1

A project report on

THE OWNER’S PERSECTIVE

Submitted in the partial fulfillment of the department for the course of

LAW AND CONTRACT FOR CONSTRUCTION

IN

ENGINEERING & PROJECT MANAGEMET

BY

SANDEEP SINGH

(A00119150)

Under the supervision of

MD. HAFIZUL HASAN

 2

Table of contents

1.1 Introduction ………………………………………………………………………………..3

1.2 The Project Life Cycle …………………………………………………………………….4

1.3 Types of Construction …………………………………………………………………….6

1.4 Selection of Professional Services ………………………………………………………..9

1.5 Construction Contractors …………………………………………………………………12

1.6 Financing of Constructed Facilities ………………………………………………………13

1.7 Legal and Regulatory Requirements ……………………………………………………..15

1.8 The Role of Project Managers ……………………………………………………………15

References …………………………………………………………………………………….16
 3

1.1 Introduction

(source : internet)

In the project management for construction, various steps are needed for the completion of the

project such as planning, designing, financing, constructing and operating. However, Full

knowledge should be beneficial especially in complicated projects. Where, the experts are the

best options who provide the valuable services. Meanwhile, Due to poor coordination and

communication the result may occur of delays and excessive cost. So, the work is entirely upon

the owners to insure such kind of issues does not occur because, at the end, the owner is the one

who provide all the relevant resources related to project.

As, the innovation and project management for construction is not an academic exercise.

According to a report by “construction industry of cost effectiveness project”, the nation largest

industry that is US is not longer get money from construction which is a bad news for the

economy of the US. All the prices related to goods and services are affected to every office

buildings, factory and power plant where the effect of this goes on decades.
 4

However, with the improvement in project management the construction industry also enhanced.

In fact, it also helps in running out the world economy smoothly. Let’s understand the

construction industry and its operating system including all the activities related to nature of

project management.

1.2 The Project Life Cycle

A major capital investment is represented by the acquit ion of constructed facility either by an

individual, private or a public agency. The resource commitment for an investment is motivated

due to the demand of markets to satisfy the objectives specified by the owner.

From the perspective of project management the term “sponsor” and “team” both are having the

same meaning because of taking all the responsibilities and major decisions by the authority.

Since owner is acquiring all the responsibility so it will be good if the owner provides clear

understanding of the whole process in order to maintain the quality, time and cost to complete t.

According to the owner perspective, the life cycle of a project may be defined schematically in

Fig: 1.essentially, a project should meet the demand of the market. There are various possibilities

which taken into consideration during the planning stage, where for the best project

technological and economic feasibility will be assessed. However, the financial scheme also is

examined and programmed for its completion and cash flows.

After clearly understand the scope of the project, a blue print for construction will be provided

by the engineer where the cost estimation is also provided for cost control. In the next stage of

procurement and construction, accurate planning and controlling should be done on material

delivery and checking the project site. After the completion of construction process, the start-up

Market demand
 5

period will be started and finally, the management turned over for the full occupancy to the

owner.

Definition of scope and

objective of project
Planning and
feasibility study
Conceptual designing
Designing

Plans and specifications

Procurement and
related to construction
construction
Completion
Startup for occupancy

Acceptance of facility
Operation and
maintenance
Fulfillment of line
Facility disposal

An owner have the quality to handle the entire work of every stage or professional advice and

services also be seeking out during the process. However, some owners choose to work in house

while, some contract outside professional if there is need of some advice for the completion of

project.

For instance, in US, the Army Corps of engineers is having in house capabilities to deal with all

the stages such as planning, budgeting, designing, construction of waterway and flood

controlling structures. The other agency such as department of state transportation is also

involved in the construction project.

The project life cycle is a process in which the project is implemented from cradle to grave. As

the process is complex, and can be decomposed into several stages. Every stage required
 6

different expertise including technical as well as managerial activities. The owner chooses the

decomposition process on the bases of size and nature of the object to obtain the result. However,

it is important to be aware from the most appropriate and beneficial approach of the project.

During construction, saving small amount of money is not worthwhile, if the outcomes did not

meet the requirement of the new facility. So, the owner should be concerned about the quality

and cost of the finished products during construction. Maintenance and operation is also a part of

the life cycle, so there must be some consideration of the cost. Therefore, operational

management should be considered as soon as possible same as the construction process is

necessary during planning and programming stages.

1.3 Major types of construction

Since, most of the owners interested in using only a specific type of facility Likewise, the

industry of construction uses diverse segments and products. Some owners choose constructed

facility once in a time for only short term advantages. However, others tend to be acquire the

periodic acquit ion of existing facilities. So it is depend on the owner to influence the

construction industry. As by individual action provide disincentives in construction work In

terms of innovation, quality and efficiency. It is because of the interest of all the members that

the owner took initiative in the construction work and influences the performance.

During planning, the methods of procuring awarding constructional contracts and financing the

facility of construction are different. For this purpose, the spectrum of board is divided into four

categories with its characteristics.

