AN INTRODUCTION TO CONSTRUCTION MANAGEMENT

1
AN INTRODUCTION TO CONSTRUCTION MANAGEMENT
MANAGEMENTCONTRACTING
2
Presentation Programme

• Introduction to speakers
• Introduction to PROJEXASIA
• Is Management Contracting New in Hong Kong?
• Three Procurement Methods Under Consideration
• Traditional Contracting and Management
  Contracting A Comparison
• Why Use Management Contracting?

3
Section 1

• Introduction to Speakers
• Mr. John Gunning
• Managing Director PROJEXASIA Ltd
• Mr. Alan McKinnon
• Project Director PROJEXASIA Ltd.

4
Section 2
Introduction to PROJEXASIA LIMITED
5

• PROJEXASIA is a Construction Management company
  that specializes in the building of luxury
  residential, retail and commercial buildings
  where quality in terms of management and the
  finished product is the Clients key objective.

6

• Established in 2001, Projexasia provides a more
  sophisticated management-orientated approach to
  construction management and offers Management
  Contracting, Construction Management and Project
  Management as alternatives to the Traditional
  Contracting form of project delivery.

7
Section 3

• Is Management Contracting new in Hong Kong?

8
Projects Built Under Management Contract in Hong
Kong
Hong Kong and Shanghai Bank
9
Projects Built Under Management Contract in Hong
Kong
International Finance Center
10
Projects Built Under Management Contract in Hong
Kong
The Belchers Tower
11
Projects Built Under Management Contract in Hong
Kong
29-31 TTWR, Stanley
12
Projects Built Under Management Contract in Hong
Kong
22 Middle Gap Road
13
Projects Built Under Management Contract in Hong
Kong
Escalators at Pacific Place
14
Projects Built Under Management Contract in Hong
Kong
Butterfields Club
15
Projects Built Under Management Contract in Hong
Kong
City Plaza - HK Island East
16
Projects Built Under Management Contract in Hong
Kong
Taikoo Place - Cineplex
17
Projects Built Under Management Contract in Hong
Kong
22 Gough Hill Road
18
Three Procurement Methods Under Consideration
Section 4

• Management Contracting
• Construction Management
• Traditional Contracting

19
What is Management Contracting?
20
Management Contracting

• Essentially a team approach to the construction
  process. It links the management expertise of the
  contractor with that of the professional design
  team, to achieve the common objective of
  providing the client with the finished product in
  the shortest possible time, within the
  limitations of the budget and to the desired
  quality.

21
What is Construction Management ?
22
Construction Management

• Is a professional service applying effective
  management techniques to the planning, design and
  construction of project, to control time, cost
  and quality. The Construction Manager is
  appointed by the client and acts for him to
  ensure that a viable and cost effective design is
  produced.

23
What is Traditional Contracting?
24
Traditional Contracting

• A process that requires a project to be
  substantially designed before main contractors
  can tender for the role of contractor.

25
Section 5

• Traditional Contracting and
• Management Contracting - A Comparison

26

• Risk
• Adding Value
• Programme
• Quality
• Cost

27

• Risk

28
Risks Traditional Contracting v. Management
Contracting
29

• Adding Value

30
Development Planning

Managed Delivery
Introduce Management entity
100
Time of influence on the projects design
DESIGN
Ability To Influence
BID
CONSTRUCT

3-5

Time - Project Life Cycle
0
31

• Programme

32
TRADITIONAL CONTRACTING
Development Planning
DESIGN
TENDERING
CONSTRUCTION
MANAGEMENT CONTRACTING
Development Planning
DESIGN
TIME SAVINGS
PROCUREMENT
CONSTRUCTION
Time
33

• Quality

34
Fast Tracked Construction Management
QUALITY
Traditional Delivery

• Day to day quality assurance is
  effectively managed by the Main Contractor.
  Profit objectives can, and often do, have a
  detrimental effect on quality. Consultants may
  also fall into no-mans land by providing
  uncoordinated quality design and observation
  as a result of inadequate scoped services
  agreements and low fees.
• Quality comes down to the people you
  have on your team. Fee levels , work loads
  and profit can and do cloud the issue of
  team selection under the traditional model.
  The Main Contractor Consultants put
  available people in the drivers seat. This
  can result in B or even C teams
  managing all aspects of design and
  construction - including quality.
• Design and Observation is often managed by
  a principle Consultant under the traditional
  model - this may be the Project Manager or
  the Architect. This approach is often
  characterized by a lack of independence,
  biased Consultancy documentation and often
  begs the question who represents the
  clients interests? It relies almost entirely
  on the Main Contractor for quality
  assurance.
• Quality Plans are often non- existent on
  projects delivered under the traditional
  model. Quality is often managed on the basis
  of defects inspections conducted by the
  Architect and his sub-consultants.

