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UNLV / Construction Management / CEM 100 / Who are the members of a construction team?

Who are the members of a construction team?

Who are the members of a construction team?


CEM 100 with Prof. Neil Opfer

Who are the members of a construction team?

Exam 1 Study Guide

Chapter 1

Construction Categories

● There are four main construction categories, and contractors typically specialize in one of these.

○ Residential Construction

○ Commercial Construction

○ Heavy/Civil/Highway Construction

○ Industrial Construction

Members of a Construction Team

● Owner

○ The owner of the project initiates, finances, and eventually owns (has a title to) the completed construction. This individual may be a public or private entity, or he/she may be part of a partnership or corporation

● Architect Engineer

What are the three ways to organize a business?

○ These individuals are generally part of private or independent design firms that produce the project design and work closely with the owner

● Heavy/Civil/Highway Construction

● Engineering Consultants

○ During the construction design, other professionals may be needed to complete the project. If the primary designer is an architect, may enlist others such as civil engineers, structural engineers, mechanical engineers, and etc. to complete a project

● Developers If you want to learn more check out What are the properties of alkaline earth metals?

○ A developer is a firm that designs and finances large buildings

● Construction Manager

○ The construction manager is usually a contractor or a firm that specializes in construction management.

What is a corporation?

● The prime contractor

○ A prime contractor completes either the entire construction project or a portion of it

● The subcontractor

○ The subcontractor works directly with the primary contractor to complete a specific part of the work on the project.

● The sub-subcontractor Don't forget about the age old question of What is hydrogen bonding?

○ The sub-subcontractor works directly with the subcontractor under contract to complete a portion of the subcontractor’s work

● Vendor

○ Vendors, or materials suppliers, provide the materials or supplies needed for a construction project. If you want to learn more check out What is ethnicity?

Project Delivery Methods

● Design-Bid-Build

○ Start with a design from the architect / engineer, who will provide advertisement of the job to contractors and contract administration services for the owner. After the contractors sign a contract with the owner, the construction begins

● Design-Build

○ Involves a single contract between the owner and a contractor, who is responsible for the execution and completion of the project

○ Also known as turnkey process

● Design-Manage

○ When the owner has a single contract for the design and construction of a project, where multiple independent contractors or a design-management firm enter into a contract with the owner.

● Preengineered buildings

○ Produced using a design-build method where a standard building model is made to offer a competitive price with design flexibility

● Fast-track

○ The design and construction phases of the project are executed in parts instead of designing the project as a whole before construction begins Don't forget about the age old question of What legal matters do forensic psychologists assist in?

○ Also known as phased construction

● CMAR (Construction Management at Risk)

○ Construction Management can be offered in the form of a separate entity or a service offered by a General Contractor

○ The construction manager is responsible for the delivery and execution of the project from design until completion

Project financing

● By owner

○ The owner provides financing for the construction project and usually does this by finding external sources such as short-term or long-term financing through commercial loans and mortgage lenders

● By developer

○ A developer provides two methods of project financing for the owner. One method involves providing the owner with the design and financing and then selecting a construction contractor to build the structure. If you want to learn more check out What are the types of depository institutions?
We also discuss several other topics like Why did europe rise?

○ In the other method, the developer designs, finances, and is responsible for the construction of the project. Upon completion, the owner either buys or leases the building.

Chapter 2

Three ways to organize a business

● Sole proprietorship

● Partnership

○ General Partnership

○ Limited Partnership

○ Joint Venture

● Corporation

Sole Proprietorship (SP)

● Owned and operated by one person

● Fewest business regulations

● Easiest business to start and end

● Sole proprietor makes all the decisions

○ Also solely responsible for all debts and liabilities of business

■ If sued, sole contractor is 100% responsible

● 75% of contracting businesses follow SP format

General Partnership (GP)

● Two or more individuals form a GP

● Advantages:

○ Two or more individuals can pool their WC, credit, tools, etc.

○ Partners can divide the proceeds based on the amount of assets each partner made to the business

○ Partners can divide up work

■ One is responsible for the office (estimating, scheduling, purchasing) ■ Other partner is responsible for the field (superintendent, project manager) ● Need a legal agreement and competent attorney between partners

○ Why? Problems:

■ What if partners don’t get along?

■ What if there is a death or incapacity of a partner?

■ How are partners compensated?

● To consider when forming a GP:

○ Why are you forming this partnership?