 Residential housing construction

 7

(source: internet)

Single-family house, high rise apartment and multi-family all includes in the residential housing

construction. During the development of the project, the familiar sponsors serve as owners where

they took charges and making contract for arranging all the necessary resources related to

designing and construction. These are generally performed by the architectures, where the hire

builders executed the process. Due to tax laws, economic condition and fiscal policies of the

government the residential housing market is highly affected. Meanwhile, Due to slight increase

in the demand of the product this will cause on the investment. Since, the housing projects are set

up at different area by various developers and individuals and because of the entry, many new

builders are attracting towards it and hence, because of this the market is highly competitive with

the high rate of risks and rewards.

 Institutional and commercial building construction

 8

(source: internet)

A wide variety of projects such as medical and hospitals, school and universities, large shopping

centers, warehousing, manufacturing plants, offices and hotels with skyscrapers all included in

institution and commercial building construction. However, the owners of these companies are

not much familiar with the ongoing practices of the construction industry, but still they have the

power to select the professional contractors and arrangement of financial budgets for the

construction by themselves. Where, the engagement of engineers especially for designing and

contractors are also specialized under such type of building.

Due to higher cost of commercial building the market of residential housing is shared by fewer

competitors. Since, the construction of such type of building is a long process and once started

will go long until completion where the demand is less as compared to speculative housing.

Where, such owners adopt an oligopoly. In this situation, the number of competition are limited

and even the price of firm depends on the strategies in the local market.
 9

 Infrastructure and heavy construction

(source: internet)

The projects covered under these are highways, tunnels, bridges, drainage, sewage system and

pipelines. All these projects are owned by publically and financed through taxes. This category is

characterized by some mechanism, which replaced labor operations. All the builders’ engaged in

this work are highly specified. Because of having different segments the need of specialized

contractor also vary according to the skills and the demand shift according to the segments. For

instance, due to declining in the highway construction projects, some of the heavy constructor

shifts their work and equipment into the available job such as mining.

1.4 Selection of professional services

While conside3ring the professional services for design and construction. The owners have wide

variety of choices. The service type is selected according to the experience of the owner While,

dealing with professional during the last projects undertaken by the company. Normally, the

projects related to professional services engaged by some combination of others or separately.

 Financial planning consultant

 10

For a capital project, at the early stage, the owner look after the services of financial planner such

as CPA that is certified public accounting to evaluate all the cost incurred during the project. For

financing the facility investment may also be consulted to analyze the long term effects of the

organization on the financial health.

 Design firms

Engaging services of a design is the best idea for improvement of industrial construction.

Shifting design and construction places into one organization leads to the result of less

differentiate. Interestingly, the owner of a firm must insure that the quality of the construction

must be good so that it does not affect the reason such as less time or good amount of money to

complete the project. Not only could this, with competition bidding sources, business get

affected. As a result of this, owners must have to check out all the sources reliable for this

project.

Another considerable permanent significance is that, most of the amenities use phased

construction procedure for large projects only. This process include the distribution of the project

into various phases, each of which have its own benefits and things can be done in a more

orderly manner, besides this, after the completion of first phase , the adult phase can be started

without waiting anything. If all work exercised in proper coordination the duration time might be

reduced. What is more, there is a turnkey approach stored by most of the workers in which

design/contract firms took all responsibility showed the result of their work with a specific price

to owners.

 Professional construction managers

 11

In recent years, a construction manager is known as new breed which offers professional services

to the construction sites in order to complete the project. These manager ranks mostly include

A/E or ever general contractors. Who might be or might be not play the dual role in services.

During the working year of A/E terms many construction managers got appropriation from their

owners. Before long time ago, some owners coming at result that, most of the construction

managers start focusing on themselves more rather than their owners when a promotion chances

are high.

It is consider in all forms which involved construction sites that if a firm took high risk related to

their construction it could be get better rewards. Interestingly, if an owner wants to implement

A/E firms rather than qualified firms than it will get what it is actually deserve. Not only this, if

owner force general constructor to take care of the uncertainties than the contract price might be

high. An owner of a company cannot import better results/feedback from these construction

mangers without providing them proper respect and trust.

 Operation and maintenance management

Many owners like to keep a permanent staff workers for their operation and maintenance

constructors facilities whereas, some of them only like to give their controls to professional

workers if any firms wants to improve operation and maintenance facilities than they can do

whatever, they want in their industries. along with it, firms can also hire for contractors if they

seem project as huge however, some people have exception on these practices. For example,

most of time private gets the contract of roadways. In many case, managers can provide a proper

spectrum to their employees in order to get a proper feedback. Thus, the owners can arrange the

proper facilities according to their choice.

 12

 Facilities management

To obtain the best services through the time period of construction, some developers and owners

may introduce strategic planning so that the spare related cost can be decreased. Consequently,

with the advancement in technology and modernization, many new firms, management firms

start working with computer based expertise. Because that is the only workers who know much

more about front end and following services in order to introduce more traditional work in

design and construction.

