensures that the degree, type, and
visibility of risk management are commensurate with both the
risks and the importance of the project to the organization.
The risk management plan is vital to communicate with and
obtain agreement and support from all stakeholders to ensure
the risk management process is supported and performed
effectively over the project life cycle.
PROJECT RISK MANAGEMENT
RISK MANAGEMENT PLAN

Risk Management Plan is the process of defining how

to conduct risk management activities for a project. The key
benefit of this process is it ensures that the degree, type, and
visibility of risk management are commensurate with both the
risks and the importance of the project to the organization.
The risk management plan is vital to communicate with and
obtain agreement and support from all stakeholders to ensure
the risk management process is supported and performed
effectively over the project life cycle.
PROJECT RISK MANAGEMENT
RISK MANAGEMENT PLAN

The risk management plan is a component of the

project management plan and describes how risk
management activities will be structured and performed. The
risk management plan includes the following:

Methodology - defines the approaches, tools, and data

sources that will be used to perform risk management on the
project

Roles and responsibilities - defines the lead, support, and

risk management team members for each type of activity in
the risk management plan, and clarifies their responsibilities
PROJECT RISK MANAGEMENT
RISK MANAGEMENT PLAN

Budgeting - Estimates funds needed, based on assigned

resources, for inclusion in the cost baseline and establishes
protocols for application of contingency and management
reserves.

Timing - Defines when and how often the risk management

processes will be performed throughout the project life cycle,
establishes protocols for application of schedule contingency
reserves, and establishes risk management activities for
inclusion in the project schedule.
PROJECT RISK MANAGEMENT
RISK MANAGEMENT PROCEDURE

Process - The project manager working with the project team

and project sponsors will ensure that risks are actively
identified, analyzed, and managed throughout the life of the
project. Risks will be identified as early as possible in the
project so as to minimize their impact.

Risk Identification - Risk identification will involve the project

team, appropriate stakeholders, and will include an evaluation
of environmental factors, organizational culture and the
project management plan including the project scope. Careful
attention will be given to the project deliverables,
assumptions, constraints, WBS, cost/effort estimates,
resource plan, and other key project documents.
PROJECT RISK MANAGEMENT
RISK MANAGEMENT PROCEDURE

Risk Identification - A Risk Management Log will be

generated and updated as needed.

Risk Analysis - All risks identified will be assessed to identify

the range of possible project outcomes. Qualification will be
used to determine which risks are the top risks to pursue and
respond to and which risks can be ignored.

Risk Analysis can be Qualitative or Quantitative.

PROJECT RISK MANAGEMENT
RISK MANAGEMENT PROCEDURE

Qualitative Risk Analysis - The probability and impact

of occurrence for each identified risk will be assessed by the
project manager, with input from the project team using the
following approach:

Probability
High Greater than 70% probability of occurrence
Medium Between 30% and 70% probability of occurrence
Low Below 30% probability of occurrence
PROJECT RISK MANAGEMENT
RISK MANAGEMENT PROCEDURE

Qualitative Risk Analysis

Impact
High Risk that has the potential to greatly impact project
cost, project schedule or performance
Medium Risk that has the potential to slightly impact project
cost, project schedule or performance
Low Risk that has relatively little impact on cost, schedule or
performance
PROJECT RISK MANAGEMENT
RISK MANAGEMENT PROCEDURE

Qualitative Risk Analysis

H
M
IMPACT

L M H

PROBABILITY
PROJECT RISK MANAGEMENT
RISK MANAGEMENT PROCEDURE

Quantitative Risk Analysis - analysis of risk events

that have been prioritized using the qualitative risk analysis
process and their affect on project activities will be estimated,
a numerical rating applied to each risk based on this analysis,
and then documented.
PROJECT RISK MANAGEMENT
RISK MANAGEMENT PROCEDURE

Risk Response Planning there should an appropriate

approach to each risk identified. Approaches can be defined
as any of the following:

Avoid eliminate the threat by eliminating the cause.

Mitigate identify ways to reduce the probability or the
impact of the risk.
Accept nothing will be done .
Transfer make another party responsible for the risk (buy
insurance, outsourcing, etc.)

