Online Task

Task 1: The Construction Industry

The first step of learning Real Estate Construction Management is to understand what the Construction Industry really means. So in this introductory topic, we learned about overall aspects of construction industry, who are the key stakeholders, how financing and contractual obligations work, this industry’s impact on US economy and many other useful ideas and terms.

Construction industry is regarded as bellwether of economic growth in the U.S.  

• Total annual volume of new construction in the U.S. is $1.2 Trillion (2006)   
• 9% of U.S. Gross National Product is expended on construction  
• Almost 1 out of every $10 spent for goods & services is spent on Construction  
• 5.5% of total workforce or 7.7 Million people are employed in Construction

Constructions can be initiated by private parties or public entities, but majority of new construction in this country is driven by private owners (78%). To initiate and complete a construction project you need atleast these members  

• Owner (public or private)  
• Architect-Engineer (or Design Professionals)  
• General Contractor/s  
• Subcontractor/s

The industry also has seen project management, construction management, and construction management (at-risk) as some essential functionality added to the food-chain. These professionals or firms may act as a liaison between the owner and all other parties, or can get into contract to finish the construction project via GC and subcontractors. Following are the main categories of construction industry  

• Residential Construction (56% of all new construction)   
• Commercial or Building Construction (26% of all new construction)  
• Heavy or Engineering Construction (16% of all new construction)  
• Industrial Construction (2% of all new construction)

I found this interesting video on Engineering Construction on YouTube regarding the famous Golden Gate Bridge:

Financing for construction projects can be obtained through banks, savings & loan associations, insurance companies, real estate trusts, or for public projects they can be financed through tax revenues, appropriations, or bonds. General Contractors can be selected by competitive bidding, negotiated contract or competitive negotiation. Competitive bidding can be open bidding or closed bidding. Without going into much detail of each type of contractor selection process, it is important to mention that Competition in Contracting Act of 1984 was passed to eliminate the noncompetitive, sole-source contracts that were often used by the U.S. Dept. of Defense. As a result almost all public contraction projects have to go through competitive bidding process and to promote Historically Underutilized Businesses (HUB) these projects has set asides where GCs will have to use HUB for a portion of the job. Construction contract can be crafted around lump sum price, guaranteed maximum price (GMP), cost plus fee etc.

Construction process can be linear or phased. In linear construction each stage, design, approval, bid, construction happen sequentially. Whereas in phased construction flexibility is achieved through overlapping phases and it emphasize speedy construction, sometimes at the expense of quality. One of the articles

Construction Management – “Management” vs. “Delivery” Clarifying CM vs. CM At-Risk, by Michael Kenig, Holder Construction was a great attempt at explaining the key differentiator between CM and CM at risk. I liked this graphic that the author used to quickly recognize whether the situation is CM or CM at risk.

Depending on where the CM is positioned he/she can be a liaison between the owner and other parties involved. On the other hand if he is more with the GC in a contractual relationship where he assumes the risk if GC fails, then it is CM at risk. I found the article very useful in understanding the concept.

The Skyscraper video from History Channel was awe-inspiring. And the building code related video would be useful for those who do not directly work in the planning-permit-inspection world. As I work in a City as a planner and deal with permit and inspection issues on a daily basis, it wasn’t very useful, but refreshing.

Task 2: Drawings & Specifications

Design of construction projects are done by architect and engineers (AE) who can be in-house, hired by the owner or have design-build or design-manage contract with the owner. Fees can be determined through one of the following:  

• Percentage of construction cost  
• Multiple of salary cost  
• Multiple of  salary cost plus non-salary expense  
• Fixed lump-sum fee  
• Total expense plus professional fee  
• Hourly or per diem charge

Services provided by these professionals vary based on the need of the owner. Also depending on the scope of services provided, responsibility to the owner and liability to third person varies. Usually these professionals have fiduciary responsibilities to the owner and if they fail to exercise ordinary skill and competence, may result in liability due to negligence. AE can be liable to a 3^rd party if bodily injury or property damage is caused to that party by reason of negligence of designer and is limited by statute of limitations. Statute of limitation varies from 4 years to 20 years in some states with average being 7 years.