1.5 Construction contractors

Construction is known as the builders who are able to supervise all the execution process. On the

other hand, general constructor like to divide their work in various task while the specialist

constructor such as mechanical and electrical does their work in specialist. Installation

contractors, role done by material and equipment suppliers, they place an imperative role in

between construction sites. However, the delivery of equipment affects the cost, time and

quality. Every contractor has its own benefits, it is essential to understand the work of these

contractors in order to deal with them in a very effective way.

 General constructors

The main work of general constructor is of coordination. However, the owner by their own

engaze in this function of hires a professional manager to do this work. A general constructor

worked in the past with the team of superintendents and can be more effective in inspiring

loyalty and coordination among team. In some projects none of the member who are working

belongs to labor union in fact, all the craftsmen work together called open shop. As the union of
 13

labor provide those employees who apprentice programmers. Where the general contractor use

all the benefits and avoid all the pitfalls which are dealing with organized labor.

 Specialty control

Mechanical, electrical, foundation and excavation are all including under specialty contractors.

They usually serve to the general contractors as subcontractors. However, in some cases, an

owner has to deal with contractor directly. For instance, in New York, special contractors such as

electrical and mechanical given separate contracts on public works with some exceptional cases

and is responsible for negotiating the agreements with the subcontractors.

 Material and equipment suppliers

All the specialty contractors containing sheet metal, roofing, glazing, readymade delivery of

mixed concrete, reinforcing of steel bar detailers are include in the material suppliers. The major

suppliers of equipment for industrial construction include boilers, piping, generators and other

used tools. However, to meet the requirement and specification most of the suppliers handle the

one site installation. As the larger structured units are manufacture outside, so the distribution

among both the suppliers and contractors become less obvious.

1.6 Financing of constructed facilities

To assured that the project will offer a good return on the investment. A huge amount of capital

is supplied by the lenders. The cost associated with project is classified into two categories:

 All the expenses related to construction must be paid to the general contractors for

evaluating the site.

 14

 All the expenses related to land, legal, A/E, construction, management fee. With the

opportunity cost to carry out empty space in the facility until fully occupied.

The first category is of direct construction cost which approximately represents 60 to 80of the

total cost.

 Construction financing

All the loans of contractors are generally issued by banks and the association of loans is for

construction fund. Above the accomplishment of the facility, there is end of loans and the post

construction financing will be organized by the holder. These construction debentures are

provided for different constructions. In the event of residential houses, loans for construction and

long term mortgage can be acquire from the banks or loan association etc. however, the case of

commercial and institution building these construction loans are acquire from the banks.

Although, the value of these industrial buildings for loan is little and the construction loan in the

estate is scarce. These financing can be easily done with the help of general corporate funds. The

framework construction which is accepted by the administration, then those properties cannot be

used for the security of loan. But yet, there are some methods for construction. For instance,

there is iconic bond equipment for the project.

Basically, the three party agreements will be served by the bank between the contractors, the

owner and the bank. On the time of agreed plan the specify loan will be paid to the contractor.

For the verification and accomplishment of the project in general, with the standard report these

payments are requested jointly. Where, these reports are then submitted every month from

contractor to the owner who submit and make a request to the bank. Where they give some

details that the work is been performed satisfactory. During this situation the bank is always
 15

anxious with the work done on time and under the budget. After the competition of this facility it

is not concerned because of the risk which is transfer to the owner or lender.

 Facility

Many private corporations continue for the general funds which are ensure from earning and

long term borrowing to some assets which can also be used for financing. Like wisely, for the

public companies, these long term findings can be acquire from the united state or local

authority. These special bonds are issued by both public and private agencies. Where, they

obtained some less interest rate. However, some of these public facilities, the evaluation of these

fees mend the funds for different type of facilities such as tool, roads and some other treatment

plants.

1.7 Legal responsibility

They usually involve some risk which is both physical and financial where the owner is always

tries to shift their risk to other companies when they enter to an agreement with other party.

Nevertheless, these actions are impossible without cost and risk. For example, the contractor who

is in big risk than he may ask for higher price for reducing their high risk which is generally end

up in known- performances. These can be avoided but if the owner is reasonable in his risk.

Above all of them, the owner of the company must realize that the power in bargaining and the

responsibility can only be making contractual agreement.

1.8 The role of the project managers

In the project life cycle the role of the project manager is most influencing at the early stage of

the projects. With the help of economic evolution decisions are made with consideration for
 16

financing, social and regulating environment. In order to make competent decisions a project

manager should familiar with all the aspects no doubt, architectural and engineer are specialize

in their work of planning or operation in construction management still the role of managers

cannot be negligible.

Since 1970, many projects are running into some problems, such as cost and delays in long

schedule. However, the megaprojects management is not able to complete task on time. Witness

is during the civil war era of railroads and construction of Panama Canal. Although, the projects

at this century is having a greater frequency and setting a new challenges but still the technical

problems are not as much larger than the organization.

References: https://www.cmu.edu/cee/projects/PMbook/01_The_Owners

%27_Perspective.html