Construction Industry of Pakistan

Challenges and Opportunities –

Way forward

Engr. Dr. Attaullah Shah

Bio details of the Speaker

• Engr.Dr. Attaullah Shah – Director ( Planning and Projects AIOU)

» pdaiou@yahoo.com. pd@aiou.edu.pk, www.drshahpak.weebly.com» +92-333-5729809, +92-51-9057212

• Qualification • PhD Civil Engineering ,M.Phil Eco ,MSc Structural Engg

• MBA, MA Eco, MSc Envir Design,BSc Civil Engg (Gold Medal), Post Grad Dip Comp (Gold Medal)

• 25 Years Experience of Teaching research and practice in Civil Engineering and Construction Management

• :Research Publications in refereed journals and conferences: – 26 Journals publications+40 Conference publications

• Areas of interests » Construction project Management

» Structural Engineering

» Sustainable built Environment

3

Built Environment

• Of the global energy consumption, 75% occurs in cities and 80% of Green House Gas (GHG) emissions emanate from cities. Indeed, climate change and urbanization are inseparable. And if cities are part of the problem, they are therefore inevitably part of the solution.

Some Quotes on Project Management • Trying to manage a project without project management is like

trying to play a football game without a game plan - K. Tate• Plans are only good intentions unless they immediately

degenerate into hard work - Peter Drucker

• Whatever we do must be in accord with human nature. We cannot drive people; we must direct their development... the general policy of the past has been to drive; but the era of force must give way to the era of knowledge, and the policy of the future will be to teach and lead, to the advantage of all concerned - Henry L. Gantt

• True motivation comes from achievement, personal development, job satisfaction, and recognition. F. Herzberg

• A project is complete when it starts working for you, rather than you working for it.

• The conventional definition of management is getting work done through people, but real management is developing people through work.”

• Good management is the art of making problems so interesting and their solutions so constructive that everyone wants to get to work and deal with them.”

• Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes.”

• good manager is a man who isn't worried about his own career but rather the careers of those who work for him.”

The tale of construction, in one way or the other, begins with the beginning of human beings. Development of infrastructure such as roads, water supply, power supply, sanitation etc have always been considered vital for leading a decent standard of life. The Express Tribune

Size of Global Construction Industry (2005)

Global Construction spending 2011-12

Role of Construction sector in Global Economy

• Annual global construction output U.S $ 4.6 trillion (2005)

• Output is heavily concentrated (77 per cent) in the high income countries (Western Europe, North America, Japan and Australasia).

• The high-income countries produce 77 per cent of global construction output with 26 per cent of total employment.

• The rest of the world (comprising low- and middle-income countries) produces only 23 per cent of output but has 74 per cent of employment ……….

• The Labor productivity in the developing countries is low…… What can be the major reasons in your mind?

Global Construction market in 2011-12

• Construction spending growth has stalled and 2011 was the fourth consecutive year with little or no growth (since 2007) .

• Overall, world construction spending grew by just 0.5% to $4.6 trillion and is still below the levels achieved in 2007.

• However, on a positive note, 2011 saw the first increases in world construction spending since the start of the recession.

• Asia and Latin America were the fastest growing regions in 2011 by a wide margin.

• For the second year running China was the largest market in 2011, and is forecast to be the fastest growing market in 2012-13 and onwards

Global Construction Market 2012-13

China-41% of Asia Pacific market twice the Japanese construction Market

Europe-RussiaPoland Russia and Turkey the leaders in Europe

Global Construction Industry forecast.

Share of spending by region: 2015-20

Global Construction Industry forecast-Cont’d.

• In the short term: Degree of stagnation • More sustained growth not expected until 2015 • Developing countries are expected to lead in 2012-13. • Asian market to develop from 31% to 46%• The strongest construction spending growth will again be in China, followed

by India and Indonesia• Reconstruction in Japan and New Zealand will provide temporary stimulus • In Americas, Brazil and Panama expected high growth rate

Middle East

Saudi Arabia, UAE and Qatar for 2020 FIFA World Cup

The future outlook • For developing “megacities,” construction in emerging markets

is expected to double within a decade and will become a $6.7 trillion business by 2020

• Access to capital, for both public and private sponsors, is becoming more challenging.

