Transcript CHAPTER-7 CONSTRUCTION AND CLOSEOUT

CE-332 CONSTRUCTION ENGINEERING
AND MANAGEMENT
CHP 7:
CONSTRUCTION AND CLOSEOUT
BY
ASSOC. PROF. DR. AHMET ÖZTAŞ
UNIVERSITY OF GAZİANTEP
DEPARTMENT OF CIVIL ENGINEERING
Lecture 7
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CHAPTER-7
CONSTRUCTION AND CLOSEOUT
 INTRODUCTION
 CONSTRUCTION
 SUBCONTRACTS
 ORGANIZATIONAL
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DESIGN
Legal Forms of an
Organization
CONSTRUCTION ETHICS
PARTNERING
QUALITY MANEGEMENT
JOB START
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OPERATIONS
PROCUREMENT
JOB SITE
PROJECT COMPLETION
Construction Closeout and
Turnover
Planning
Owner Startup
OPERATING PHASE
CONCLUSION
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Student learning objectives
 The activities necessary to properly organize and
prepare a project for construction.
 How construction sites are staffed and the
relationship between the field and the home offices.
 The legal forms of construction organizations.
 The physical and administrative work necessary to
properly close out and turn over a construction
project.
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Introduction-1
Once a project enters the construction phase, builder's work is same no
matter what contract form or delivery method was chosen.
Same activities are necessary to get the project built:
 the subcontractor’s contracts must be negotiated,
 the project staffed,
 a detailed schedule of values and work schedules developed, and
 the job site assembled.
To simplify our discussion, we assume builder as a CM at risk. This means
the subcontractors work directly for the builder with no direct contractual
relationship with the owner.
Construction is;
 a show time.
 Testing the assumptions made during planning and design
 Transformation from 2-dimentional to 3-dimentional
 From a computer image to a full-scale object.
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Introduction-2
After drawings and design are complete, need for planning, anticipation, and even
design does not end. Rather, needs shifts into field.
 Everyday that work installed,
 the conditions at site is change,
 Construction manager aware of these shifting circumstances.
Manager should be ahead of the day. Manager`s real skill is to solve problem
before it is a problem. How it done?
With Good anticipation, contingency planning and Well-organized team of people
A large part of organizing for construction is creating best possible relationship
among,
The work: needs to be accomplished
The people: who accomplishing the work
The conditions: under which they are working
The work that needs to be accomplished is largely outside the control of the
contractor. The designer and the owner determine the scope of the project. To
make the work most efficiently, the contractor should setup two components:
the personnel and the working conditions.
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Subcontracting-1
Once owner accepts bids, CM enter into negotiations with subcontractors.
Parties discuss:
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Obligations to owner,
Closeout requirements,
Assumptions that formed the basis of bid.
A final price is agreed after discussions. A contract is signed between
subcontractor and CM, no direct contractual relationship with owner.
Subcontract can be signed by contractor with either
 A trade contractor: has specific construction skill... Carpentry, plumbing
 Supplier: furnishes a product to job… refrigeration unit, electrical
generator.
Example: a mechanical sub-c may hire a sheetmetal sub-c to fabricate
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and install the ductwork
Subcontracting-2
 There are provisions in owner-contractor general conditions that pass
on the same owner obligations to sub-c and sub-c to owner.
 Subcontractors do large % of work on most projects and at
considerable risk. They are bound by terms of contract between prime
contractor and owner, but no part in negotiating them.
 Most sub-c are not paid until owner pays the prime contractor.
 When change order needs to be negotiated, payment can occur many
months after work completed.
After signing a contact, CM works with sub-c and develop a detailed
schedule.
With sub-c on board, CM have majority of work force, needs home office
support, field supervisory personnel and laborers.
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Staffing-1
On any construction project, there
is a split in how the project is
managed between home office and
field office.
Home office personals and field
office personals perform different
tasks. (See next figure).
• Home office…communication
with owner. Preparing reports,
impeding problems and suggested
solutions.
• Field office…supervision of sub-c,
management of safety program.
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Staffing-2
Although projects organizations are temporary, they
must interact with corporate structure of company. Home
office staffs may grow and shrink with ups and downs of
market.
What this mean?
- some functions (scheduling, procurement, estimating,
accounting) may take place at Home office during good
times but shift to field during slow time.
A project manager must be careful about when he
staffs a project. If there is insufficient work, lost money
never recovered. However, understaffing can cost time on
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project that may never be recovered.
