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11/11/2020

RICS-SBE/XX/XX/S006/R02 1
Revised on: 24-05-2019

CM662 Project Development and


Pre-Construction Planning
Module 2
Project Development
MBA-CPM/CEQS (Semester-1)
Odd Semester 2020-2021 (Sep-Dec 2020)

V. Paul C. Charlesraj
vpcharlesraj@ricssbe.edu.in
Chief Course Coordinator

M2 Agenda

CM662-Project Development and Pre-Construction Planning by V. Paul C. Charlesraj

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Module 2 (30%)
Project Development
SLO2: Explain and appraise the project development process
M002: Client care
T037: Development/project briefs
T087: Project feasibility analysis

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Project Development
Overview of project development process - project need identification - feasibility
analysis - project selection

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Property Development
• Any activity that changes the state of land
• Erection of new buildings
• Demolition of existing buildings & their replacement with new one
• Improvement of existing buildings
• State of repair; fixtures & fitting; design; enlarging

UK Town & Country Planning Act 1990

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Stages of Property Development Process


Detailed
Development Taxation
Financial Marketing
Concept Implications
Appraisal
Development &
Design Brief

Supervision
Site Search & Arrangement Detailed
Study of Finance Planning
of
Development

Outline Building
Planning
Planning Control Site Purchase
Investigations
Application* Approval

Tender
Initial Financial Market Costing of Documents &
Appraisal Research Construction Construction
Contract

CM662-Project Development and Pre-Construction Planning by V. Paul C. Charlesraj


Millington, AF (2000) Property Development

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Development Management

• ‘The management of the development


process, from the emergence of the
initial development concept to the
commencement of the tendering
process for the construction of the
works.’

RICS Guidance Note on Development Management, 1e (2009)

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Development Management - Phases

Phase Phase Phase Phase Phase


1 2 3 4 5
• Developer’s • Site • Outline • Outline • Full planning
initial acquisition appraisal planning permission
concept strategy permission

RICS Guidance Note on Development Management, 1e (2009)


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Stages of services compared with development 17

management

RICS Guidance Note on Development Management, 1e (2009)


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Project Selection
and
Feasibility Study

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Project Selection
• Process of evaluating projects so that the organizational strategy is
achieved

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Strategic Management

• Specific
• Measureable
• Achievable
• Realistic
• Time bound

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Project Selection and Review Process

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Project Selection Models


Non-numeric
Numeric

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Criteria for Project Selection Models


• Realism (technical-, resource-, market-risk)
• Capability (adequately sophisticated)
• Flexibility (valid results over large domain)
• Ease of Use (no expert needed to run model)
• Cost (much less than project benefit)
• Easy Computerization (use standard software)

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Non-numeric Project Selection Models


• The Sacred Cow
• The Operating Necessity
• The Competitive Necessity • Strategic Projects
• The Product Line Expansion • Operational Projects
• Comparative Benefit Model • Must do Projects
• Q-Sort Model

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Q-Sort Model

• Q-methodology (also known as Q-sort) is


the systematic study of participant
viewpoints.

• Q-methodology is used to investigate the


perspectives of participants who represent
different stances on an issue, by having
participants rank and sort a series of
statements.

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Numeric Project Selection Models - Profitability 26

Models
• Payback Period
• Average Rate of Return
• Ratio of average annual profit to the initial fixed investment
• Discounted Cash Flow
• Net present value (NPV) of all cash flows by discounting them by the required rate
of return
• Internal Rate of Return
• Rate of return for which present value of inflows is equal to present value of cash
flows
• Profitability Index
• Benefit/cost ratio Payback period model combined with
discounted cash flow is commonly used
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Project Selection Process


• PRE-FEASIBILITY REPORT
• Study the relationship between the project’s expected results and the
organization’s strategic objectives/goals

• FEASIBILITY REPORT
• Project evaluation factors – Production/Technology, Marketing, Financial,
Personnel, Administrative/Managerial and Miscellaneous

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Pre-feasibility Report
• Synoptic review of project details
• Project background and history
• Project scale and size
• Project sponsor(s)
• Preliminary determination of project scope
• Estimated cost and time
• Project engineering
• Demand and market for the project
• Cost of studies already conducted and to be conducted if project is selected
• Preliminary risk assessment
• Contribution to organization objectives/goals …………….