• They will need to promote and finance infrastructure and/or building alliances with investment banks and infrastructure funds.

• Already, Chinese companies, leveraging huge internal demand, are becoming a force to be reckoned with in global construction markets.

• Construction companies based in Brazil and India may soon follow suit and join the new class of powerful emerging market multinationals

Construction industry segments• Two very broad categories: - General building construction

- Engineered construction.• General Building Construction• Include residential, commercial, institutional and industrial

buildings. • Residential construction produces buildings for human habitation,

including single-family dwellings, condominiums, multifamily townhouses, flats and apartments and high-rise apartment buildings.

• Commercial construction includes retail and wholesale stores, markets and shops, shopping centers, office buildings, warehouses and small manufacturing facilities.

• Institutional construction are medical clinics and hospitals, schools and universities, recreational centers and athletic stadiums, governmental buildings and houses of worship and other religious buildings.

• Industrial construction is a special segment of the industry that develops large-scale projects with a high degree of technical complexity.

• Such endeavours result in facilities that manufacture and process products; examples include steel mills, electric power-generating plants, petroleum refineries, petrochemical

processing plants

Construction industry segments

• Engineered construction• This broad category of construction, sometimes called

engineering construction, is characterized by designs prepared by engineers rather than architects, the provision of facilities usually related to the public infrastructure and thus owned by public-sector entities and funded through bonds, rates or taxes and a high degree of mechanization and the use of much heavy equipment and plant in the construction process.

• Examples: PSDP mega projects in Pakistan • Two common subcategories of engineered construction are:

-Highway construction and

- Heavy construction.

Impact of Construction on National Economies

THE CONSTRUCTION INDUSTRY

• Construction Contractors– Companies and individuals engaged in the

business of construction are commonly referred to as construction contractors because they operate under a contract arrangement with the owner.

THE CONSTRUCTION INDUSTRY

FIGURE 1-1. Construction of St. Louis Gateway Arch. (Copyright © American Institute of Steel Construction, Inc. Reprinted with permission. All rights reserved.)

THE CONSTRUCTION INDUSTRY

• Construction Industry Divisions– The major divisions

of the construction industry consist of building construction (also called “vertical construction”) and heavy construction (also called “horizontal construction”). FIGURE 1-2. Distribution of U.S. new

construction volume. (Source: Bureau of the Census)

THE CONSTRUCTION INDUSTRY

FIGURE 1-3. Modern building construction project.

THE CONSTRUCTION INDUSTRY

FIGURE 1-4. Heavy construction project—Kennedy Space Center launch complex. (U.S. Air Force photograph)

THE CONSTRUCTION PROCESS

• Project Development and Contract Procedures– The major steps in the construction contracting

process include bid solicitation, bid preparation, bid submission, contract award, and contract administration.

Construction Project Lifecycle.

• Pre-Project Phase: • An idea or perceived need or desire to improve• Project delivery system to be used• Type of contract to be used with the contractor.• The owner may engage a professional engineer, an

architect or a project manager during this pre-project phase to advise on these important decisions.

• Planning and design phase• It is convenient to divide this phase into three stages.

– Stage-I: The goal of the first stage is to define the project’s objectives, consider alternative ways to attain those objectives

– Stage-II: Develop schematic diagrams showing the relationships among the various project components,

– Stage-III: Detailed design of the structural, electrical and other systems

Construction Project Lifecycle.

• Contractor selection phase– Client: Procurement and tendering methods to be

– Contractor: • Study of various methods and techniques/equipment by the

to workout the schedule of the project and all activities and

• Second, a priced proposal will be prepared, including the direct costs of labour, materials, plant and subcontractors, various overhead charges and a sufficient added amount for profit.

– The last step in this phase is the submittal, opening and evaluation of tenders, the selection of the successful contractor and the finalization of the construction contract.

• Project mobilization phase– Various bonds, licenses and insurances must be secured ( Can

you name some)

– A detailed programme for the construction activities must be prepared.

– The cost estimate must be converted to a project budget and the system for tracking actual project costs must be established.

– The worksite must be organized, with provisions for temporary buildings and services, access and delivery, storage areas and site security.