Or we may provide specific control measures for each

identified risk.
PROJECT RISK MANAGEMENT
RISK MANAGEMENT PROCEDURE

Risk Response Planning

RISK
CONTROL MEASURES & LEVEL
RISK DESCRIPTION RISK
PERFORMANCE
P I R

(1)Shoring installed to prevent soil

movement which may affect adjacent
Adjacent Structures Soil Collapse, Death structures (2) Signages in place L H
(3)Fence provided to prevent
unauthorized entry to the site

Enclosing the area with precautionary

Open trenches / pits and
Accident / Incident, Injury warnings (barricades/bollards, caution M H
excavations
tapes and signages)
Pre-Construction
Planning
PRE-CONSTRUCTION PLANNING
ACTIVITY DEFINITION
This is the process of identifying the specific actions to be
performed to produce the project deliverables. It is the process of
dividing a project into smaller entities, called activities or tasks. An
activity is a unique, definable element of work.

WORK BREAKDOWN STRUCTURE

The WBS is defined as a task-oriented, detailed breakdown of
activities that organizes, defines, and graphically displays the total
work to be accomplished to achieve the final objectives of a project.
The WBS breaks the project down into progressively more detailed
levels. Each descending level represents an increasingly detailed
definition of a project component.

Schedulers and estimators can use the standard breakdown of the CSI
(Construction Specifications Institute) MasterFormat 1995 (divided into 16
divisions) or MasterFormat 2004 (divided into 50 divisions).
PRE-CONSTRUCTION PLANNING
16 CSI DIVISION

Division 1:
Division 2: Division 3: Division 4:
General
Site Construction Concrete Masonry
Requirements

Division 7:
Division 6: Division 8:
Division 5: Thermal and
Wood and Doors and
Metals Moisture
Plastics Windows
Protection

Division 9: Division 10: Division 11: Division 12:

Finishes Specialties Equipment Furnishings

Division 13: Division 14:

Division 15: Division 16:
Special Conveying
Mechanical Electrical
Construction Systems
PRE-CONSTRUCTION PLANNING
Factors considered in activity definition for better control

o Nature of the work/Homogeneity: If the work involves two different

materials and/or measured by different units, it must be divided into
two different activities.

o Location/floor: Activities falling in different locations must be

separated.

o Size/duration: For large activities, it is better to divide the activities

into small portions. For example, large excavation can be divided into
smaller activities by grid or depth. For linear excavation,this can be
divided by stations or segments. This helps in measuring work
progress while execution.
PRE-CONSTRUCTION PLANNING
Factors considered in activity definition for better control

o Timing/chronology: Sometimes a portion of the work maybe

delayed purposely by the contractor. For example, a portion of the
slab on grade (SOG) for a building maybe delayed till the end of the
project because the area is being used as storage. Such portion must
be considered as an activity by itself.

o Responsibility: Schedulers must break down pieces of work that are

done by different parties (subcontractors). In case of schedule
variance, it is important to indicate who is responsible for the variance.

o Phase: This can be a division made by the designer based on certain

criteria such as timing, location, or other aspects.
PRE-CONSTRUCTION PLANNING
SAMPLE FUNCTIONAL BREAKDOWN STRUCTURE
PRE-CONSTRUCTION PLANNING
SAMPLE WORK BREAKDOWN STRUCTURE FOR CONSTRUCTION PROJECT
PRE-CONSTRUCTION PLANNING
CALENDARS
In most construction projects, durations are calculated in
workdays, which usually, but not always, follow a 5-day workweek. In
some cases, the project, or only certain crews, follow a 6- or 7-day
workweek. In some other countries, a 6-day workweek may be the
norm. In others, such as those in the Middle East, a workweek starts
on Saturday or Sunday, not Monday. The scheduler must be aware of
such calendars.

The scheduler must also account for nonworkdays, such as

holidays, rain (weather) days, shutdowns, and the like. The contract
usually specifies official holidays and the allowed number of rain days.
Rain days represent the number of days (per month) that work on the
project is expected to be suspended because of weather delays. This
prediction is usually calculated on the basis of past meteorological
data for the location. It does not include unusual weather and
disasters. Delays due to unusual weather or disasters are potential for
claims.
PRE-CONSTRUCTION PLANNING
SEQUENCING

Any schedule produced by a planner must show the activities

involved in a realistic sequence within the contractually required
timings based on the resources available to the contractor.