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Feasibility Report
• DETAILED PROJECT INFORMATION
• Scope
• Alternatives and assumptions
• Infrastructure requirement
• Location
• Finance
• Cost
• Schedule
• Team
• Technology
• Risk assessment

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Financial Appraisal

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Market Appraisal

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…Market Appraisal
• Total demand and rate of growth of demand
• Demand in different segments of the market
• Socio-economic characteristics of buyers
• Motives of using/buying
• Unsatisfied needs
• Satisfaction with existing projects/products
• Competition
• Attitudes towards various projects
• Advertising and distribution strategy
• Government policies
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Examples
• Transrapid Shanghai Train
• Travels at 430kph from Pudong International
• Airport to close to Shanghai’s business centre
• Can carry 453 passengers on a trip, but only carries 500 – 600 passengers in a day
• Ticket price is beyond the reach of an average middle class Chinese family
• Community needs not studied properly
• Scope reduced
• Customer need not linked with Return on Investment

• Delhi Airport Metro ?!


• BRT in Delhi ?!
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Technical Appraisal

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Technical Feasibility
• Familiarity with Project Constraints
• Familiarity with construction technology
• Project size
• Compatibility

Can we build it?

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Socio-Economic Appraisal
• To evaluate the project utility from the point of view of the society or
national economy instead of commercial profitability
• Social Benefit Cost analysis
• Used for public projects

Can we build it?

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Environmental Impact Analysis


• For projects which may cause effects on the public or the physical
environment
• Performed as an integral part of project formulation and not as a
consequence
• Impact on immediate as well as larger environment
• Impact can be direct / indirect
• Impacts can be quantifiable / non-quantifiable
• Cause and effect relationship to be studied

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…Environmental Impact Analysis


• Project Cost should include cost of
• Internal measures to reduce the environmental impact
• Mitigating effects of the project on its environment
• Compensating people directly affected environmentally by the project

Ministry of Environment, Forests and Climate Change (MoEFCC)

Can we build it? Sample EIA


Report

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Managerial Appraisal
• Project Management methodologies
• Optimum decision-making structure Sample Pre-
• Decision making under risk and uncertainty is important feasibility Report

• Experience from previous projects will help

Sample Feasibility
• Principal-Agent Problem Report

Can we build it?


https://www.nhsrcl.in/en/project/feasibility-study-report

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Business Case
• Used to create the Project Charter
• Describes the necessary information from a business standpoint to
determine whether the expected outcomes of the project justify the
required investment
• Typically contains business need and the cost benefit analysis to justify
and establish boundaries for the project

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Project Charter
• A document issued by the project initiator or sponsor that formally authorises
the existence of a project and provides the project manager with the authority
to apply organisational resources to project activities
• Documents high-level information on the project and on the product, service or
result the project is intended to satisfy
• Provides the direct link between the project and the strategic objectives of the
organisation
• Creates a formal record of the project
• Shows the organisational commitment to the project
• Establishes a partnership between the performing and requesting organisations
• The approved Project Charter formally initiates the project
• A Project Charter is not considered to be a contract because there is no
consideration or money promised or exchanged in its creation
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Typical Project Charter


• At a high-level, the project charter ensures a common understanding by the
stakeholders of the key deliverables, milestones, and the roles &
responsibilities of everyone involved in the project
• Project purpose
• Measureable project objectives and related success criteria
• High-level requirements
• High-level project description, boundaries and key deliverables
• Overall project risk
• Summary milestone schedule
• Preapproved financial resources Sample
• Key stakeholder list
• Project approval requirements
• Project exit criteria
• Assigned project manager, responsibility and authority level
• Name & authority of the sponsor other person(s) authorising the project charter

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Integrated approach to project


feasibility analysis
Case Study

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Prasanta Kumar Dey (2001) Integrated approach to project feasibility analysis: a case
study, Impact Assessment and Project Appraisal, 19:3, 235-245
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Site Selection Process


