Lesson 1

Construction Organization

DR. YONG CHO

Introduction
Construction Industry
• 2009--$1.0 trillion (U.S.A.)
• 7.7 million employed people
• 880,000 construction companies
• 9% of the gross national product

Construction Industry Divisions

◦ Building Construction (Vertical Construction)
◦ Heavy Construction (Horizontal Construction)
Distribution of U.S. new Construction
Volume
Segments of
the Industry
Housing or Residential Building
Commercial or Building
Engineering or Heavy Construction or Infrastructure
Project Building
Industrial Construction Project Building

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Housing or Residential
Majority of the houses built on speculation.
Homebuilding is extremely material and craft oriented.
Homebuilders:
◦ Produce single family houses and apartments.
◦ Use dimensioned lumber – “stick built”
◦ Hires the designers
◦ Subcontracts out most of the work.
◦ Constructs approximately 10-25 houses per year.

40-45 % of new construction per year.

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Commercial Building
Projects may have private and public owners.
◦ Office buildings, high-rise residential, warehouses, retail stores,
shopping centers, schools, religious buildings, banks, sports facilities,
light and durable goods manufacturing plants, hotels, and hospitals.
◦ Structures are made of concrete, steel, or timber.
◦ Designed by architects with engineering help.
◦ Heavily subcontracted to specialty contractors.
25-30 % of new construction per year.

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Heavy Construction Projects
The owner is primarily the public, and the projects are
publicly financed.
Horizontal construction projects
◦ Highways, canals, tunnels, dams, railroads, pipelines, bridges, airport
runways, sewers, harbors, subways, sewage treatment plants, etc.
◦ Designed by civil engineers, often employed by public agencies
◦ Constructed by a general contractor.
◦ Heavy equipment oriented.

20-25 % of new construction per year.

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Industrial Construction Project
The design/build firm does the design & construction, with
few subcontractors
◦ Power plant, manufacturing plant, processing plant, petrochemical plant, ore
smelting processes, etc.

Highly technical in nature.

5-10 % of new construction per year
Industrial projects are privately financed

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Types of Construction

fig_01_11
Questions
Who are the stakeholders in a
project?
A stakeholder is someone whose interests may be
positively or negatively impacted by the project.

What is their role?

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Stakeholders and Designated
Roles
Some Key stakeholders
◦ Contractors
◦ Owners (sponsor)
◦ Architects/Engineers
◦ Workers
◦ Lending agencies
◦ Governmental bodies
◦ Insurance companies
◦ Material Supplier/Vendors
◦ Others?
Their roles
◦ Evaluate subsoil conditions
◦ Survey surface topography
◦ Predict weather conditions
◦ Provide transportation
◦ Supply material(s)
◦ Connect utilities/services
◦ Perform local subcontractor
services
◦ Hire and fire labor
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Focus on Important Participants in
the Construction Industry
The Owner
◦ The Public Owner
◦ The Private Owner

The Architect/Engineer (A/E)

The Prime Contractor
The Sub Contractor
The Vendors (and suppliers)
◦ Materials & Equipment

The Regulators

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The Owner
Public Owner
◦ Who: Agencies of the federal government, state, county and municipal
entities (local boards, commissions and authorities).
◦ Goal: Act in the interest of public.
◦ Financing: Appropriations, bonds, tax levies.
Private Owner
◦ Who: Individuals, partnerships, corporations
◦ Goal: Private use or investment
◦ Financing: Lenders

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The Architect- Engineer
The architect-engineer is the design professional that is the party,
organization, or firm that designs the project.
Often direct employees of owner by contract
Sometimes in permanent relationships with owners (corporate
partnerships)

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The Prime Contractor
Aka. general contractor(GC)
Firm with direct contract with the owner
Entity who constructs the project in whole or parts
Coordinates the diverse inputs of the construction process
into a single, coordinated effort
Generally in charge of
◦ Control of construction
◦ Procurement and field operations
◦ Allocation of manpower, equipment, and materials
◦ Maximizing efficiency of time and money.

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The Subcontractor
Construction firm that contacts with prime contractor
Performs some specialized portion of the prime’s scope of work
◦ Example: electrical/mechanical in building construction
The sub-contractual relationship is limited to these prime and
the sub, without the owner’s involvement.
The prime contractor maintains contractual responsibility to
the owner for the work performed by the subcontractor.

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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
Construction Employing an Owner
Construction Forces
Owner Management of Construction
contract
Owner

Construction
staff

Project director

Hired labor
Contractor(s)
force

(a) (b)
Construction by a General
Contractor
Construction using a design/build (turnkey) contract

Owner

Design/
build firm

Design Construction
force force

Subcontractor
Construction utilizing a construction
management contract
General Construction Company Organization
Company Organization Structure (1)
Types: Functional, Projectized and Matrix
1. Functional organization
Organization is grouped by areas of
specialization within functional areas (e.g.,
accounting, construction and engineering).
Projects generally occur within a single
department. If information or project work is
needed from another department, the request
is transmitted up to the dept. head (functional
manager), who communicates the request to
the other dept. head. Team members
complete project work in addition to normal
dept. work.
Company Organization Structure (2)
2. Projectized organization
In a projectized organization, the entire
company is organized by projects. The
project manager has control of the
projects. Personnel are assigned and
report to a project manager. When the
project is over they do not have a
department to go back to. They need to
be assigned to another project or get
another job with another employer. One
time organization which is set up for the
purpose of handling one specific
project.
◦ Gradually built up and gradually
disbanded near project completion
◦ Not continued employment
Company Organization Structure (3)
3. Matrix organization
◦ Combination of functional and projectized ogranizations.
◦ Team members report to two bosses: project manager and functional
manager (e.g., VP Engineering, etc).
◦ Communication goes from team members to both bosses.
◦ Team members do project work in addition to normal dept. work
◦ Strong matrix (project manager: PM) vs. weak matrix (functional manager)
◦ In a weak organization, the PM’s role might be more of a
◦ Project expediter: act as a staff, communication coordinator, cannot personally make or
enforce decision.
◦ Project coordinator: similar to the project expeditor except has some power to make decision,
some authority, and reports to a higher-level manager.
Company Organization Structure (4)
3. Matrix organization (Balanced Matrix)
Functional Organization
Advantages Disadvantages
Easier management of specialists People place more emphasis on their
functional specialty to the department
of the project
Team member report to only one No career path in project
supervisor management
Similar resources are centralized, the Project manager has little or no
company is grouped by specialties authority
Clearly defined career paths in areas
of work specialization
Projectized Organization
Advantages
Efficient project organization
Loyal to the project
More effective communications than
functional(quick)
Disadvantages
No “ home” when project is
completed
Lack of loyalty toward their employer
Lack of professionalism in disciplines
Less efficient use of resources
Matrix Organization
Advantages
Highly visible project
objectives
Improved project manager
control over resources
More support from functional
organization
Maximum utilization of scarce
resources
Better coordination
Better horizontal and vertical
dissemination of information
than functional
Team members maintain a
“home”
Disadvantages
Extra administration required
More than one boss for
project teams
More complex to monitor and
control
Tougher problems with
resource allocation
Need extensive policies and
procedures
Functional mangers may have
different priorities than
project managers
Higher potential for conflict