UNIT 1 BASICS OF CONSTRUCTION PROJECT MANAGEMENT

Structure
1.1 1.2 1.3 Introduction
Objectives

Basics of Construction Project Management

Construction Projects Classification of Construction Projects

1.3.1 Classification Based on the Type of Facility Created 1.3.2 Classification Based on Total Outlay of Money 1.3.3 Classification Based on Duration of the Project 1.3.4 Differences from Other Type of Projects

1.4

Phases in a Construction Project

1.4.1 Project Initiation Phase 1.4.2 Project Planning and Design Phase 1.4.3 Execution and Control Phase 1.4.4 Project Closing Phase

1.5 1.6 1.7

Stakeholders in a Construction Project (Owner, Contractor, Architect, Engineer, etc.) Summary Answers to SAQs

1.1 INTRODUCTION
In this unit we would learn about construction projects, their types and characteristics. Different phases connected with a construction project are described. Stakeholders of a typical construction project are discussed.

Objectives
After studying this unit, you should be able to understand the meaning of a construction project, appreciate different types and characteristics of construction project, learn about how a construction project may be considered in phases, and recognize various stakeholders of a construction project.

1.2 CONSTRUCTION PROJECTS

Definition The evolution of Indian construction industry has been supported by the government. Even then, a lot of constrution activity is still organised in the unorganised sector. After independence the need for industrial and infrastructural developments in India has further contributed to development of construction, architectural and engineering services

Construction Management

The period from 1950 to mid 80s witnessed the government playing an active role in the development of the construction sector and most of construction activities during this period were carried out by state owned enterprises and were supported by government departments. In various five-year plans, construction of civil works was allotted a major portion of the total capital outlay. Following are some of the professional construction and consultancy providing companies, set up after independence : National Industrial Development Corporation (NIDC), Indian Railways Construction Limited (IRCON), National Buildings Construction Corporation (NBCC), Rail India Transportation and Engineering Services (RITES), Engineers India Limited (EIL), etc. Some of the private companies in this respect were M N Dastur and Company, Gammon India, Hindustan Construction Company (HCC), etc. Later on, the government started encouraging foreign collaborations in these services. This measure encouraged international construction and consultancy organisations to set up joint ventures in India. This led to further growth in the field of construction. In recent years, there has been an emphasis on involving the private sector through public-private partnerships & mechanisms like build-operate-transfer (BOT). In India around 16 per cent of the working population depends on construction for its livelihood. The Indian construction industry employs over 3 crore people. A major portion of this workforce is still employed in the unorganised sector. Construction contributes more than 5 per cent to the nation's gross domestic product in India. Total capital expenditure of central & state governments was of an order of Rs. 1,43,587 crores in the year 1999-2000. The Indian construction industry comprises more than 200 firms in the corporate sector. In addition to these firms, there are about 1,20,000 class A contractors registered with various government construction bodies.There are thousands of small contractors, who compete for small jobs or work as sub-contractors for big contractors. Total sales of construction industry have reached Rs. 42885.38 crores in 2004-05 from Rs. 21451.9 crores in 2000-01. The Indian economy has witnessed considerable progress in the past few decades. Most of the infrastructure development sectors moved forward, but not to the desired extent. With the present emphasis on creating physical infrastructure, a massive investment is needed in this sector. The Planning Commission has estimated that investment requirement in infrastructure shall be to the tune of about Rs. 14,50,000 crore during the 11th Five Year Plan period. This is a requirement of an immense magnitude. Better construction management is required for optimising resources and maximising productivity and efficiency. In the case of civil engineering, construction is the building of any infrastructure at a place. It involves any improvement or alteration to real estate including demolition work to clear a site. We keep on seeing and listening of the construction of different types of structures here and there. It may be a case of a house being built up in our locality or a case of a long bridge or a big size tunnel for a railway network somewhere in our country

or in any part of the world.