■ If to increase WC, consider adding investors

■ If to pool more talent, remember talent can be hired

● Very likely that partnerships are formed and then split up

Limited Partners

● Can supply additional WC

● Liability is capped by the amount of their investment

● Limited partners do not participate in the management of the firm


● Adding more general partners can add management issues

● Limited partners should be covered by a legal agreement


● An artificial being that is set up as separate from those that form and own through shares of stock of the corporation

● A business that is chartered by a state and legally operates by itself not its owners ● Owned by stockholders who have purchased units or shares of the company Corporation Advantages

● Three key advantages: financial power, limited liability, and unlimited life ○ Can raise money by sharing stocks

○ Financial institutions are more willing to lend large amounts of capital because it is closely regulated by government

○ Owners are liable only to the amount of their investments

○ Death or withdrawal of an owner does not affect the lifespan of the corporation ■ Ownership is transferred by selling stock to someone else

■ New stock certificate is issued in the name of new stockholder

Corporation Disadvantages

● Difficult to form and operate

● Legal assistance is necessary

● Need approval from the State to establish

○ Must register the Articles of Incorporation with the State

● Subject to more government regulations than SPs or GPs

● Reporting taxation requirements

○ Vary from state to state

● Must hold regular meetings with corporate officers and keep minutes of meetings ● New charter must be approved if corporation’s activities change

● Dual taxation by corporation on the profits of the firm and the stockholders on what they receive from their stock

Joint Venture (JV)

● JV has existed for many years and is old in construction history

● Formed around a single construction project

○ Allows two or more construction firms to pool credit resources, bonding capacity, management talent, etc. to take on large projects

● Spreads risks on a project to two or more entities

● On large projects the size can exceed a single firm’s bonding capacity ● Competition is reduced

○ Because there are two or more entities already in the project

● JV allows the work to be divided up on large projects

● If JV doesn’t work, it’s over after the single project

○ If it does work they can choose to carry on multiple projects

Chapter 3

Organization, Teamwork, & Communication

● Structure impacts:

○ Decision making

○ Costs & efficiencies

○ Overall success and sustainability

● Organizational culture

○ A firm’s shared values, beliefs, traditions, philosophies, rules, and role models for behavior

○ There are two types of culture:

■ Formal expression

● Mission statement

● Code of ethics

● Manuals

● Ceremonies

● Memoranda

■ Informal expression

● Dress code

● Work habits

● Extracurricular activities

● Stories

○ Organizational culture ensures that members:

■ Share values

■ Observe common rules

■ Share problem solving approaches

● Organizational structure is the arrangement or relationship of positions within an organization

● Structure develops

○ Managers assign work tasks

○ Coordination of diverse activities to reach goals

● What the organizational chart shows:

○ Organizational structure

○ Chain of command

○ Others relationships

○ Lines of communication

Assigning Tasks

● Organizational Structure

○ Purchase lumber from suppliers

○ Fabricate roof trusses

○ Ship lumber packages and truss packages to jobs

○ Layout framing

● Specialization

○ Managers divide the labor into small, specific tasks and assign to employees to accomplish individual tasks

● Why specialize?

○ Efficiency

○ Ease of training

○ Activities too numerous

● Overspecialization problems:

○ Employees become bored

○ Job dissatisfaction

○ Poor quality work

○ Increased injuries

○ Increased employee turnover

● Departmentalization:

○ Grouping of jobs into working units (departments, groups, divisions, etc.) ■ Functional departmentalization

■ Product departmentalization

■ Geographical departmentalization

■ Customer departmentalization

Assigning Responsibility

● Delegation of authority

○ Give employees tasks and power to carry them out

● Employee accountability

○ Employees are answerable to a superior

● Delegation creates a responsibility

○ Obligation placed on employees to carry out the task and they are held accountable for the task


● Centralized organizations

○ Authority is concentrated at the top level

● Decentralized organizations

○ Decision-making authority is delegated far down the chain of command Span of Management

● The number of subordinates who report to a particular manager

● A wide span of management exists when a manager directly supervises a very large number of employees

○ Flat Organization

● A narrow span of management exists when a manager directly supervises only a few subordinates

○ Tall Organization

Forms of Organizational Structure

● Line structure

● Line-and-staff structure

● Multidivisional structure

● Matrix structure

Groups & Teams In Organizations

● Group: Two or more individuals who communicate with one another, share a common identity, and a common goal

● Team: a small group whose members have complementary skills, a common purpose, goals, and approach; hold themselves mutually accountable

