Construction Project Organization
Construction Project Organization
roject Organiza
tion
Organizing for Project Management
Amiel Sacdalan
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1
What is Project
Management?
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Project Management
Project management is the art of directing and coordinating human and material resources throughout the life of a projec
t by using modern management techniques to achieve predetermined objectives of scope, cost, time, quality and particip
ation satisfaction.
Points to remember: 5
Construction projects have a specific set of objectives and constraints such as a required ti
me frame for completion.
1 2 3 4
Specification of project obje Maximization of efficient re Implementation of various o Development of effective co
ctives and plans including d source utilization through pr perations through proper co mmunications and mechani
elineation of scope, budgeti ocurement of labor, material ordination and control of pla sms for resolving conflicts a
ng, scheduling, setting perfo s and equipment according nning, design, estimating, co mong the various participan
rmance requirements, and s to the prescribed schedule a ntracting and construction i ts.
electing project participant nd plan. n the entire process.
s.
Areas requiring project manager knowledge and at
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tention:
management pro
cess approach
By analyzing management along functional lines, a framework can
be constructed into which all new management activities can be p
laced.
management pro
cess approach
Management functions can be organized into a hierarchical struct
ure designed to improve operational efficiency.
Successful firms must improve and align the many processes underway to their strategic visio
n. Strategic positioning in this fashion requires:
1 2 3
Creating a unique and valuable positio Making trade-offs compared to compet Creating a "fit" among a company's acti
n. itors. vities.
Strategy is creating fit among a company's activities. The success of a strategy depends on
doing many things well - not just a few - and integrating among them. If there is no fit among
activities, there is no distinctive strategy and little sustainability.
Project managers should be aware of the strategic position of their own organization and the
other organizations involved in the project.
For example, a contracting firm may see their strategic advantage in new technologies and
emphasize profit opportunities from value engineering.
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3
Strategic Planni
ng and Project P
rogramming
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Strategic Planning and Project Programming
The programming of capital projects is shaped by the strategic plan of an organization, which is influenced by market demands and resources c
onstraints.
The programming process associated with planning and feasibi
lity studies sets the priorities and timing for initiating various pr
ojects to meet the overall objectives of the organizations.
The owner or facility sponsor holds the key to influence the constr
uction costs of a project because any decision made at the beginn
ing stage of a project life cycle has far greater influence than thos
e made at later stages.
Points to remember: 20
Some projects, notably some nuclear power plants, are clearly unsuccessful and abandoned before completion,
and their demise must be attributed at least in part to inadequate planning and poor feasibility studies.
The design and construction decisions will influence the continuing operating costs and, in many cases, the revenues over the facilit
y lifetime. Therefore, an owner should obtain the expertise of professionals to provide adequate planning and feasibility studies.
Many owners do not maintain an in-house engineering and construction management capability, and they should consi
der the establishment of an ongoing relationship with outside consultants in order to respond quickly to requests.
Finally, the initiation and execution of capital projects places demands on the resources of the owner and the
professionals and contractors to be engaged by the owner.
For very large projects, it may bid up the price of engineering services as well as the costs of materials and equipment and t
he contract prices of all types. Consequently, such factors should be taken into consideration in determining the timing of a
project.
Example 1: Setting priorities for projects 21
A department store planned to expand its operation by acquiring 20 acres of land in the southeast of a metropolitan
area which consists of well established suburbs for middle income families. An architectural/engineering (A/E) firm
was engaged to design a shopping center on the 20-acre plot with the department store as its flagship plus a large n
umber of storefronts for tenants. One year later, the department store owner purchased 2,000 acres of farm land in t
he northwest outskirts of the same metropolitan area and designated 20 acres of this land for a shopping center. Th
e A/E firm was again engaged to design a shopping center at this new location.