In any case, using different types of resources (like equipment, manpower, materials, etc.) we create a facility or a structure which is useful and provide service according to its function. Construction of houses, hospitals, roads, transmission towers, bridges, canals, dams, airport runways etc. may be cites as examples in this regard. Though construction of any facility or structure may look like being a single activity it is, in-fact, a result of several activities taking place in a particular duration of time. In other words, construction is a feat of multitasking. A construction project encompasses everything connected with the construction of a facility right from its inception to its actual creation. It may be classified depending on the type of the structure or facility being created. For example, it may be a construction project of a long railway tunnel or one linked to construction of a hospital building. At the same time, there are other criteria or aspects also which can be used to classify construction projects and to put a particular construction project into a particular type class. These criteria may be the total outlay of the project (or amount of money allotted to the project), total duration of the project, types of activities, nature and extent of risks involved, nature of priorities connected to the project etc. Many times, type of facility being constructed, total outlay of money and time duration are used to put a project into a particular type or class.

Basics of Construction Project Management

1.3 CLASSIFICATION OF CONSTRUCTION PROJECTS

Some possible classifications of construction projects are being presented below.

1.3.1 Classification Based on the Type of Facility Created

Housing project Hospital project Railway tunnel project Dam project Canal project Airport construction project etc.

1.3.2 Classification Based on Total Outlay of Money

Small projects Medium projects

 Large proje cts

1.3.3 Classific ation Based on Duration of the Project

Short -term proje cts Medi umterm proje cts Long -term proje cts S i m i l a r l y , w e m a y t r y

to classify construction projects based on types of activities involved in it. A classification based on the type and nature of risks involved shall differentiate between a construction project for a small building and another one 7

Construction Management

linked to the construction of a big dam. Likewise, some construction projects may be necessary in view of national safety and hence, they may be considered as a different type. For example, a construction project for a road in a city and the one for a road in a border area for the sake of troops movement for the security of the nation may not be considered at the same footing.

1.3.4 Differences from Other Type of Projects

Construction projects related with the construction of civil engineering structures or facilities have some peculiar attributes or qualities. These qualities make these projects different from other types of projects. Let us have some examples of other types of projects. A project for the manufacturing of some object may involve the manufacture of many objects which are similar. We keep on manufacturing similar objects for a long time, especially those ones which are successfully marketed. A human resource development project may involve the creation of educational facilities where similar educational endeavors may continuously go on. In these two types of above-mentioned projects the product is repeatedly produced. In the first case it may be some finished object, in the other one it shall be the educated person. Both of such projects may be situated in an area with sufficient facilities. Construction projects are different in the respect that each construction project is of a unique type. Choose any two construction projects and the differences may be readily noticed. They may be differentiated on the basis of type of structure being constructed (a building or a road construction project), use of material (brick masonry or reinforced cement concrete), type of terrain or area of construction (plane or rocky), type of soil conditions in the area of construction (clayey, sandy or rocky), etc. The gestation period or the period in which a construction project becomes economically viable, especially in bigger construction projects involving a lot of funds, is normally long. For example, construction of a dam may take a long time. When its construction is complete it may be used for producing electricity. The benefits or value of electricity produced may compensate the cost of the dam only in a long time. Many construction projects are started in difficult uninhabited areas and in this respect they may be different, for example, from other projects which are taken up in developed areas. Many times, construction projects are taken up by governments as a social responsibility. In our country many people are poor and illiterate. They are without any means of living. Poverty, population and unemployment in our country are responsible for the starting of some construction projects. In the times of famines or other natural calamities construction projects, such as construction of roads, embankments, ponds etc., are taken up with a major focus to provide employment to people.

1.4 PHASES IN A CONSTRUCTION PROJECT

In a construction project, different activities are taken up. We have to think about the need of the facility to be constructed. The benefits and costs involved are also to be assessed. If the things go the right way, everything concerning the project has to be planned in such a way that maximum advantages could be drawn out, investing the least (or optimum) amount of money in the optimum time (as the duration of time of a construction project also influences cost say, considering the salaries to be paid to workers). The facility being constructed

should have a durable life span with the least possible life cycle costs.