– The process of obtaining materials and equipment to be incorporated into the project must be initiated and arrangements for labor, the other essential resource, must be organized.

– With the completion of this phase, it is finally time to begin the actual field construction.

– Project operations phase– Three majors areas are looked into by the contractors

• Monitoring and control ( Five aspects ) – Time Management

– Cost management

– Quality Management

– Work safety and

– Environmental issues

• Resource Management • Documentation and Communication

– Project closeout and termination phase:• Finally, as the project nears completion, a number of special activities

must take place before the contractor’s responsibilities can be considered complete.

• Tastings, final verification and acceptance etc

• closing the construction office and terminating the staff’s employment.

THE CONSTRUCTION PROCESS

• For major projects, steps in the project development process include the following:– Recognizing the need for the project.– Determining the technical and financial

feasibility of the project.– Preparing detailed plans, specifications, and

cost estimates for the project.– Obtaining approval from regulatory agencies.

THE CONSTRUCTION PROCESS

• How Construction Is Accomplished– Construction employing an owner construction

force.– Owner management of construction.– Construction by a general contractor.– Construction using a design/build (turnkey)

contract.– Construction utilizing a construction

management contract.

THE CONSTRUCTION PROCESS

FIGURE 1-5. Construction employing owner construction forces.

FIGURE 1-6. Owner-managed construction. [Either (a) or (b) or both may be employed.]

Many large industrial organizations, as well as a number of governmental agencies, possess their own construction forces. Although these forces are utilized primarily for repair, maintenance, and alteration work, they are often capable of undertaking new construction projectsMore frequently, owners utilize their construction staffs to manage their new construction.

THE CONSTRUCTION PROCESS

FIGURE 1-7. Construction by a general contractor.

- Construction by a general contractor operating under a prime contract is probably the most common method of having a facility constructed

THE CONSTRUCTION PROCESS

FIGURE 1-8. Construction employing a design/build firm.

Design and Build: Under the design/build or turnkey construction concept (Figure 1-8), an owner contracts with a firm to both design and build a facility meeting certain specified (usually, performance oriented) requirements. Such contracts are frequently utilized by construction firms that specialize in a particular type of construction and possess standard designs which they modify to suit the owner's needs. Since the same organization is both designing and building the facility, coordination problems are minimized and construction can begin before completion of final design. In this case, the construction contract is normally on a cost-reimbursement basis. This type of construction is referred to as fast-track. The major disadvantages of the design/build concept are difficulty in obtaining competition

THE CONSTRUCTION PROCESS

FIGURE 1-9. Construction utilizing a construction management contract.

Construction Management contracts: A professional construction manager (CM) acts as the owner's agent to direct both the design and construction of a facility.

-Three separate contracts are awarded by the owner for design, construction, and construction management of the project.

Methods of Construction Procurement

Methods of construction project procurement (Mastermann,1996).

Design Bid Build vs Design & Build

Advantages of Design and Build:-Single point of Responsibility-Price certainty-Speed and high progress-Effective Cost control -Build ability/Constructability.-Less claims

Disadvantages:-Poor quality of design-Additional fee for design revision and improvements.-Lack of flexibility in the contract

Classification Design & Build projects in China

CODES AND REGULATIONS• Projects constructed in most areas of the world must comply

with a number of governmental regulations. • Building Codes

– These include building codes, zoning regulations, environmental regulations, and contractor licensing laws, among others.

– International Building Code– Pakistan Building Code ( Seismic provisions 2007)– Pakistan Energy Code

• Zoning, Environmental, and Other Regulations• CDA Zoning Code • Environmental regulations (EIA) • Safety and health Regulations (OSHA)

Trends in Construction industry • Green Building

– LEED, an internationally recognized green building certification system sponsored by the United States Green Building Council (USGBC).

• Alternative/Renewable Energy – Solar farms, wind turbine facilities, and nuclear-based electrical

generation facilities.

• Information Technology – Virtual design and construction (VDC)- Building Information

Modeling (BIM) – Integration of various phases increases speed, reduces costs and

eliminates typical errors caused by manual replication of data.

– Globalization – Globally-distributed design and project management teams – Changing competition from local to global levels.