Sequencing is a thought process, whereby the planner

considers an appropriate sequence of operations, examining the
construction methods, choice of plant, quantities of work and risk;
estimates the activity duration and then produces the schedule
(Cooke and Williams, 2009).
PRE-CONSTRUCTION PLANNING
SEQUENCING
Review the drawings
Identify the sequence of Identify the main activities
operations Produce a rough schedule
Look for the stages of construction
Cranage
Materials handling
Consider construction methods Hoisting Area and Equipment Access
Scaffolding
Temporary Works
Consider resource availability
subcontractors
Determine the activity durations plant
labor
location
List activities
Use summary activities as headings
Schedule bar chart Enter durations
Link activities with logic.

Complete the schedule

PRE-CONSTRUCTION PLANNING
LOGICAL RELATIONSHIP
A logical relationship exists between two activities when the
start of one activity (or finish) depends physically on the finish (or start)
of another activity. This is also called Hard Logic.

RESOURCE CONSTRAINT
A resource constraint (or restriction) is when you can
theoretically do two tasks at the same time, but you schedule one as a
predecessor of the other because of resource (labor, equipment)
limitation. This is sometimes called Soft Logic.
PRE-CONSTRUCTION PLANNING
PRIMAVERA (P6) CONSTRAINTS

Project Constraints Projects Start Date and Projects Contractual

Finish Date

Activity Constraints These can be used when an activity is subject

to a (mostly subjective) constraint such as approval of an owner or a
government agency, funding availability, or even workspace
availability. Typically, a good project schedule should only have a few
constraints at most.
Most Common Types of Activity Constraints
o Start On or After (Early Start)
o Finish On or After (Late Finish)
PRE-CONSTRUCTION PLANNING
NETWORK
A network is a logical and chronological graphic
representation of the activities (and events) composing a project.

Two Types of Network Diagrams

o Arrow Networks
o Node Networks
PRE-CONSTRUCTION PLANNING
Two Types of Network Diagrams
o Arrow Networks
Also called arrow diagramming method (ADM), activity on
arrow (AOA) networks, or the I-J method.

Activities are represented by arrows. Each arrow connects two nodes

(the from node and the to node which represent events or milestones.

o Node Networks
Also called activity on node (AON) networks.

A
E

Activities are represented by nodes. The nodes are connected by arrows

that represent logical relationships. For aesthetic reasons only, a
network can start and end with nodes represented by events (Project
Start and Ptoject Finish) displayed as diamond-shaped nodes.
PRE-CONSTRUCTION PLANNING
PRECEDENCE NETWORKS
Precedence networks are node networks that allow for the use
of four types of relationships: finish to start (FS), start to start (SS),
finish to finish (FF), and start to finish (SF).

Lags and Leads

o A lag is defined as a minimum waiting period between the
finish (or start) ofan activity and the start (or finish) of its
successor.
o lead simply means a negative lag
PRE-CONSTRUCTION PLANNING
Four Types of Relationships
o Finish-to-start (FS) relationship: The most common type of
relationship is the FS relationship. Many examples of this type exist,
such as the following: The concrete cannot be placed (poured) until
the formwork has been built. The doors cannot be hung until door
frames have been installed.
o Start-to-start (SS) relationship: The SS relationship is common and
extremely useful. Examples of this type are as follows: Excavation for
the foundation cannot start until clearing and grubbing begins (usually
with a certain lag; i.e., a certain percentage is finished). Laying felt on
the roof cannot start until sheathing has started (also usually with a
lag).
o Finish-to-finish (FF) relationship: The FF relationship is also
common and useful. Examples of this type are as follows:
Landscaping cannot finish until the driveway is finished. Backfilling a
trench cannot finish until the pipe in the trench has been laid.
o Start-to-finish (SF) relationship: The SF relationship is uncommon
and almost nonexistent in construction projects.
PRE-CONSTRUCTION PLANNING
CRITICAL PATH METHOD
The critical path method (CPM) is an algorithm for
scheduling a set of project activities. It is an important tool for
effective project management.

The essential technique for using CPM is to construct a model of

the project that includes the following:
o A list of all required activities (typically categorized within a WBS),
o The duration that each activity will take to completion, and
o The dependencies between the activities.

Using these values, CPM calculates the longest path of

planned activities to the end of the project, and the earliest and latest
that each activity can start and finish without making the project longer.
This process determines which activities are "critical and which have
"total float.
PRE-CONSTRUCTION PLANNING
CRITICAL PATH METHOD
The critical path method (CPM) is an algorithm for
scheduling a set of project activities. It is an important tool for
effective project management.

Critical
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the project that includes the following:
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