For a project, sequential grouping of various project phases, from the beginning to the end of the project, is made. This sequential grouping forms the project life cycle. The time between the start to the end of the project is termed as the project life span. A typical construction project has the following for phases : Project initiation phase Planning and designing phase Execution and control phase and Closing phase

Basics of Construction Project Management

In the project initiation phase, the scope of the project is looked at. The need of the construction of the facility is considered and various broad aspects such as those related to costs, time required etc are considered. Various constraints related to these aspects are also critically examined to reach a decision as to whether the construction project should be taken up. If a go-ahead decision is made, planning of various activities should be taken up in the second phase. It is the phase in which designs of various components or parts of the facility is to be taken up. Necessary approvals for the designs and construction activities are to be sought from the regulating agencies of the government. The third phase of execution and control consists of all activities which are taken up for the construction work. Control of activities from the point of view of quality of construction or workmanship is very important. The last phase, i.e. the control phase, represents all activities which are taken up in the last leg of the project. For example, if a person has to get his house constructed he must feel the need & necessity of it. In the first stage he would think about various options related with construction, costs involved and the time input needed for the construction. Depending on the resources available with him and various other constraints, he would have to take a decision if he should get the house constructed. Once a decision for the construction of the house is taken, he shall have to make a planning of construction. This planning may include the possible size of the house, materials to be used, location of the house if the house land site is still to be purchase etc. An architect also may have to be engaged to have a drawing of the house or an engineer for getting structural designs for the same. Necessary clearances for construction have to be obtained from the civil bodies such as municipal corporation or nagar palika, etc. He shall have to pay for the services of the architect and engineer as well as pay the required fees for getting clearances. All these are to be included in the cost of the construction project. All such activities come in the second phase of the project. In the third phase of execution & control, the contractor would take up the construction work of the house. An engineer appointed for the purpose may provide a check on the workmanship and quality of the construction work. In the final phase of the project activities such as finishing of the facility, electrification, plumbing etc may be taken up and necessary final payments are made. This may complete a small construction project such as construction of a small house. As reported earlier, any construction work utilizes various resources. These resources may be in the form of money, materials, time, etc. We have to use all 9

Construction Management

these resources in such a fashion that maximum advantage could be derived from them. Example of construction of a small house may indicate a simple nature of a construction project. This may be true for a small project but a large construction project may have a very complex interrelation between various activities. In such a case, a deep understanding of various phases, considered above, is important. Now let us consider these phases afresh for a large construction project.

1.4.1 Project Initiation Phase

This phase includes the following activities to be considered/taken up/completed. Need Identification This activity considers if there is a real need of the facility which is planned to be constructed. Because of the need only (and consequent benefits later on) bridges, roads, school buildings etc. are constructed. Feasibility Studies Feasibility or appropriateness of a construction project may be considered from various angles. Before taking up a construction project we have to determine what benefits may be available to the society after the intended facility is constructed. As resources are limited, they should not be used in the construction of structures which are not used. This fact requires a feasibility study for the use of the facility. A technical feasibility study would see the aspect of practicality of construction of a structure. A project has to be viable from the point of view of economy, finance and environmental conservation also. For example, a feasibility study for a bridge on a river may find out that the bridge would beneficial to the society. From the point of view of economic use of resources, the bridge should be made at the location where the width of the river (and consequently the length of the bridge) shall be the shortest. From a technical point of view, we shall have to see if the bridge can be constructed at the intended location (as there may be undesirable conditions of ground soil or flow of water, etc.). As described above, a feasibility study for a project analyses the intended construction project from various angles. A feasibility report consists of the following information : Project description Various locations and intended location of the project Approximate requirements of inputs of various resources Technical considerations Overhead costs Probable benefits and risks associated Implementation schedules

Investment Appraisals The costs of a large construction project may be exorbitant. For large projects even governments have to plan how money would be made available for them. Sometimes they also have to take loans or grants of

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m on ey fro m cr ed ito r ins tit uti on s su ch as th e W orl d Ba nk . In ou r co un try ,

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some construction projects are taken up jointly by the central government and state governments. In them proportions of costs to be borne by them are fixed. A project failure may occur due to unplanned, untimely and insufficient financing. Some of the ways to acquire finances for a project are the following : Equity and preference share capital consisting of governments contribution, public subscription, assistance from lending institutions such as Infrastructure Development Finance Corporation, etc. Lease financing of resources Issue of public sector bonds, debentures etc. Getting external aid from development institutions