The A/E firm was kept completely in the dark while the assemblage of the 2,000 acres of land in the northwest quietl
y took place. When the plans and specifications for the southeast shopping center were completed, the owner infor
med the A/E firm that it would not proceed with the construction of the southeast shopping center for the time bein
g. Instead, the owner urged the A/E firm to produce a new set of similar plans and specifications for the northwest s
hopping center as soon as possible, even at the sacrifice of cost saving measures. When the plans and specification
s for the northwest shopping center were ready, the owner immediately authorized its construction. However, it took
another three years before the southeast shopping center was finally built.
Example 1: Setting priorities for projects 22
The reason behind the change of plan was that the owner discovered the availability of the farm land in the northwe
st which could be developed into residential real estate properties for upper middle income families. The immediate
construction of the northwest shopping center would make the land development parcels more attractive to home b
uyers. Thus, the owner was able to recoup enough cash flow in three years to construct the southeast shopping cent
er in addition to financing the construction of the northeast shopping center, as well as the land development in its vi
cinity.
While the owner did not want the construction cost of the northwest shopping center to run wild, it apparently was s
atisfied with the cost estimate based on the detailed plans of the southeast shopping center. Thus, the owner had a
general idea of what the construction cost of the northwest shopping center would be, and did not wish to wait for a
more refined cost estimate until the detailed plans for that center were ready. To the owner, the timeliness of compl
eting the construction of the northwest shopping center was far more important than reducing the construction cost
in fulfilling its investment objectives.
Example 2: Resource Constraints for Mega Project
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A major problem with mega projects is the severe strain placed on the environment, particularly on the resources in t
he immediate area of a construction project. "Mega" or "macro" projects involve construction of very large facilities s
uch as the Alaska pipeline constructed in the 1970's or the Panama Canal constructed in the 1900's. The limitations
in some or all of the basic elements required for the successful completion of a mega project include:
• engineering design professionals to provide sufficient manpower to complete the design within a reasonabl
e time limit.
• construction supervisors with capacity and experience to direct large projects.
• the number of construction workers with proper skills to do the work.
• the market to supply materials in sufficient quantities and of required quality on time.
• the ability of the local infrastructure to support the large number of workers over an extended period of tim
e, including housing, transportation and other services.
Example 2: Resource Constraints for Mega Project
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To compound the problem, mega projects are often constructed in remote environments away from major populatio
n centers and subject to severe climate conditions. Consequently, special features of each mega project must be ev
aluated carefully.
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4
Effects of Proje
ct Risks
On
Organization
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Project Risks on Organization
The uncertainty in undertaking a construction project comes from many sources and often in
volves many participants in the project. Since each participant tries to minimize its own risk, t
he conflicts among various participants can be detrimental to the project.
Only the owner has the power to moderate such conflicts as it alone holds the key to risk assignment through proper contractu
al relations with other participants. Failure to recognize this responsibility by the owner often leads to undesirable results.
In approaching the problem of uncertainty, it is important to recognize that incentives must be provided if any of the particip
ants is expected to take a greater risk. The willingness of a participant to accept risks often reflects the professional compe
tence of that participant as well as its propensity to risk.
However, society's perception of the potential liabilities of the participant can affect the attitude of risk-taking
for all participants. When a claim is made against one of the participants, it is difficult for the public to know
whether a fraud has been committed, or simply that an accident has occurred.
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Risks in construction projects
environmental protection
has contributed to the uncertainty for construction because of the inability to know what will be required an
d how long it will take to obtain approval from the regulatory agencies. The requirements of continued re-ev
aluation of problems and the lack of definitive criteria which are practical have also resulted in added costs.
economic instability
Economic conditions of the past decade have further reinforced the climate of uncertainty with high inflation
and interest rates. The deregulation of financial institutions has also generated unanticipated problems relate
d to the financing of construction.
Organizational relationships 29
The risks related to organizational relationships may appear to be unnecessary but are quit
e real.
Strained relationships may develop between various organizations involved in the design/c
onstruct process.
When problems occur, discussions often center on responsibilities rather than project need
s at a time when the focus should be on solving the problems.