• Integrated Project Delivery/Lean Construction – Innovative contracting and project management approaches build

upon partnership:• Design collaboration integral to design-build project delivery • Risk sharing, pull-based project scheduling, inventory

minimization, value stream mapping and waste reduction

• Public-Private Partnerships (PPP)– PPPs are offered as a financing solution for governmental entities

with strapped cash resources and/or limited borrowing abilities – To leverage private capital and private financing mechanisms to

fund public infrastructure projects.

• Infrastructure Re-building – Critical infrastructure improvements ……………….

• International Certification – ISO 9000, ISO14000 ISO…….

Construction Industry of Pakistan

• GDP contribution only 2.1% as compared to Employment contribution 6.1%- Low productivity.

• Growth 17.2 % ( 2006-07) as against 5.7 percent (2005-06)• Construction Sector has shown 5.2 percent growth in

2012-13 as compared to growth of 3.2 percent in last year (2011-12).

• Provides linkage to 40 building material industries.• It provides jobs to about 6.1 per cent of the total

employed labor force or to 2.43 million persons.• Per capita consumption of cement in Pakistan is one of

the lowest among the developing countries i.e. 72 kgs as compared to 603 Kgs in Japan, 600 Kgs in Thailand, 450 Kgs in China, 261Kg in USA and 99 kgs in India.

Future demand in Construction industry

• Housing Sector – Existing house stock: 19.30 Million

• 39 % Kucha houses • 40 per cent semi-Pucca houses.• 21 per cent Pucca houses

– 6.5 Million houses backlog. – 25,000 houses for public servants in five years.– Annual Requirement 650,000 Houses – Annual Production /Supply: 350,000– Annual short fall: 300,000 – Workers Welfare Fund was established for providing low

cost housing

– The current road network in the country is about 263,415 kms

– NHA road network is around 12,131 kms, 33 highways and strategic roads.

– 79 projects of 12,131 kms are ongoing at a cost Rs.557 billion.

– Annual growth rate of 7.0 per cent for passenger traffic and 6.0 per cent for freight traffic

– Go Punjab has started a Metro Bus service in February 2013 in Lahore from Gajjumata to Shahdara.

– Karachi Circular Railway comprising of 50 kms track approved at PKR 247 Bn in Aug,2012

– Feasibility Study on Mass Transit System for Peshawar under Technical Assistance (TA) of Asian Development Bank (ADB)

– Pakistan Railway has started three trains from Lahore to Karachi on public private partnership

Transport Sector:

• Benazir Bhutto International Airport (BBIA) in Islamabad spread over 3,200-acre

• Passenger handling capacity of 9mn in 2014 expected to increase to 15mn passengers by 2019 and 25mn passengers by 2024

• The airport, which will be Pakistan's first Greenfield airport, entails an investment of more than PKR 60bn (US$653.92mn)

• The 1,800km pipeline project Turkmenistan-Afghanistan-Pakistan-India (TAPI) is estimated to cost US$7.6bn, with the supply of gas through the pipeline to fulfill the increasing energy demand in India and Pakistan

• Industry value of US$5.5bn is expected for 2013

Future demand of Construction industry-Cont’d

• Construction demand is increasing due to: – Increased Government Spending on Infrastructure Development

for– Housing Sector– Improvement of Water Resources– Development of Roads Network– Development of Ports– Development in Aviation– Increased World Bank and Asian Development Bank Loans for

Infrastructure Development– Reconstruction of Earth Quake/flood effected Areas with the help

of World Aid

According to an estimate, $47.85 Billion will be spent on infrastructure development and construction in Pakistan in the next five years

Construction Industry Challenges Ten major causes of cost and time overruns 1. Fluctuation in prices of raw materials and Unstable cost of

manufactured materials

2. High cost of machineries

3. Lowest bidding procurement method

4. Business and Regulatory Environment

5. Poor project (site) management/ Poor cost control

6. Long period between design and time of bidding/tendering

7. Wrong method of cost estimation

8. Additional work

9. Improper planning

10. Inappropriate government policies

ISSUES AND PROBLEMS

• Incorrect Project Estimates

– Not based on prevailing market rates.– Current data about input prices not available. – Non Responsive bids. – Incorrect estimates leads to releases of funds. – Lack of qualified quantity surveyors.– Estimates are based on preliminary designs and at detailed

design stage, many parameters change. – Estimates are tended to be on lower side.