Basics of Construction Project Management

Economic and Financial Studies A construction project should be economically and financially viable and sustainable. It means that the economy of the area should have a positive and beneficial effect from the project. For example, construction of a dam with a network of canals shall improve irrigation in an area, thus benefiting the agriculture in that area. Financially, the construction of the facility should be able to generate profits in the long term so that money invested in the project may be recovered during the life span of the facility constructed. Some of the facilities may not generate money resources back but they may serve other useful causes of the society thus proving their utility. In the economic and financial feasibility studies estimates regarding the cost and benefits are made. For a project to be viable, the cost benefit ratio should be greater than one. Statutory Clearances for the Project Before a project is started, a number of clearances are to be taken from the governmental agencies. Some of these are the following : Grant of letter of intent and licenses Approval of foreign participation and appointment of foreign consultants Import of capital goods, technology, machines, etc. Clearances for use of electricity, cutting of trees, use of river/canal water for construction Permission for use of explosives for blasting purposes Clearances based on environmental impact assessment

Project Definition Based on the above-mentioned activities, the scope of the project is to be finalized. It may include consideration of the following aspects : Broad scope of work involved Objectives of the project Time plan for the project 11

Construction Management

Availability of resources for the project and cash flow pattern Potential risks and problem areas

Development of Strategy for Execution of Project This step consists of consideration of various technical options for the execution of the project for a timely and efficient completion of the project. Structuring of Project Organization Sufficient manpower, including officers, is required for a big project. People from various organizations are deputed in a construction project. A hierarchy of these officers is made for an efficient command structure. Some middle level officers may be permanently employed in the construction project. They are required for maintenance of the facility created after the completion of the construction project. Decision Regarding Project Take Up A decision for going ahead with the construction project may be formally taken. If this happens, next phase of project planning and design is taken up.

1.4.2 Project Planning and Design Phase

In a construction project, various activities are taken up. In most of these activities resources are utilized. These resources should be used with proper planning so that their most optimum use may be possible. Activities should start and end with their predetermined time. Resources required for them should be available. At the same time, resources such as materials may not be procured in excess quantities in advance due to possible problems of storage or wastage. In a typical construction project, planning covers the following aspects : Planning for acquisition of basic designs and drawings for the project Time planning Planning for procurement of resources Cost planning &and budgeting Planning for services like transport, communication, etc. Planning for quality control Organizational planning Planning for risk management

The design phase includes the finalization of designs and drawings for the project. Specifications concerning quality of construction are also defined in this phase. Project information is collected, analyzed, communicated and recorded in this phase. Estimation of quantity of work, cost and construction time are decided based on the proposed designs only. Cash flow for the project is decided based on intended progress of work in different stages of construction. The design phase includes the following three stages. Schematic Design Stage In this stage preliminary designs are made with the help of sketches, diagrams and written documents to indicate the project 13

s c o p e . Design Developmen t Stage

This phase commences after the approval of schematic designs. Various aspects linked with construction practice, system integration and aesthetics are considered. Development of plans, elevations and sections of the facility are developed in this stage. For example, designs in connection of the following may have to be developed in this phase for a small housing project : Foundations and superstructure of the building Structural designs of various components Plumbing services Sewerage system and storm water drains External gas supply Fire alarm system

Basics of Construction Project Management

Documentation Phase of Drawings and Development of Specifications In this phase, drawing sets consisting of all drawings are made so that these can be distributed to concerned people and institutions. For example, these sets may be helpful to the contractors for making bids as well as for government institutions for granting clearances for construction of a facility. Specifications define the qualitative requirements for the products, materials and workmanship of construction. Specifications also define the inspection and acceptance procedures based on standards. Sometimes Indian standards may be referred in specifications and guidelines given in these standards shall have to be followed.

1.4.3 Execution and Control Phase

Execution involves directing, inspecting, motivating and inspiring people in a direction as per established vision to produce desired results. Some typical functions performed by the officers in the execution phase are the following. 12 Overseeing of project organization Mobilization of resources Maintaining of quality assurance set up Mobilization of site activities Development of team work Safety management Distribution of information Maintenance of recording procedures

 Maint enanc e of office s and stores P r o j e c t c o n t r o l p h a s e a i m s a t e n s u r i n g e x e c u t

ion of construction work as per planned schedule. Application of corrective measures, if needed, is made to achieve project objectives. Following aspects may be important in this phase : Control of Resources Control of schedule of construction Cost control

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Construction Management

Construction quality control Risk control Reporting of progress of work and performance Contract administration

1.4.4 Project Closing Phase

This is the winding phase of a project. The constructed facility is to be handed over to the right authority by the project construction staff. Unused materials are to be taken from the site and accounts are cleared.