• Site Evaluation
• Location and Direction
• Regulations
• Environmental Considerations
• Project Requirements

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Detailed Project Report (DPR)


• Prepared after investment decision has been taken based on the
Feasibility Report
• Provides more accurate and detailed information regarding the project
• Provides Baselines or Targets for the project

DPR Template

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Site Selection & Investigations


site identification - survey and mapping - geo-technical investigation and analysis

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Site Survey
and Mapping

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Geo-technical
Investigation
and Analysis

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Purpose
► Land Surveys / Aerial Surveys

► Sub-stratacharacterization
► Soil bearing capacity
► Rock
► Water level
► Water quality

► Contour Map
► To finalise the positioning of the building components
► To calculate earth cut and fill requirement

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Survey Tools & Techniques

► Optical - Photogrammetry - Remote Sensing


► Theodolite – Total Stations – Digital Cameras - LIDAR - UAV -
Drones – Satellites
► GIS

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pH Mapping

Image source: ALTA Arizona

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Illustrations

Typical Cross Section of Hillside Adjoining Site

Schematic Section of Anchored Steel Sheet Pile Retaining Wall

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Construction Site Environment

Cross-Section Illustration of a Landfill

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GIS
► A framework to organize, communicate, and understand the science of our world

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GIS

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Logistics Planning
logistics planning

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57 Planning by V. Paul C. Charlesraj

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Site
Management

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Construction
Logistics
Planning
(CLP)

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Background
► Logistics
► A branch of knowledge applying new concepts to control material, service, information and
finance flows between suppliers and customers
► Supply Chain

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Basic Models of Logistics


► Informal
► coordination of logistic tasks of separate departments and fields of
activity enforced within the existing organisational structure of the
company
► Semiformal
►alogistics manager responsible for coordination of logistic processes of
the company, but is not in charge of the departments, where these
processes are conducted
► Formal
► a separate department takes over all the logistic processes of the
company

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Challenges in Material Delivery


► Type of material
► Order quantity
► Delivery time
► Delivery place
► Supplier selection
► Sequence of delivery
► Financing
► Purchase priorities

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Models of Supply System


► Independent supply chains for individual contractors, where selection of
suppliers, supply planning and scheduling is the duty of each contractor

► Centralizedsupply system managed by general contractor or other party


managing the whole project, by means of their own logistics departments

► Centralized supply system managed by an external logistics company

► Combination of the above

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Logistics Activities in a Construction Project


► Develop logistic concepts for designing and planning

► Develop strategic guidelines for bidders

► Assist bidders in bid preparation

► Develop plans of the building site logistics

► Monitor & Control the implementation

► Optimise supply and purchasing process

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What is CLP?
► Important management tool for planners, developers and construction
contractors
► Focuses specifically on construction supply chains and how their impact on
the road network can be reduced
► Construction supply chain covers all movements of goods, waste and
servicing activity to and from site
► Well planned construction logistics will reduce:

► Environmental impact: Lower vehicle emissions and noise


levels
► Road risk: Improving the safety of road users
► Congestion: Reduced vehicle trips, particularly in peak periods
► Cost: Efficient working practices and reduced deliveries

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Purpose
► CLP provides the framework for understanding and managing construction
vehicle activity into and out of a proposed development.

►A full assessment of all phases of construction should be included and


detail:
► The amount of construction traffic generated
► The routes the construction vehicles will use and consideration of local
impacts
► The impact on relevant Community Considerations
► Any traffic management that will be in place

‘Community Considerations’ - to address the main concerns


faced by construction logistics activities, particularly at local
level

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Types of CLP
► Outline CLP
► written during the planning and design stage and is submitted with the planning
application

► Detailed CLP
► written during the pre-construction/construction stage and is implemented and
monitored throughout the construction programme

Source: TfL – CLP Guidance

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Outline CLP
► written during the planning and design stage and is submitted with the planning application
► gives the planning authority an overview of the expected logistics activity during the
construction programme
► required during the planning approval stage for medium and high impact developments