These videos have done a good job in explaining the basics of how to read construction drawings:

Drawings are portrayal of physical aspects of structure that Show arrangement, dimensions, construction details, materials, and other info. Drawings are necessary for estimating and building. Well prepared drawings prevent disputes and overages. When I went through Architecture school in India (1997-2003) we still used to draft manually with drawing board, T-set-squares, and scales. We shifted to computerized drawing method after our first two years in college as AutoCAD was introduced. Drafting and design technology has grown in leaps and bounds since then. Now architects and engineers use specialized Building-Information-Modeling (BIM) systems to design the structure in a 3D layout. These techniques enhance designer’s probability of avoiding costly mistakes, conflict in MEP etc.

Once the design is finalized, standardized drawings are prepared for construction. The drawings show what is to be built; the specifications describe how the project is to be constructed and what results are to be achieved. I learned a new term in construction specification called MASTERFORMAT. MASTERFORMAT is a standard for organizing specifications and other written information for commercial and institutional building projects in the U.S. and Canada. Sometimes referred to as the "Dewey Decimal System" of building construction, MASTERFORMAT is a product of the Construction Specifications Institute (CSI) and Construction Specifications Canada. In November 2004 MASTERFORMAT expanded from 16 Divisions to 48 Divisions, reflecting innovations in the construction industry. It provides a master list of divisions, and section numbers and titles within each division, to follow in organizing information about a facility’s construction requirements and associated activities. 

• When a material or process specification is worded such that only one proprietary product will be acceptable they are called closed specification.  
• Architect-Engineer words specifications so that products of various manufacturers are acceptable they are known as open specification.

Task 3: Project Management & Administration, Project Time Management, Project Cost Management

Project management is an essential function of construction practise as it involves field projects directly. Project manager deals with project time and cost aspects to avoid delays or cost overruns. Project superintendent on the other hand supervises subcontractor activities and overall individual job activities to make sure every job meets schedule and cost limits. Quality control through project management can help construction industry in cost savings as well as it can potentially reduce claims and liability issues. Project scheduling or time management can be done via precedence diagram and critical path method (CPM). CPM is a path of activities on a critical path diagram that defines the duration of the project and critical path activities have no float. Float is determined by finding the difference between early start and late start days (ES-LS).

Project manager is responsible for the following:               

• Standards of quality  
• Minimum acceptable rates of production  
• Rates of planned expenditures

To determine how much project is over budget or behind schedule, the following variances are calculated.  

• Schedule variance = BCWP – BCWS  
• Cost Variance = BCWP - ACWP

Something to watch out for, from the owner’s perspective is front loading. Contractors may try to put the most costly jobs earlier on the schedule to get as much payment out of the owner as early as possible. Some of the videos that we watched as part of this section talks about modular residential structure and using modular components as part of residential construction. It shows how construction process can be quickened significantly by using factory built modular components. Quality can be ensured as well due to standardized factory production. Cost saving can be generated by reducing amount of subcontracting needs as these units will come with pre-installed MEP items. I found this idea pretty interesting. Don’t know how popular it will be among home buyers, but it seems to gather acceptance among construction community.

Task 4: Labor Law, Labor Relations, Project Safety

Without getting into the dry detail of labor law, labor relations, and project safety, I think the Aggie Bonfire video beautifully encapsulates the critical need for such rules and regulations to ensure safety of human lives. It was not one of the typical engineering construction projects where safety procedures were regulated by law. A more informal tradition was followed where students and faculty partnered to creatively continue this age-old custom. Somehow the procedure swayed from the informal safety precautions and guidance that were developed over the time. Structural stability was jeopardized by using uneven logs and going for a higher structure than one with a wider solid base that tapered off gradually. It reminds us how safety can be overlooked until tragedy happens.