SAQ 1
What are different phases in a construction project? Enlist them and write a small paragraph for each phase.

1.5 STAKEHOLDERS IN A CONSTRUCTION PROJECT (OWNER, CONTRACTOR, ARCHITECT, ENGINEER, ETC.)

Let us first understand the meaning of the term stakeholder. A stakeholder is a party that affects or can be affected by the actions of a project or an enterprise. The stakeholder concept was first used in a 1963 internal memorandum at the Stanford Research institute. It defined stakeholders as those groups without whose support the organization would cease to exist. The theory was later developed and championed by R. Edward Freeman in the 1980s. The term has been broadened to include anyone who has an interest in a matter. By stakeholders of a construction project we mean those people or organizations holding interest in a construction project, being considered. Their interests would guide or impel them to associate themselves with the project. In the last decades of the 20th century, the word stakeholder has become more commonly used to mean a person or organization that has a legitimate interest in a project or entity. In discussing the decision-making process for institutions including large business corporations, government agencies, and non-profit organizations the concept has been broadened to include everyone with an interest (or stake) in what the entity does. Let us now think about stakeholders of a company dealing with some business. Various stakeholders are mentioned in Table 1.1. 14 Table 1.1 : Stakeholders and Their Interests

Stakeholder Owners/shareholders Government

Interests or stakes Profit, Performance, Direction income from taxation, Providing employment

Basics of Construction Project Management

Senior Management staff Performance, Targets, Growth Non-Managerial staff Trade Unions Rates of pay, Job security Working conditions, Minimum wage, Legal requirements Value, Quality, Customer Care, Ethical products Interest income Jobs, Involvement, Environmental issues, Shares

Customers

Creditors Local Community

We know that any construction project is a feat of multitasking. It means that in a construction project many people or organizations would be associated with different activities of the project and they would make efforts to discharge whatever is required from them. For example, in the case of a professional entity undertaking the refurbishment of a housing unit, which is occupied while the work is being carried out, key stakeholders would be the residents of the housing unit, neighbours (for whom the work is a nuisance), construction management team and housing maintenance team (such as architects, interior designers, engineers and contractors) employed by the entity. Other stakeholders would be people or organisations funding the work. In general, there are three groups of stakeholders involved in a construction project. These may be termed as the following types. The owner group among many other responsibilities of this group the foremost one is to supply the finances needed for the project The engineering group this group consists of people such as architects, engineers, planners, designers and construction managers. These experts provide the specifications, plans and schedules and designs for the project. This group is also responsible for supervision and quality control functions. The construction group this group is responsible for the execution of the project according to the specifications provided by the engineering group. To understand, let us consider a small construction project of a residential house. Different persons, likely to be associated with the project and their respective interests or stakes and duties are presented in Table 1.2 below.

Table 1.2 : Stakes and Duties in a Small Project 15

Construction Management

Sl. No. 1.

Persons/Organizations Owner

Interests or Stakes To get the house constructed

Duties To approach various persons and allocate work to them To provide money for the project

2.

Architect

To get paid for his services

To plan the building To provide various construction drawings To provide labour and other resources To get the house constructed

3.

Contractor

To get paid for his services

4.

Engineer

To get paid for his services

To design and supervise construction To maintain the quality of construction

All such persons shall be considered as stakeholders in the construction project. The interest of the owner is to get the house constructed and that of an architect/contractor or an engineer is to provide their services and to earn their fees or profits. The above four persons are not the only ones who are connected with the construction of the house. For example, the owner of the house may have to take a bank loan for the construction of the house. The bank also becomes a stakeholder in the construction project as it shall earn interest income from the loan given to the owner of the house. Architects and Engineers may have several persons working for them in their offices. A contractor shall have a team of many workers including masons and labour. These secondary groups of people, working for architects/contractor/engineers, may several times, be not directly connected with the construction project but their interests lie with the successful completion of the construction activities related with the project. Construction projects of bigger sizes (i.e. involving more money) may have more stakeholders involved in them. Let us take another example of a river valley project where a dam, a number of barrages and canals have to be constructed. Water coming from the dam may be used for a number of purposes. These purposes may include power generation, irrigation of fields, drinking water supply, etc. For example, Tehri hydro power project in the state of Uttrakhand in India, in which the Tehri dam and a number of hydraulic structures and canals have been constructed, is being used for the generation of electric power and providing water for irrigation & drinking purposes to many states. That is why many state governments are stakeholders in this project. Naturally people of these states become indirectly the stakeholders as the completion of this project has started giving benefits to them. With various state governments, central government is also a stakeholder in the project as it has partly financed the project in the interest of people. These governments and the people of the concerned states may be added in the list of stakeholders in the table of stakeholders given above in the example of construction project of a small house. Here the owner of the construction project shall be replaced by the set of state governments & the central