ISSUES AND PROBLEMS• Financial Issues

– Lack of financial facilities restrict growth of construction industry.

– Disbursement and payments procedures cumbersome and lengthy, lead to delays.

– Cost of doing business is high.

– Payment procedures hamper progress.

• Management Deficiencies and Capacity Building

– Some Contractors and Consultants lack professional

management

– Inadequate Research and Development.

– Lack of capacity in the project managers.

ISSUES AND PROBLEMS• Management Deficiencies and Capacity Building

– Inadequate capacity of contractors to ensure value

addition in construction sector.

– Limited use of IT in Construction Industry• Trade Policy and Regulatory Framework

– Import policy regarding construction equipment is not rationalized.

– Trade Policy does not facilitate constructors.

– Regulatory Framework discourages international contractors / consultants.

– Audit should play a positive role.

ISSUES AND PROBLEMS• Unprecedented Increase in Construction Material Cost

– Price variation due to Govt. policies.

– No insurance cover provided – Rapid escalation and instability of market prices is causing

serious problems in managing cash flows.– Lack of data on materials availability affects project planning

and execution.– Government controlling agencies are not in a position to control

cartels and monopolies.– Shortage of major construction materials---Bitumen, steel etc.

ISSUES AND PROBLEMS• Size of Projects and Quantum of work

– Current practice in some sectors of splitting major projects into a number of smaller projects discourages foreign investors / contractors.

• Human Resource and Management – Shortage of qualified and skilled manpower at all levels.

– Lack of vocational training facilities for the development

of required human resources.

– Quality of human resources available with clients, contractors and consultants needs improvement.

ISSUES AND PROBLEMS

• Escalation of Material Costs – Prevailing bidding documents do not cater for due escalation.

– Statistical bulletin---Not reflective of real market rates.

– All major material inputs should be covered in permissible escalation.

• Integrated Construction Contract and Project Design – Deficient and non-comprehensive

– Liable to abrupt changes which adversely affect cash flow, budget and time frame.

Recommendations for revival of construction industry

• Implementation of National Housing Policy-2001• The presumptive tax on construction companies should

not be more than 1% on yearly receipts• Reduction in Stamp Duty• Credit facilities for Housing Industry

– State Bank: to ensure a certain portion say minimum 5% of annual investment in housing mortgage

• House Building Finance Co. Ltd– Minimum Rs. 10 Billion to be invested by HBFC on annual

basis in small housing and low cost housing• Import of Machinery for Construction industry-Zero duty

Recommendations-Cont’d • Public Private Partnership (PPP) must be encouraged

in the mega projects particularly hosing and transport sectors

• Strategic Board for promotion of construction industry

• Industry Academic linkages must be improved • Abolition of Sales Tax on Construction• Many more recommendation would come from the

conference ……………………….

Course outlines Week Concepts

1 Status of Global and Local Construction industry- Past Present and Future Course Introduction

2 Corporate and Project Management

- Corporate, or Company, Structure - Organizational Management Systems - Project, or Site, Structure

3

Effective and Efficient Site Management - Workforce Organization and Supervision - Management Styles/ Leadership - Defining Construction Site Management

Planning and Programmes - Construction Planning - Construction Programmes - Computer Applications for Planning and Programmes - Case Study Planning Examples Summary

5

Operation, Cost Planning and Monitoring Expenditure - Operations Strategy - Productive Systems - Managing Resources - Business Process Re-engineering - Partnering

6 Site Establishment.

- Site Organisation - Site Layout - Case Study – Site Layout

7

Plant and Materials - Plant Management - Terotechnology as a Management Technique - Materials Management - Just-In-Time Concept - Supply Chain Management

Course outlines 8 Mid Term

9

Progress and Control - Basic Concepts of Construction Progress and Control - Benefits of Effective Progress Control - Progress Control - Progress Charts

10

Quality Assurance - Various Quality standards - Quality Control at construction sites - TQM in construction

11

Health and Safety - Issues in health and safety - Health related legislation (OSHA) - Health and Safety issues in construction industry of Pakistan

