chapter 2 construction relations - u of s … 2 8-9-07 student-1.pdfthe nature & scope of the...

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September 2007

CE 420

Chapter 2

CONSTRUCTION RELATIONS

62.1 INTRODUCTION2.1 INTRODUCTION

2.2 OVERVIEW AND DEFINITIONS

2.3 MAJOR PLAYERS IN THE CONSTRUCTION INDUSTRY

2.4 THE BUILDING PROCESS

2.5 CONSTRUCTION INDUSTRY

2.6 ENGINEERING PROFESSION

2.7 CONSTRUCTION ORGANIZATION

2.8 COMPANY ORGANIZATION AND STRUCTURE

2.9 COMPANY OPERATIONAL PHILOSOPHIES

72.2 OVERVIEW AND DEFINITIONS2.2 OVERVIEW and DEFINITIONS

CONSTRUCTION -The creative effort that converts the four M’s of construction -, , , and into a

constructed facility.

CONSTRUCTION MANAGEMENT - Comprises the planning, initiating, and direction of the construction process required in a specific project.

THE NATURE & SCOPE OF THE CONSTRUCTION MANAGEMENT EFFORT WILL DEPEND UPON:

1) 2)3)4) 5)

82.3 MAJOR PLAYERS IN THE CONSTRUCTION INDUSTRY2.3 MAJOR PLAYERS IN THE CONSTRUCTION INDUSTRY

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i) BOTH HAVE LOTS OF PROBLEMS

ii) USUALLY MOST PRIVATE OWNERS BUILD ONLY ONCE.

iii) WANT A FIRM PRICE

iv) PUBLIC OWNERS BENEFIT FROM BETTER ORGANIZATION IN THE FORM OF STATUTES AND REGULATIONS.

2.3.1 OWNER

A) OR B)


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2.3.2 GENERAL CONTRACTORi) BEST DESCRIBED AS A “RESOURCE MANAGER ”

ii) DECIDES WHAT PORTION OF THE WORK WILL BE SUB-CONTRACTED OUT.iii) MONITORS THE WORK OF THE SUBSiv) USUALLY PERFORMS 10 - 70% OF THE WORK.v) JOB BROKERS ???????

MOTIVATION

OR


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2.3.3 ARCHITECT/ENGINEER [CONSULTANT]

PROVIDES THE OWNER AN ESTIMATE OF THE TOTAL COST BASED ON:

i) ii)iii)

THE OWNERS GENERALLY TAKE THIS $ FIGURE TO MEAN “FIRM PRICE”, WHICH CAN CAUSE CONSIDERABLE PROBLEMS, ESPECIALLY IF THE COST IS WELL OVER THE ESTIMATE.

IF THIS IS THE CASE, THE CONSUTLANT IS USUALLY REQUIRED TO MODIFY THE DESIGN AT HIS/HER OWN COST.

A/E’S ARE BECOMING RELUCTANT TO SUPERVISE PROJECTS BECAUSE OF LIABILITY PROBLEMS.


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2.3.4 REGULATORY AGENCIES

EVALUATE PROJECT TO ENSURE THE SAFETY AND LONG-TERM BENFIT TO SOCIETY.

i) SASKATCHEWAN ENVIRONMENT (SERM)ii) iii) FISHERIES AND OCEANSiv)


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2.4.1 THE LINEAR NATURE OF THE BUILDING PROCESS

2.4 THE BUILDING PROCESSConstruction is Engineering in Action


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2.4.2 TRADITIONAL CONSTRUCTION PROCESS


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2.4.3 DESIGN BUILD PROCESS

THE CONSTRUCTION PROCESS WHERE A CONTRACTOR/ENGINEER IS CHOSEN TO DESIGN AND BUILD A FACILITY.

THIS MAY ALSO INCLUDE START-UP AND INITIAL OPERATION SOMETIMES REFERRED TO AS A TURN-KEY PROJECT RESULTS IN A SIGNIFICANT SHIFT OF RESPONSIBILITY TO THE DESIGN/BUILD FIRM.

CANADIAN DESIGN-BUILD INSTITUTE (CDBI)

THE CANADIAN DESIGN-BUILD INSTITUTE IS A SPECIAL COMMITTEE OF THE CANADIAN CONSTRUCTION ASSOCIATION. ESTABLISHED IN FEBRUARY 1998,THE NEW CDBI IS THE NATIONAL VOICE OF CANADIAN DESIGN-BUILD PRACTITIONERS.[www.cdbi.org]


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DOC 14 - 2000 DESIGN-BUILD STIPULATED PRICE CONTRACT

Standard prime contract between Owner and Design-Builder where the Design-Builder performs Design Services and Construction under one agreement, for a single, pre-determined stipulated or fixed price.