Cooperation and communication between the parties are discouraged for fear of the effect
s of impending litigation.
This barrier to communication results from the ill-conceived notion that uncertainties resultin
g from technological problems can be eliminated by appropriate contract terms. The net resu
lt has been an increase in the costs of constructed facilities.
Technological problems 30
The risks related to technological problems are familiar to the design/construct professions which h
ave some degree of control over this category.
Certain design assumptions which have served the professions well in the past may become obsolete in d
ealing with new types of facilities which may have greater complexity or scale or both.
Site conditions, particularly subsurface conditions which always present some degree of uncertainty, can create
an even greater degree of uncertainty for facilities with heretofore unknown characteristics during operation.
Because construction procedures may not have been fully anticipated, the design may have to be m
odified after construction has begun.
An example of facilities which have encountered such uncertainty is the nuclear power plant, and m
any owners, designers and contractors have suffered for undertaking such projects.
Remember 3
1
If each of the problems cited above can cause uncertainty, the combination of such problems is often regarded by a
ll parties as being out of control and inherently risky. Thus, the issue of liability has taken on major proportions and
has influenced the practices of engineers and constructors, who in turn have influenced the actions of the owners.
Many owners have begun to understand the problems of risks and are seeking to address some of these problems.
For example, some owners are turning to those organizations that offer complete capabilities in planning, design, an
d construction, and tend to avoid breaking the project into major components to be undertaken individually by speci
alty participants. Proper coordination throughout the project duration and good organizational communication can
avoid delays and costs resulting from fragmentation of services, even though the components from various service
s are eventually integrated.
Attitudes of cooperation can be readily applied to the private sector, but only in special circumstances can they be a
pplied to the public sector. The ability to deal with complex issues is often precluded in the competitive bidding whic
h is usually required in the public sector. The situation becomes more difficult with the proliferation of regulatory req
uirements and resulting delays in design and construction while awaiting approvals from government officials who
do not participate in the risks of the project.
Organization of Project Partici
pants
The top management sets the overall policy and selects the appropriate or
ganization to take charge of a proposed project. Their decisions will also in
fluence the organization to be adopted for project management. In genera
l, there are many ways to decompose a project into stages.
1
Sequential processing whereby the project is divided into separa
te stages and each stage is carried out successively in sequenc
e.
2
Parallel processing whereby the project is divided into independe
nt parts such that all stages are carried out simultaneously.
3
Staggered processing whereby the stages may be overlapping, s
uch as the use of phased design-construct procedures for fast tr
ack operation.
critical issues involved in organizatio
n for project management 3
3
It should be pointed out that some decompositions may work out better than others, depending on
the circumstances. In any case, the prevalence of decomposition makes the subsequent integration
particularly important.
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How many organizations are involved?
2
What are the relationships among the organizations?
3
When are the various organizations brought into the project?
Separation of organizations
Numerous organizations serve as consultants or contractors to the owner, with different orga
nizations handling design and construction functions.
Integration of organizations
A single or joint venture consisting of a number of organizations with a single command under
takes both design and construction functions.
basic approaches
There are two basic approaches to organize for project implementation, even though many variations may e
xist as a result of different contractual relationships adopted by the owner and builder.
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Matrix Organiz
ation
Since construction projects may be managed by a spectrum of partici
pants in a variety of combinations, the organization for the managem
ent of such projects may vary from case to case. On one extreme, eac
h project may be staffed by existing personnel in the functional divisi
ons of the organization on an ad-hoc basis as shown in Figure 2-4 unt
il the project is completed. This arrangement is referred to as the mat
rix organization as each project manager must negotiate all resource
s for the project from the existing organizational framework.
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Project-Orient
ed Organizatio
n
On the other hand, the organization may consist of a small central fun
ctional staff for the exclusive purpose of supporting various projects,
each of which has its functional divisions as shown in the figure. This
decentralized set-up is referred to as the project oriented organizatio
n as each project manager has autonomy in managing the project.
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