Staffing-3
At the end of a project, it can be difficult to get people off the
job if there is no pressure for staff members on the other jobs.
Ideally, a job will have a gradual build up, a level production
period, and a gradual decrease. PM analyze this pattern and
try to mimic it as closely as possible. However, a job
slowdown can be difficult to accommodate.
Slowing down or stopping work means finding other places
for workers. Once workers are gone from the site, it is difficult
to get them back.
Each project requires different staffing scheme, if it is large
there may be more task breakdown, if small less breakdown.
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Organizational design-1
Organizations can take many forms.
Their structure is dictated by the nature of
work, their size, and the level of control.
The generalist organization is the most
basic organizational structure. It includes
both line authority and staff authority.
Line authority: giving orders `down the
line` about production. Line supervisors
direct, supervise, and evaluate work of
their subordinates.
Staff authority: advising and assisting
those with line authority.
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Organizational design-2
A concern of every organization is
number of people that any one manager
has control over. This is called Span of
control. Narrowing one’s span of control
creates additional organizational
hierarchy. A narrower span of control
provides more supervision and control
but also tends to create more
departmentalization (specialization).
Here, each unit focuses on a specific
technical or production area, grouping
people by discipline, expertise, and
training…promoting technical teamwork.
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Organizational design-3
There is downside to departmental
structure. Communication among
the involved departments must be
sound with each providing the
necessary resources at the correct
times.
Matrix organization responds to
this need (See Fig 7.6). Here, a
PM is assigned the responsibility
for budget and schedule, and for
reporting on project status to client
and principals of the firms.
PM must work closely with each
dept. head.
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Organizational design-4
Communication and decision making must be
considered in the design of an organization.
More layers of hierarchy means information will be
received with longer time, and information may be filtered.
The higher in an organization that a decision is
made , farther the decision maker is from the job and
longer it may take to be made.
Job satisfaction must also be considered.
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Legal forms of organizations
How the Home office is organized,
How flexible the administration is,
Administration`s impact on decision making
depends in part on legal the form of organization.
Three forms are common in businesses ;
1) Proprietorship
2) Partnership
3)Corporation
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Proprietorship
It is single-person ownership. This person
owns, operates, and makes all major decisions for the
company. Only responsible person is the one proprietor.
This is simplest form of ownership. It can be started with
no formal documents and ended with no formal
documents.
The disadvantage of this form is the high risk involved for
the person who owns the company. All losses are
personnel losses to the owner.
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Partnership-1
A partnership must include at least two people to be legal,
but they may be many more than two in the partnership.
The percentage of ownership varies. Partners are each
fully responsible for all debts incurred by any one member.
Partnership dissolves according to prior agreement about
how to dissolve it. Reasons of dissolution:
• If one member dies or is terminated for just cause,
• if there is mutual decision to quit or a predetermined time
frame for dissolution. However, there can be provisions for
others to continue by buying shares. In a bankruptcy or
financial loss, there are general rules for how depths are
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paid off. Outside creditors are paid first.
Partnership-2
Limited partnership: another variation of partnership
agreement.
Limited partner … who invest a certain amount of money,
but don`t contribute management of firm. He is only liable
to the extent of his investment, even if the percentage of
ownership is greater. The difference between general and
limited partners is this limit of liability and their involvement
with business decisions.
General partners may take on limited partners to increase
their ability to raise capital and credit base while retaining
control over the firm.
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Corporation-1
Corporations are most complex form. To form a corporation, a
company has to apply for a charter from the state in which it
does business. Once corporation is formed, formal
meetings must be held for any major decision.
The percentage of ownership is recognized in the amount
of stock given to each member. Each share is given
A par value… simple unit of measure – say 1TL, and
A book value… actual amount contributed by each member.
Advantages:
a) Corporation has continuity independent of the stockholders.
b) The corporation is perpetual.
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Corporation-2
c) Assets that belong to firm are attachable for claims
Stockholders are only liable up to the amount that they
have invested in the company. The corporation can sell
more shares of stock to raise additional capital.
Disadvantages:
a) Some management decisions about dividend levels
paid out or the selling of additional stock must be
approved by all stockholders.
b) Taxes. Profits from corporations are taxed twice: once
on the corporate level and once on an individual level.
Dissolution: first outside creditors, last shareholders.