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government of India. A part of the project may be constructed with the help of money received from the World Bank. As this type of a project is a mega project,

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many construction firms or organizations shall have to be involved. These firms may give a part of their jobs to a number of sub-contractors. Seeing to this, we may try to recognize some of the stakeholders in this project. These are listed in Table 1.3 below. Table 1.3 : Stakeholders in a Dam Project
Sl. No. 1. Persons/Organizations State governments and the central government Interests or Stakes To get the dam and other structures constructed Duties To approach various persons and allocate work to them To provide money for the project To plan the building To provide various construction drawings To provide labour and other resources To get the house constructed 4. Engineering organizations To get paid for services To design and supervise construction To maintain the quality of construction 5. 6. World Bank People of India To help countries in their development Development of the nation To fully or partly finance development projects To pay taxes To maintain facilities constructed

Basics of Construction Project Management

2.

Architect/architectura l firm

To get paid for services

3.

Construction firms and their sub-contractors

To get paid for services

A number of construction projects in which many countries have stakes or interests may be cited. India Pakistan Iran gas supply pipeline project may be one of these examples. Naturally governments of these countries shall be stakeholders in this project. Generally the interrelationship between these stakeholders is contractual in nature. The short-term employment with job tenure lasting only for the period of the duration of a particular contract and piece-wise payments made to contractors depending on the progress of the work are main features of any construction project. Management and labour relations also are contractual in nature and last only for the period of the contract made for the project. In a construction project each stakeholder generally work from the point of view of its own perspective. Each stakeholder wishes to protect its own interest. For example, the owner would emphasise strict financial control to achieve optimum quality with the least expenditure. An architects main concern shall be on aesthetics and superficial beauty of structures being constructed while a structural engineer or structural designer would stress on safety and practical aspects of construction. A construction manager would like to improve efficiency of work and improve the progress of work based on time, work and quality schedules. The contractor would definitely try to push up his output of work and productivity and many times he may become careless with regard to quality of 18

work and safety at

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Construction Management

the work site. Seeing from this social psychological angle, each interface among various stakeholders seems to be a conflict prone area. These interactions sometimes conflicting based on ones own interests of so many independent as well as interdependent stakeholders may have a far reaching influence on quality, productivity and work environment in a construction project. In big public projects, people at large should be considered as a group of stakeholder. Many times people oppose those projects which are considered by them as detrimental to their interests. For example, people may oppose a dam construction project with the following reasons that the construction of dam would lead to : submergence of a large area of land under water cutting of a large number of trees in those lands which are going to fall under water dislocation of a large number of farmers from that land area and consequently they would be brought to miserable conditions unsustainable environmental conditions in the dam area loss of culture and civilization loss of ancestral property to which they are emotionally linked trigger of earthquake activity in the area flash floods in the case of failure of dam insecurity in the time of a war

The anxieties and apprehensions of the people in such situations are generally assuaged by the government. They are sensitized regarding the benefits of the project and their duties and responsibilities for the development of the nation.

SAQ 2
(a) Enlist likely stakeholders in a highway construction project linking many state capitals with the national capital. The project is to be part financed by the World Bank. Can various stakeholders in a construction project have conflicting interests? If yes, explain with an example of your own.

(b)

1.6 SUMMARY
Construction projects may be classified on the basis of many parameters. A construction project generally has many phases. Different people are associated with these phases. Each phase takes the project from a different perspective. Various stakeholders are there for a construction project and they have different interests and duties.

1.7 ANSWERS TO SAQs

Refer the preceding text for all the Answers to SAQs.