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Detailed CLP
► written during the pre-construction/construction stage and is implemented and monitored
throughout the construction programme
► submitted to a planning authority at the post-granted discharge of conditions stage and
provides the planning authority with the detail of the logistics activity expected during the
construction programme
► extensive plans that are required to be produced for medium and high impact sites
► An up to date CLP should be maintained as a live document throughout construction

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CLPs and the Planning Process

Source: TfL – CLP Guidance

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Who is Involved?
► Local Planning Authorities (LPA)
► Developers
► Planning Specialists
► Designers
► Contractors
► Logistics Operators
► Transport Authorities
► Insurance Companies
► Financial Institutions

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Writing a CLP
► Content of a typical CLP
► 1. Introduction
► Objectives of the CLP, Site context, Development proposals, CLP structure CLP toolkit
► 2. Context, considerations and challenges
► Policy, Plans, Local access including highways, public transport, cycling and walking,
Community Considerations
► 3. Construction programme and methodology
► Building and infrastructure phases
► 4. Vehicle routing and site access
► Regional, local and site plan
► 5. Strategies to reduce impacts
► Committed, proposed, considered
► 6. Estimated vehicle movements
► 7. Implementing, monitoring and updating

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CLP Template & Sample

CLP Guidance CLP Toolkit

CLP Template CLP Sample

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London Construction 74

Consolidation Centre

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Key Facts/Main Benefits of CCC


► 15% reduction in waste materials
► 95% improvement in delivering performance (right materials, right place,
right time)
► 68% reduction of vehicles traveling to site
► 25% reduction in accidents/injuries

► 47% increase in site productivity


► 75% reduction in CO2 emissions

CCC Case Study

Source: http://www.wilsonjames.co.uk/case-study-6-construction-consolidation-centre-.html

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CM662-Project Development and Pre- 76


Construction Planning by V. Paul C.
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Construction Site Layout Planning


► Construction site layout involves identifying, sizing, and placing Temporary
Facilities (TFs) within the boundaries of construction site.
► These temporary facilities range from simple laydown areas to
warehouses, fabrication shops, maintenance shops, batch plant, and
residence facilities.
► Required temporary facilities and their areas are depending in many
factors including project type, scale, design, location, and organization of
construction work.

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Objectives of Construction Site Layout Planning


► The site must be designed to maximize efficiency of operations
in order to promote worker productivity, to shorten project time
and to reduce cost.

► The final plan must create a project with a good work


environment in order to attract and retain the best personnel and
thus contribute to better work quality and productivity

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The Problem
► Failure to plan the site layout in advance is a prime cause of
operational inefficiency, and can increase the overall cost of a
project substantially.

► Poor Site Layout Planning leads to


► Material stacks wrongly located
► Plant and equipment wrongly located
► Inadequate space allowed
► Site huts wrongly located in relation to their effective use

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Elements of Site Layout Planning

► Safety ► Water Supply & Sanitation


► Site Accessibility ► Material Handling

► Information Signs ► Storage & Site Cleaning

► Security ► Craft Change-Houses

► Accommodation ► Batch Plant & Fabrication

► Offices
Shops

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Characteristics of Temporary Facilities


► Satisfying environmental and safety regulations
► Availability of diverse solutions for the same problem

► Relatively short life span of a specific location

► Reutilization with a minimum loss for the same or modified


function at another location
► Easy of assembly, dismantling, and exploitation

► Standardization of design

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Approvals
administrative structures and statutory
compliances

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Project Procurement Methods


Project Delivery Systems
What is Procurement?

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Categories of Procurement Systems in Construction

Design &
Manage

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Popular Project Delivery Methods

Sacks, R., Eastman, C., Lee, G., & Teicholz, P. (2018). BIM Handbook. CM761-BIM for Built Environment by V. Paul C. Charlesraj
John Wiley & Sons, Inc.

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Traditional Procurement System

► Linear/Sequential Process

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Design & Build Procurement System

► Integrated Design & Construction

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Management Contracting & Professional Construction


Management

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Design & Manage Procurement System

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Public Private Partnership Model


► Executed for Public projects
► Government needs assistance of Private Enterprises to invest in
public projects
► Infrastructure projects are primarily executed through this model

► Not very successful in India


► Private concessionaire exiting the Delhi Metro Airport Link line

► Variants
► BOT – Build – Operate – Transfer
► BOOT – Built – Own – Operate ‐ Transfer

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Integrated Project Delivery (IPD)


• IPD integrates people, systems, business structures and practices into a process
that collaboratively harnesses the talents and insights of all participants to
optimize project results, increase value to the owner, reduce waste, and maximize
efficiency through all phases of design, fabrication, and construction.