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Construction ethics-1
Society governs behavior by written laws and unwritten
moral and ethical codes. Many acts are allowed by low but
considered unethical or immoral by a certain group’s
standards. In professional circles, expected ethical behavior is
sometimes written out as a code of ethic.
Often it is difficult to discern if certain ways of acting
are unethical or simply economic business practice.
In construction, one example of unethical behavior is
bid shopping. Basically, bid shopping involves letting a
specific contractor or subcontractor know enough about the
other bids so that he/she can bid below them to win the job.
This practice hurts all bidders.It is fair not to give everyone the
same chance of winning the job. winning subcontractor may
reduce his profit that the incentive to cut corners is high. 21
Construction ethics-2
Additionally the owner will find it difficult to get good bids on
subsequent jobs.
Being able to trust the people we work with is a big part of
putting our best effort into our work. On a construction job
people often do not know each other very well. They
come together to do a project but may have no prior
common working experience. A key to success is creating
a trusting environment in which people feel comfortable
with each other.
If project participants adhere a professional code of ethics,
they already have a foundation for creating that trust.
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MÜHENDİSLİK YEMİNİ
Bana verilen mühendislik unvanına daima
layık olmaya; onun bana sağladığı yetki ve
yüklediği sorumluluğu bilerek, hangi şartlar
altında olursa olsun onları ancak iyiye
kullanmağa; yurduma ve insanlığa yararlı
olmaya kendimi ve mesleğimi maddi ve manevi
alanlarda yükseltmeğe çalışacağıma namusum
ve şerefim üzerine yemin ederim
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Partnering-1
Construction industry adopted a more structural approach to
working together. This approach is called partnering. Its
primary goal is to encourage people to look beyond traditional
adversarial roles toward cooperation & open communication.
For partnering to work, all stakeholders must make serious
commitment. Issues of ethics are also taken more seriously.
Partnering usually begins with owner. There must be a
commitment from top management of all stakeholders and a
designated managing partner who nurtures the project
participants throughout the project.
Partnering is a project-length commitment and does
need continual renewal.
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Partnering-2
Usually partnering involves a workshop in which all
participants (through a facilitator), discuss and agree to
mutual goals. A charter is developed that identifies the goals.
Then a formal organization is established. This
organization lays out lines of communication, dispute
resolution methods, and decision making and problem
solving procedures. Follow-up and support are important
components of the plan.
The rewards of partnering are;
 Decrease in litigation costs;
 Collaborative problem solving; and
 Equity in the development of goals, personnel job
satisfaction, and a job well done.
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Quality management-1
Another factor that contributes to more cooperative corporate relationships
across traditional boundaries is the evolution of a company’s internal
quality management. This breaks down barriers among organizations
because customer satisfaction is focus of work and measure of success.
Many companies use standards such as ISO 9000 to assure costumers
worldwide that quality will be consistently high.
Goal: to deliver consistent high quality to client at a reasonable profit.
It assumes high level involvement from upper management and participation
by everyone in the organization. The fulfillment of client needs defines
success, and the client’s voice is included in all organization decision.
All of these systems assume a feedback loop either through internal methods
or through customer surveys.
QM systems developed for product-oriented organizations, but also applied to
construction. In some construction companies bonuses are given at the
end of a project after feedback is solicited from the customer.
Bonuses are given to team in equal proportions without preference to one
individual. This encourage people to look out for each other, and focuses
attention on successful completion of whole job, not just isolated tasks.
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Quality management-2
There are many rewards to creating a customer-focused organization. It
means;
 Building long term relationships,
 Learning to understand needs of customer. This means repeated
business and more negotiated work.
 More opportunities to help clients in other ways.
The foundation of total quality is continuous improvement. One way is
ISO 9000. ISO stands for International Organization for
standardizations.
Registration in the ISO means that a third-party accredited auditor will
examine the company’s practice to ensure that it meets the
appropriate standard. Companies join the ISO with the hope of
increasing their competitive advantage worldwide.
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Job start-1
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Before actual construction starts, the owner, the architect,
and the contractor usually hold a preconstruction meeting.
Focus… logistics of getting the project built.
Agreement about communication protocol is established,
site rules are reviewed,
certificates of insurance are submitted.
The contractor establishes when the work is to begin.
Team members discuss means and methods. They review
general and special conditions of the contract to ensure that
contractor understands his/her obligations.
Administrative details are worked out. (change orders, shop
drawing procedures, applications for payment).