○ Examples: project teams, product development teams, quality assurance teams (quality circles), self-directed work teams

● Committee: permanent, formal group performing a specific task

● Task force: temporary group responsible for a particular change activity Communications In Organizations

● Formal communications: flow of communication within the formal organizational structure

○ Upward & Downward communication

○ Horizontal & Diagonal communication

● Informal communication: separate from management's formal official communication channels

○ Grapevine

Chapter 4

Bid Documents

● Project announcement

● Notice to bidders

● Instructions to bidders

● Proposal forms

● Other documents


● Condition of contracts

● Drawings

● Specifications

● Addenda

● Alternates

Change Orders

● Cause of change

● Directive change order

● Constructive change order

● Cardinal change order

Design Firm Selection Methods

● When an owner does not have an in-house design firm, he / she must go through a selection process to choose the designer for a project

Owner Payments To Design Firms

● The method of payment for design firms is outlined in the agreement between the architect-engineer and the owner.

● These include compensation for the designer’s expenses incurred while on the job, which include, and are not limited to travel, document reproduction, etc..

● When the project is publicly financed, designer fees are often governed by statutory or administrative limitations and conditions

Architect-Engineer Services

● Analysis of need

● Document and bid contract preparation

● Contractor selection

● Represents the owner during construction

● Administration of warranty issues

Chapter 5

Cost Estimating

● Cost estimating is a mission-critical skill needed by all contractors in getting construction work

● At the start, few documents exist so approximate estimating methods are utilized ● As the project evolves and design plans approach higher degrees of completion, the accuracy estimates improve

● Need for cost estimating at various design stages

○ Importance of cost estimating (Dynamic vs Static Approach)

○ Types of Cost Estimating:

■ Rough Estimates: -30% ~ +60%

■ Semi-Detailed Estimates: -15% ~ +20%

■ Detailed Estimates: -3% ~ +5%

● Owners will use rough estimates just to determine project feasibility

Difficulties In Estimation

● One-of-a-Kind-Estimates

● Time and effort available

● Estimator expertise

Categories Of Cost Estimating

● Capital investment

● Labor costs

● Material costs

● Maintenance costs

○ Important to construction

● Property taxes and insurance

● Operating costs

● Quality costs

● Overhead costs

● Disposal costs

● Revenues

● Market values

Sources Of Cost Estimating Data

● Accounting records

● Other sources within the firm

○ Engineering, production, sales, etc.

● Published information

○ US Cost Indexes, CPI, PPI, BLS Labor costs

○ R.S. Means Building Construction Cost Data

● Other sources outside the firm

○ Vendors, salespeople

● Research & Development

○ Pilot plant, Test market

Cost Estimating Approaches

● Top-down Approach

○ Uses historical data form similar engineering projects

○ Modifies original data for changes in inflation, activity level, weight, etc. ○ Best use is early in estimating process

● Bottom-up Approach

○ More detailed cost-estimating method

○ Attempts to break down project into small units and estimate costs ○ Smaller units added together to obtain overall cost estimate

○ Works best when detail design is available

Estimating Construction Costs

● The key to a good job and successful cost control is the development of a good estimate as the basis for bid submittal

Types Of Estimates

● Estimating methods vary in accordance with the level of design detail that is available to the estimator

● The representative unit is multiplied by a price per unit to obtain a gross estimate (10% accuracy)

● Conceptual estimate is useful in the schematic or budgetary phase, when design details are not available

● As the design detail increases, the designer maintains estimates of cost to keep the client informed of the general level of costs to be expected

● First step is called preliminary design

○ Offers the owner a pause in which to review construction before detail design commences

○ Prepared by the architect or AE (Architect Engineer)

● The AE produces a final engineer’s estimate including total job minus markup ○ This estimate should achieve approximately ± 3% accuracy since the total design is now available

● Owner’s estimate is used:

○ To ensure the design produced is within the owner’s budget

○ To establish a reference point in evaluating bids submitted by competing contractors

● On the basis of final drawings and specifications the contractor prepares his estimate of the job’s cost including a markup or profit

○ This is called bid estimate

● Both engineer’s and bid estimates require a greater level of effort and a considerable number of estimating hours to prepare

● Rule of thumb states the bid estimate by the contractor will cost one-fourth of one perfect of the total bid price

● In building construction, these four levels of estimates are the ones most commonly encountered:

○ Conceptual

○ Preliminary estimate

○ Engineer’s estimate

○ Bid estimate

Detailed Estimate Preparation

● Preparation of a detailed bid-level estimate requires that the estimator break the project into cost centers or cost sub-elements

● Construction cost centers relate to some physical subcomponents of the project, such as foundation piles, excavation, steel erection, etc.