• IPD includes presence of all key factors of the project from outset in an integrated
manner, and using their experiences and constructive cooperation in a multilateral
contract to have a more successful project and participation in risk and reward for
all stakeholders in project life cycle

• Multiparty agreement
• Shared risk and reward
• Early involvement of all parties

AIA, “Integrated Project Delivery: A Guide,” Am. Inst. Archit., pp. 1–62, 2007.

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Types of Contracts based on PRICING


► Lump Sum Contract
► Penalty
► Unit Price / Item Rate
► Reward
► Cost Plus
► Fixed Percentage
► Fixed Fee
► Variable Percentage

► Target Estimate

► Guaranteed Maximum Cost

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Relative Costs of Several Types of Construction


Contracts
Type of Contract Markup Contract Price
1. Lump sum M = (R +R1)E B = (1 + R + R1)E
2. Unit price M = (R + R2)E B = (1 + R + R2)E
3. Cost plus fixed % M = RA = RE B = (1 + R)E
4. Cost plus fixed fee M = RE B = (1 + R)E
5. Cost plus variable % M = R (2E - A) = RE B = (1 + R)E
6. Target estimate M = RE + N (E-A) = RE B = (1 + R)E
7. Guaranteed max cost M = (R + R3)E B = (1 + R + R3)E

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Relative Costs of Several Types of Construction 94

Contracts
• E = contractor's original estimate of the direct job cost at the time of contract award
• M = amount of markup by the contractor in the contract
• B = estimated construction price at the time of signing contract
• A = contractor's actual cost for the original scope of work in the contract
• U = underestimate of the cost of work in the original estimate (with negative value of U denoting an
overestimate)
• C = additional cost of work due to change orders
• P = actual payment to contractor by the owner
• F = contractor's gross profit
• R = basic percentage markup above the original estimate for fixed fee contract
• Ri = premium percentage markup for contract type i such that the total percentage markup is (R + Ri),
e.g. (R + R1) for a lump sum contract, (R + R2) for a unit price contract, and (R + R3) for a guaranteed
maximum cost contract
• N = a factor in the target estimate for sharing the savings in cost as agreed upon by the owner and the
contractor, with 0<=N<=1

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Relative Costs of Several Types of Construction 95

Contracts
Type of Contract Owner's Payment Contractor's Gross Profit
1. Lump sum P = B + C(1 + R + R1) F = E - A + (R + R1)(E + C)
2. Unit price P = (1 + R + R2)A + C F = (R + R2)(A + C)
3. Cost plus fixed % P = (1 + R)(A + C) F = R (A + C)
4. Cost plus fixed fee P = RE + A + C F = RE
5. Cost plus variable % P = R (2E - A + C) + A + C F = R (2E - A + C)
6. Target estimate P = RE + N (E - A) + A + C F = RE + N (E - A)
7. Guaranteed max cost P=B F = (1 + R + R3)E - A - C

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Time vs. Risk Transfer at Start

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Selection of Procurement System

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Procurement Strategy
► Time‐ an early completion can be achieved if construction is commenced
before the design is fully completed. However, this approach can attract
risk in terms of cost certainty.
► Cost – the importance of cost certainty at various stages of the
procurement process.
► Quality – The quality characteristics that are required of the building will
have an impact on the cost and the timescale. Some procurement
strategies enable the Client to control the quality in detail, whilst others
reduce the client’s ability to both control and make changes to the
building’s specification.
► Risk‐ the Clients willingness to take on risk.

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Procurement Process
► Procurement Strategy – this will identify the best way of achieving the
project objectives, bearing in mind the four issues noted above.

► Choice or Form of Contract – choosing the most suitable form of contract


to deliver the project.

► Procurement Route – The actions required to carry out the Procurement


Strategy

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