Other site-specific issues are reviewed.
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Job start-2
One important issue is communication protocol.
Discussions clarify;
 the specific roles of each project participant;
 establish lines of communication; and
 set procedures for submittals, questions and answers
about design, emergencies, community relations, and
dispute resolution.
Often a project runs into trouble when communication
protocol are either poorly worked out or ignored by project
participants. To ensure that right information gets to right
people at right time, these protocols must be observed
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Construction operations
Organizing a construction project is primarily a material
handling challenge:
 understanding how material needs to flow into the site,
 when it needs to arrive, and
 how it will be manipulated once it arrives.
Some materials are used temporarily (eg scaffolding, forms),
others permanently (steel, concrete, etc). The quantity of
materials required and size of each component are two
factors to consider when organizing the job, because
sometimes sites are limited in size, especially in an urban
environment.
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Procurement-1
During the latter stages of design, the owner or construction
manager purchases critical items needed on the job earlier
than normal bidding processes allow for. These may be
large equipments items or materials.
Once contractor starts buying out subcontracts, more items
will be identified that needs to be purchased out of
sequence. An understanding of global economic conditions
and local construction activities will help identify which
items should be bought early.
In a simple world, purchasing would involve ordering a
specific item for a specific amount of money to be
delivered at a specific time.
In more complex world of construction, construction manager
has to consider many factors
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Procurement-2
Before committing to a specific item, the construction manager should
consider the following:
 Evaluate the difference in the handling cost versus the worth of item.
 Discuss custom items with designer;standard product may do same job.
 Order in bulk to bring down the unit cost.
 If the owner organization has agreements with vendors, use leveraging
power to reduce costs.
 Understand production schedules and stay within normal ranges to
keep costs at a minimum.
 Consider shipping costs to choose the best method of getting the
material to the site…
 Evaluate cost and risk to the job of storing materials before installed.
(double handling, damage, theft, misplacement)
 Conversely, consider the cost of not having the material on site when
needed- direct cost of rush shipping and indirect costs of interruption.
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Procurement-3
Procurement deals with entire cycle of material handling – from purchasing,
shop drawing approval, fabrication, delivery, installation, testing, and
then turning over completed project to owner.
If procurement is treated only as a purchasing function, construction
manager may have problems.
Vendors do not voluntarily share information about production problems,
and sometimes conditions change on the job, accelerating the schedule
of delivery.
A routine trip to a vendor`s facilities, periodic phone calls to check on
progress, and understanding the production schedules and routine plant
shotdowns are all important.
Control of material purchasing, delivery, and storage on the site can have a
large effect on overall production on the job.
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Job site-1
A construction site is like a factory. Both transform row materials into a
finished, permanent product that is more than the sum of its parts.
Each new product that come to the factory requires only minor retooling at
the plant. But construction site deals with one unique product. When
product is complete, site is disbanded and its parts sent off to new
sites.
Advantage: site is set up specifically to manage a project most efficiently.
Disadvantage: lessons learned are not transferable to the next project.
This is unique challenge of construction.
Before the contractor sets up the job site, he should plan it on paper. A
scaled version of the site, with dimensions, access road, utility
locations, elevations, and existing structures, should be noted. Then
decide how people will move into and around the site. Visitors must be
escorted to wherever they need to go in the site. Because, the site is
messy, confusing, and ever changing.
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Job site-2
The goal of the site is to
make
 Sorting,
 Processing,
 Movement of
materials
from storage to lay
down areas to
installation areas as
short as possible.
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Job site-3
For the site to operate efficiently over time, many
organizational and procedural decisions and policies need
to be made.
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Contractor's designated area for storage
Designated locations for lunch and breaks
Use of toilet facilities
Start and finish times for work; regular and overtime rules
Security access after hours
Everyday access to and from the site
Safety rules and first-aid stations
Emergency evacuation and accident procedures.
Superintendent must ensure that each new employee is aware
of these rules and obey them.
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Project completion-1
Construction Closeout and Turnover
Completion of a project is actually more complex than it seems.
One common miscalculation is underestimating this complexity
However, a poorly planned, understaffed project closeout can have a
adverse effect on a company’s reputation.
By the end of job everyone is tired. Huge efforts have been expanded from
beginning to ending of the job. But the job doesn’t end here, instead, last
phase of the project begins. This is involving closeout, commissioning of
systems, and turning over the project to the owner.