• Day to day quality assurance is managed
  by the Clients Construction Manager. An
  individual who has significant practical
  construction experience and is focused on the
  clients objectives not hidden agendas.
  Quality design and observation is a key
  part of PXAs Agreement Documentation.
• The CM puts a considerable emphasis on the
  selection and prequalification of suitable
  people. We expect our Consultants and
  Contractors to provide A teams and we go to
  considerable effort to research both listed
  and unlisted references. Construction
  Management is founded on the principle of
  using the best people for the job.
  Quality is no exception.
• Quality Assurance challenges the building
  industry to move from a culture based on a
  supervisory mentality to a culture where
  consultants accept full responsibility for the
  provision of goods and services in
  accordance with the Clients requirements. PXA
  is at the forefront of that movement. We
  have developed Special Conditions of Engagement
  based on the principle of Consultant
  accountability for quality.
• PXA develops project specific quality plans
  and monitor quality throughout construction.
  A very high level of site observation is
  required so that project completion defects
  are dealt with progressively instead of at
  the end of the project.

QUALITY MANAGEMENT
PEOPLE
DESIGN OBSERVATION
QUALITY PLANS
35

• Cost

36
Fast Tracked Construction Management
COST
Traditional Delivery

• Managed by the Architect, QS Main Contractor
• Final Cost based on Main Contractors
  Tender or GMP including risk premiums and
  any subsequent variations including costs
  associated with time claims, Main Contractor
  Subcontractor Margins, and P G
  elements partially or wholly capitalized on
  the project.
• Historical evidence from North America and
  UK suggest the traditional delivery model
  cost up to 25 more than Construction
  Management.
• Price includes risk premiums based on
  completeness of Design (GMPs), time risk,
  Liquidated Damages and any risk transfer set
  out in the Tender documentation.
• Contingencies set by Quantity Surveyors on
  basis. No accountability.
• Contrary to popular myth Cost Uncertainty
  under the traditional model is higher over a
  longer period of time than under Fast
  Tracked Construction Management. The only
  element of cost uncertainty which is lower
  is Market risk which represents only a
  small of overall risk on most
  projects.

• Managed by the Client / Construction Manager (QS
  assists)
• Final Cost based on Total Value of Individual
  Trade Packages plus variations. Time claims
  minimized or eliminated. No penalising Main
  Contractor margin on variations. No loss of
  profit claims for deletions or credits. No
  Subcontractor margins on direct purchased plant
  and materials.
• US, UK and Australasia experience shows CM
  delivers projects between 5 to 20 below
  independently prepared market estimates. The
  rates information used by the Quantity
  Surveying profession comes almost entirely
  from projects delivered under the
  traditional model.
• Risk premiums are reduced based on a
  managed process of risk transfer. Liquidated
  damages are applied to time critical trade
  packages after a careful cost / benefit
  assessment.
• Contingencies based on Risk Impact
  Analysis updated each month throughout the
  project.
• Under the fast tracking model longer
  periods of time are available to manage the
  design to work through site conditions risk
  during the tendering period. This creates
  what we call opportunity value which means
  that the Client has greater ability to
  influence the final cost of the project
  while simultaneously reducing risk.

COST CONTROL
ELEMENTS OF PROJECT COST
VALUE FOR MONEY
RISK PREMIUMS
RISK MANAGEMENT
COST UNCERTAINTY OR COST RISK
37
Section 6

• Why use Management Contracting?

38
Section 6 Why Use Management Contracting?

• Team Work and Synergy
• Fast Track Construction
• Buildability and cost efficiency
• Flexibility
• Non-adversarial and no conflict of interest
• Control

39
Fast Track Construction
TRADITIONAL CONTRACTING
Development Planning
DESIGN
TENDERING
CONSTRUCTION
MANAGEMENT CONTRACTING
Development Planning
DESIGN
TIME SAVINGS
PROCUREMENT
CONSTRUCTION
Time
40
Buildability and Cost Efficiency
Escalators at Pacific Place
41
Flexibility
Butterfields Club
42
Non-adversarial and no conflict of interest
22 Middle Gap Road
43
Control
City Plaza - HK Island East
44
Recommendations and Conclusions . Type of
Project . Size of Project . Owner
Capabilities . Time considerations .
Likelihood of changes
45
end