DESIGN-BUILD DOCUMENTS

DOC 15 - 2000 DESIGN-BUILDER/CONSULTANT CONTRACT

Standard contract between Design-Builder and Consultant to perform the design services required under a design-build contract between Owner and Design-Builder.

To obtain these two documents please visit the CCDC web site at www.ccdc.org for a full listing of document outlets, or call your local association.


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2.4.4 CM PROCESS

CONSTRUCTION MANAGEMENT IS THE TERM USED TO DESCRIBE THE COMPOSITE OF ALL MODERN MANAGEMENT METHODOLOGIES HAVING AS THEIR OBJECTIVES THE CONTROL OF TIME, COST, AND QUALITY IN THE DESIGN AND CONSTRUCTION OF A NEW FACILITY.

PROJECT MANAGEMENT IS USED TO EMPHASIZE THAT THE CONCEPTUAL PLANNING, PRE-DESIGN, AND DESIGN PHASES MAY BE OF EQUAL IMPORTANCE TO THE CONSTRUCTION PROCESS.THE TERM CM INCORPORATES BOTH OF THESE PHILOSOPHIES OF MANAGEMENT.

CM’S ROLE IS TO:

I) ADVISE THE DESIGNER ON FEASIBILITY.II) III) CM’S SOMETIMES PUT TOGETHER THE FINANCIAL PACKAGE -BECHTEL (AT PRESENT).


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DEFINITION OF CMConstruction management/project management does not concern itself with the direction of work within a contract or a subcontract but rather deals with the planning for and manipulation of those contracts.

Thus, CM does not seek to eliminate the general contractor or to administer a series of separate contracts for a fee. It does focus on the fact that the greatest savings in ,

, and on a construction project can be achieved during the concept and design phase. Nor is CM solely a fast-track system, although the latter can indeed be an appropriate part of the CM process. CM DOES concern itself with a service to the owner seeking to control time, and during the entire project, and the construction manager should be selected to function concurrently with or preceding the planning and design phase of the work and continue his efforts throughout all the subsequent phase or design and construction. The construction manager, of course, may perform other services ancillary to the main objectives stated above, such as scheduling and CPM program maintenance, management of the procurement effort, administration of owner or tenant move-in, coordinator of site and off-site operations, furnishing of operating or maintenance manuals, and other serves as called for by the owner.

A definition of construction management may be stated as that group of management activities over an above normal architectural and engineering services related to a construction program, carried out during the conceptual planning. Pre-design, design and construction phases, that contributes to the control of time, cost, and quality in the construction of a new facility.


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2.5.1 CANADIAN CONSTRUCTION ASSOCIATION[http://www.cca-acc.com/home.html]

THE CCA IS BEST DESCRIBED AS THE NATIONAL VOICE OF CANADA’S LARGEST INDUSTRY

CCA is a large multi-disciplinary organization representing over 20,000 General Contractors, Specialty Contractors, Heavy Contractors, Road Builders, Industrial Contractors, Manufacturers and Suppliers.


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2.5.1 CANADIAN CONSTRUCTION ASSOCIATION (Con’t)Construction Industry Economic Outlook- 2001 EXAMPLE

Volume/Output

The total construction expenditure in Canada in 1999 as measured by Statistics Canada, which includes both residential and non-residential construction, was approximately $100.9 billion. The nominal gross output in 2001, which is defined as total production of an industry (unadjusted for inflation and including input costs such as labour and materials) is expected to rise by 14% to $139.2 billion (Source: Informetrica).

In 2001, construction labour force is expected to grow by 6.3%, to reach 894,000 people, an indication of high labour demands spilling over from 2000. The tight labour markets have resulted in the need for companies to hire additional labour at greater cost to meet demand. With the combined effects of an increased labour force and increased salaries, input costs rose, even though year-over-year production (measured by construction GDP) actually shrank.