Closeout usually takes place while the owner is occupying the facility. The
punch list items that are left over can be a source of annoyance for the
owner, with people complaining when they move in that the facility is not
complete. Usually there is not enough construction people at the end of
job. Last minute items and their importance for the owners make difficult
to schedule, because his/her focus is on the next job.
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Project completion-2
Planning
Project closeout officially begins when the contractor turns over the
certificate of substantial completion to the owner. Closeout requirements
should meet the specifications that was agreed at the beginning.
Closeout requirements may include the following:
 Responsibilities for each participants: owner, contractor,
designer
 Clarification of what constitutes substantial completion and
final completion
 Verification of government regulations
 Schedule of owner-furnished equipment and furniture
 Confirmation of warranty start and duration
 Review of turnover procedures
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Project completion-3
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Planning
A few months before the end of the project second meeting should be
established to review obligations. At meeting, agreed procedures
and responsibilities should be reviewed to refresh everyone`s mind
Closeout includes organizing and turning over documents to the
owner as follows:
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Guarantees and warranties
Certificates of completion
Operation manuals and instructions for equipment
Keying schedule
Maintenance materials, spare parts, special tools
As-built drawings
Certificates of code compliance
Lien waivers
Consent of surety for final payment
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Project completion-4
Field office also has to be decommissioned, including the equipment. How
equipment was purchased determines how it is decommissioned.
Builder can move it to another site.
Several other activities are also involved in decommissioning the field office.
 Inventory equipment, office supplies, and furniture
 Changing the field office address,
 Terminating phone,radio, and pager accounts
 Terminating office equipment, rentals, and leases
 Demobilizing the office and taking it off site,
 Reassigning field office staff
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Project completion-5
Perhaps the most important and the most visible aspect of the closeout is
closeout of the construction and the subcontracts, which involves the
following:
 Preparing the closeout schedule
 Terminating temporary utilities
 Issuing contractor’s certificate of completion
 Conducting a pre-punch list inspection
 Preparing a punch list with the architect
 Completing a punch list
 Performing the final inspection
 Receiving a certificate of completion or substantial completion
 Requesting final payment
 Issuing a lien waiver and consent of surety of payment
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 Receiving final payment
Owner startup-1
People who are going to ultimately run the facility should be
involved in the design so that they understand the rationale
behind design decisions and have time to get familiar with
new technologies as they are incorporated.
During design, team members should hold reviews that
focus on operations and maintenance issues, including
the following.
 Size and layout of working space around equipment,
 Suitability of equipment models in relation to existing
inventory,
 Proposed control systems and their effect on energy cost
and staffing requirements,
 Life-cycle costs of equipment and building systems
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Owner startup-2
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Environmental considerations: airflow, noise, odors,
safety, accessibility for people with disabilities
Personnel and budget planning for operations and
maintenance staff (Q&M), including training
requirements (with the goal of having trained staff on
opening day)
If these reviews take place during design, the start-up
period will flow much more smoothly.
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Owner startup-3
Those are the main components of a start-up program:
Scheduling activities, determining construction
completion, and putting together an action plan
that outlines who will oversee testing
 Determining that each component of the project
is in working order and can be operated as
planned
 Providing a training program for Q&M personnel
 Confirming Q&M manuals
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Operating phase
During the operating phase the facility is staffed entirely
by the owner’s employees. The owner’s staff
members serve as the first contact for any problems;
but they in turn call the contractor, the subcontractor,
or the supplier directly depending on the nature of the
problem.
It is in contractor`s best interest to be responsive during
this phase.
It is often frustrating time for owner as bugs of new
equipment are worked out. If it is difficult to get
attention of installer or manufacturer that frustration
can exceed the actual bounds of the problem.
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Conclusion
The construction period can be the most exciting part of the
design/built cycle. Everyday conditions of the job change.
If the project gets out of control from a cost, schedule, or
logistical standpoint, it is very difficult to get it back on track.
Tempers get short; motivation to cooperate is lessened; efforts
to blame increase.
Construction project manager must be quick to recognize when
the project is going off track and be prepared to act
decisively to get it back on track, often before anyone else
notices that it has strayed. Last minute details, pressures
from the owner to finish, loss of staff and subcontractors as
the project winds down all play against getting the project
100 % complete. However, that is goal and expectation.
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Next Chapter
Chapter 8 – ESTIMATING PROJECT COSTS
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