12

Environment - Impacts of Construction industry on natural environment - Environmental Impact Assessment (EIA) - Role of Pakistan Environmental Protection Agency (EPA)

13 Case Study – Exercise on EIA

14

Post-Contract Review - Post construction audits - Post construction review meetings - Contract closure and related issues

15 Project Presentations 16 Final Paper

Grade Distribution • On Campus DL• Mid Term Exam 20 Percent 20 Percent• Final Exam 40 Percent 40 Percent• Class Assignments 10 Percent 10 percent • Quizzes 10 Percent• Project Presentation 10 Percent 10 present • Group project 10 Percent 10 percent • Summaries (Special Assignments) 10 percent • --------------------------------------------------------------------------------------

Total: 100% 100%

Assignments and quizzes (10%+10%)

• 4 Home assignments- – 2 before mid semester and 2 after mid

semester

• 4 Class Quizzes– After every two classes, there will be a class quiz of

30 minutes to cover the previous lectures. – For DL students special activity based assignment will

be given

Individual Project (10%) • The student will take the projects from the following list as per last digit of their

Roll No:

1. Corporate and Project Management

2. Effective and Efficient Site Management

3. Planning and Programmes

4. Operation, Cost Planning and Monitoring Expenditure

5. Site Establishment.

6. Plant and Materials

7. Progress and Control

8. Quality Assurance

9. Health and Safety

0. Environment

The project presentation will be comprised of the following three parts- Literature review - Case Study - Final report

Format of Project report • Title Page• Acknowledgments (if any)• Table of Contents• Executive Summary (total 1000 words or less, 3 paragraphs)

– Brief introduction of the chosen topic– Advantages and disadvantages– Possible Applications

• Main Body of the Report (10-15 pages including tables and pictures)– Introduction (1-2 pages) – History (if any)– Possible applications in construction with special reference to Pakistan (1-2 pages)– Case Study

• The actual application of the proposed topic in the construction site for ,medium or large projects and check the compliance and deviations in real cases.

• References– At least 5 for undergraduate students– At least 10 for graduate students

• All references must be properly cited in the report using numbers or last name of the authors with year of publication. ( [1] or (Shah, 2005) ). Use APA referencing style.

Group Project 10%• This activity is aimed at developing better coordination and

integration amongst the students. • The class will be divided into 3-4 groups and they will select

the group leader. • The group will select a project, where they can visit in

group, study the site etc, collect some first hand data and present their group study to the class. The evaluation of the group project will be done on the basis of the following parameters – Research Activity: 35%– Group Reprt: 35% – Final group presentation: 30%

• After formation of the group and selection of the group leader, the group will give the selected project/site for approval on or before the 3rd class of the session.

Assignments No.1 • EMERGING ICT TRENDS IN CONSTRUCTION PROJECT TEAMS: A

DELPHI SURVEY– By Dr Graham Brewem and Thayaparan Gajendran

– Journal of Information Technology in Construction - ISSN 1874-4753

http://www.itcon.org/data/works/att/2009_09.content.05224.pdf

– Summary: • This paper describes the design, implementation and findings of a project funded by the

Chartered

• Institute of Building(CIOB) in Australasia to investigate the evolving use of Information and Communication Technology (ICT) in construction projects. It describes the context provided by literature relating to ICT enabled project team performance and proposes an on-line, modified Delphi methodology based on the Blackboard educational delivery platform to facilitate the asynchronous participation of a panel of experienced practitioners in the generation of data. The paper closes by reporting the study findings and their implications for professional practice, concluding that clear leadership in the fields of ICT standardization and ICT-mediated project procurement could foster supply chain integration. Such leadership has the potential to optimize project outcomes, but only if a clear potential for all stakeholders to increase their levels of profitability is demonstrated.

• - What is Delphi technique- How it is used to address the problem stated in the paper - What are the major findings and recommendations - What suggestions would you recommend?

• -

Essence of Survival“Every morning in Africa, a Gazelle ( small dear) wakes up, it knows it must run faster than the fastest Lion or it will be killed.

Every morning a Lion wakes up, it knows it must outrun the slowest Gazelle or it will starve to death.

It does not matter whether you are a Lion or a Gazelle – when the sun comes up; You’d better be running.”