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2000 construction investment figures compare to 1999 by province:

2001 2000 1999

BC 16.4 Billion $ 16.6 Billion 14.9Alberta 23.2 $ 23.8 19.9Saskatchewan 3.9 $ 3.6 3.1Manitoba 4.3 $ 2.8 2.6Ontario $ 33.9 32.5Quebec $ 20.5 19.0New Brunswick $ 1.7 1.7Nova Scotia $ 2.3 3.0PEI $ 0.3 0.3Newfoundland $ 2.4 2.5Territories $ 0.9 0.7Canada $ 108.7 Billion $ 100 Billion

$123 BILLION, 2003


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CCA Briefs & Reports

December 10, 2001 - 2001 Federal Budget - A Construction-Related Analysis By The Canadian Construction Association

October 30, 2001 - CCA Submission To The House of Commons Standing Committee on Industry, Science and Technology

October 4, 2001 - CCA Presents to the House of Commons Finance Committee


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The Gold Seal Program

CCA has taken a leadership role in developing a national certification program for Project Managers, Superintendents and Estimators within the disciplines of general, mechanical and electrical contracting. The Association is also exploring an expansion of the program to include specialty trades. This program recognizes a minimum standard of proficiency in each managerial occupation based on education, experience and examination. Gold Seal has already become a huge success and has contributed to a greater level of professionalism, mobility and pride for the industry.


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2.5.2 SASKATCHEWAN CONSTRUCTION ASSOCIATION

CREATED TO

Saskatoon Construction Association,532 - 2nd. Ave. North, Saskatoon.Phone: 653-1771


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Typical Project Listing Saskatoon Construction AssociationUpdated on October 1, 2001 1:00 PM.

PROJECT NAME, LOCATION, and CLOSING DATEHangar 6 Truss Repairs & Renos, 15 Wing Moose Jaw OCT 04Washrooms Upgrade, Government of Canada Building, Saskatoon OCT 11Fire Alarm & Sprinkler System Upgrade, Regina RCMP Training Academy OCT 10 Mechanical, Electrical & Elevator Upgrades, Saskatchewan Legislative Building, ReginaCree Nations Treatment Haven: Ahtahkakoop, Big River, Pelican Lake, Witchekan LakeFirst Nations OCT 10Superstore/Extra Foods Gas Bar Expansions: Calgary, Edmonton, Saskatoon OCT 09 Garden Market IGA, Moose Jaw OCT 15Water & Sewer Mains, Standing Buffalo Dakota First Nation OCT 10Modular Classrooms: Mother Teresa & St. James Schools, Saskatoon OCT 05Water Supply Pipeline Well #14, Yorkton OCT 10 Capital Improvement Project, Tender Package #3, Regina OCT 05Casino & Parkade, Moose Jaw OCT 04


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Regulation of the Engineering and Geoscience Professions in Saskatchewan

Canadian EngineeringQualifications Board

(CEQB)

Canadian EngineeringAccreditation Board

(CEAB)

Other CCPECommittees

Canadian Councilof Professional Engineers

(CCPE)

Provincial and TerritorialAssociations

CCPE ORGANIZATIONAL CHART

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APEGS ORGANIZATIONAL CHART

APEGS STAFF

Committees

GovernanceBoard

Committees

Image and IdentityBoard

Committees

IssuesBoard

Committees

EducationBoard

Council

Members

Society


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2.7 CONSTRUCTION ORGANIZATION2.7.1 INTRODUCTON

The manner in which a construction company is organized has a significant impact on its ability to succeed and grow. Important organizational considerations are:

1) Type of business formation

2) Internal organization and structure

3) Range of Activities and Personnel, and

4) Operational Philosophy


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2.7.2 BUSINESS FORMATION

There are a number of different business arrangements which can be set up to manage the operations of a construction company, or for a specific project.

The basic formation is:

1]2]3]4]


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* Income taxed at an individual rate

Advantages

1)

2)

2.7.2.1 Sole Proprietorship

Disadvantages

1) Unlimited liability

A) Financial - bankruptcy may represent a way out

B) Criminal - No escape!


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2.7.2.2 Partnerships

Partnerships - based on trust

Tends to suffer when money is involved

Advantages1)2) Share Liability - May depend on the type of partnership

A) General - Joint and Several LiabilityB) Limited - (Value of shares or just for one of the general

partners)3) Limited partners not usually required to be listed4) Profit shared by a percentage of “ownership”5) Increased owner talent and credit standing

A dispute clause/ arbitration should be listed in the partnership agreement; also put something in to facilitate a smooth termination of the partnership.


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2.7.2.3 Corporations

Organization1) Common purpose – Profit and other goals2) Communication - very important3) Cooperation among officers to reach objective4) Ability to advance or grow with company - [family

company situation]

Disadvantages1) Must file a number of documents2) Government restrictions3) Tax approx. _______________ -

Sask.

Profit DistributionProfit -retained earning

-dividends-tax

Advantages1)2)3)


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2.7.2.4 Joint Ventures and Consortiums

Reason For Formation

-Need to pool-

-

-Other risk

-Political judgment- marketing standpoint

- Minority partners - i.e.: offshore Lester B. Pearson International Airport - Toronto


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Organization in terms of operational functions can be defined as:

“The process of determining what individual job positions are required, defining the responsibilities of each such position, and establishing the relationship of one position with another insofar as carrying out of those responsibilities is concerned.” (Clough, 1981).

Before an organizational chart can be set up it is necessary to examine the different which will be performed by the company, and what are the assets and liability of the employees presently in the company.

This does not mean that some of the work cannot be contracted out, i.e.: accounting; or that new personnel won’t be hired to fill newly created positions. It means that the organizational chart should reflect the personality of the company (what it does and the people who are familiar with its operation).


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2.8.1 Philosophy of Setting up an Organization

In small organizations two or three people may all be at the topCommon but has some inherent disadvantages

The key to setting up an organization is looking at the people you have, similarly you often have to look at the traditional responsibilities certain functions have reported to. Some of these functions can be located under more than one particular area.

The preliminary functions within a company include:

1) 2)3)


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2.8.1.3 SupportStaff function – Responsible for:

1) Estimating2) Scheduling3) Soils Investigation

2.8.1.1 OperationsLine function – Responsible for:A] Basic PlanB] Supervision - Use of Resources

LaborEquipmentMaterial

C] SafetyD] Engineering Technology

2.8.1.2 AdministrationStaff function – Responsible for:

1) Payroll2) Taxes3) Union4) Personnel


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The number of people one individual can effectively control is 3 - 5

In setting up a structure for an organization you must keep in mind the concept of function mapping, and placing over that, the ability of individuals to handle those jobs.

We must also keep in mind that this organization must change as the volume of work grows.

Thus, the first thing to change or grow is the operations section.

During this time additional support in the administration section may be contracted out.

2.8.2 Span of Control


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Responsible for:1)2) Interaction with policy group & public3) Must be able to delegate authority

2.8.4 The Policy Group

2.8.3 President

Responsible for:1)2) Short term goals used to monitor the companies progress

towards its long term goals.


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2.8.5 Typical Organizational ChartHome Office

BOARD OF DIRECTORS

PRESIDENT

VICE-PRESIDENT

OPERATIONS

HEAVY ENGIN.

CONSTR DIVISION

BUILDING CONSTR DIVISION

PROJECT ENGINEER

PURCHASING

ENGINEERING

SCHEDULE & ESTIMATE

DESIGN

STAFF SPECIALISTS

COMPUTING SERVICES

ADMINISTRATION

PERSONNEL STAFF SPECIALISTS


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2.8.6 Typical Organizational ChartField Organization

ADMINISTRATIVE

RECORDS OFFICE COSTPROJECTIONS

AIDE

FUNCTION

SHOPFOREMAN

PROJECTENGINEER

WORKSUPERINTENDENT

PROJECTMANAGER

SURVEYCREWS

FIELDENGIN.

CONSTR.MONITOR.

CAMPOPERATIONS

WAREHOUSING

PURCHASING FIELDOPS.

SUB-CONTR.

SUPERVIS.SAFETY


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2.9 COMPANY OPERATIONAL PHILOSOPHIES2.9.1 Expansion

It is generally recognized that maintaining the same level or volume of work is dangerous in the long run. Thus most companies must expand to ensure their continued growth and security

HorizontalMoving into other areas (diversification)Maintaining the same level in the industry

VerticalMoving into other areas of your present work, such as taking over the work traditionally handled by the subcontractors (down), or by becoming a developer and handling the overall development (up).


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2.9.2 Centralized and Decentralized Control

Centralized

•Strong home office - i.e.: (Bechtel)

Decentralized

•Send out a team and almost form a new company, especially for that project.•Tremendous amount of authority at the job site.•Advantages in dealing with the head office.•May be no employment after the project is completed.


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A combination of the two, with allegiance to the home office.

Effectively you have two bases and have many advantages (i.e.: pools of specialized manpower which can be sent to projects).

2.9.3 Matrix

HOME OFFICE

MATRIX

OPS QA

PROJECT

PROJECT MANAGER

QA


chapter 2 construction relations - u of s … 2 8-9-07 student-1.pdfthe nature & scope of the...

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