● Certain nonphysical components of the work generate costs

○ Many of the items or “indirects” are not directly connected with physical components

● These costs include insurance and bonding premiums, fees for licenses and permits, safety and minority participating programs, etc.

● The process of estimating is part art, part science

● Estimator follows certain steps in developing the estimte

○ Break the project into cost centers

○ Estimate the quantities required for cost centers

○ Price out the quantities determined, pricing may be based on a price unit (unit cost) basis or a lump sum (one job) basis

○ Calculate the total price for each cost center

● Estimator usually summaries the values for each cost center on a summary sheet Definitions Of Cost Centers

● The subdivisions into which the project is divided for detail cost estimation are variously referred to as :

○ Estimating accounts

○ Line items

○ Cost accounts

○ Work packages

■ “Work package” has become current and is commonly used to indicate a subdivision of the project that is used for both cost control and scheduling Quantity Takeoff

● The development of the quantities of work to be placed in appropriate units is referred to as quantity takeoff (QTO)

● Five of the most common errors experienced during QTO are:

○ Arithmetic

○ Transportation

○ Errors of omission: overlooking items required to accomplish the work ○ Poor reference: scaling drawings rather than using the dimensions indicated ○ Unrealistic waste or loss factors

● The first step in QTO is to identify the materials required by each estimating account or work package

● Before the calculations for the QTO are performed, detailed working drawings are sometimes required to clarify the contract drawings and specifications or the chosen construction method

● A complete list of all components needed to complete the project

● Include all components including site and direct overhead

● Units include all common units (feet, sq. feet, yards, etc.), months, each, and lump sum ● Material categories:

○ Counted items

○ Linear components

○ Sheet and roll items

○ Volumetric goods

○ Quantity-From-Quantity-Goods

● Actual calculations should be performed on a standard spreadsheet to allow independent checks and self checks

● All supporting documentation should be attached to the estimate to aid in checking by other sources

● Quantity estimated from another quantity

● Determine all materials, equipment, and labor

● Build up the project from the bottom up in your mind 

Work Packages

● Related labor tasks are divided into work packages

● Job cost codes may be broken into multiple work packages

● Should match project sequence and scheduling

Methods Of Detailed Cost Determination

● The two methods of cost determination most frequently used are:

○ Unit pricing

○ Resource enumeration

● Unit pricing values are available in many standard estimating references ● The standard references normally give a nationally averaged price per unit ● The dollars-per-unit value is calculated as follows:

○ (Cost of resources per unit)/(Production rate of resource) = ($/hour)/(Unit/hour) = $/unit

● The unit cost is the ratio of resource costs to production rate

● The overhead and profit (O&P) charges associated with labor are:

○ Fringe benefits

○ Workmen’s compensation

○ Average fixed overhead

○ Subcontractor overhead

○ Subcontractor profit

● A 10% markup is applied to material cost

Problems With Unit-Cost Method

● The data that the contractor has available from company records are presented as dollars per unit and in most cases no records of the crew composition

● The unit price available from averaging values on previous jobs has to be treated with caution

● The numerator of the unit-cost ratio will vary significantly over time as the costs of labor and machines vary

● In order to factor out the inflationary escalation inherent in resource cost some contractors maintain the ratio of man-hours or resource hours required instead of dollars per unit

○ (Resource hours per hour)/(Units per hour) = RH/Unit

● The cost per unit can be calculated by multiplying the resource hours per unit value by the average hourly cost per resource

Work Package Or Assembly-Based Estimating

● A work package or assembly that is commonly encountered in construction is viewed as an estimating group

● Most of these system-based systems are computerized

● If a manual approach is used to estimate each work package, a work package take-off sheet is helpful

Cost Estimating Ethics

● Not many areas of construction are more prone to ethical issues than the area of cost estimating and bidding

● Public work is open competition but not so on private work

● Unethical methods:

○ Bid shopping:

■ This is typically done by general contractors against subs

○ Bid peddling:

■ This is done by subs to get a G.C.’s work

○ Bid rigging:

■ Done by either subcontractors or general contractors but more often by subs

■ Illegal by the Sherman Antitrust Act

● The Golden Rule applies: “do unto others as you would have them do unto you” ● As a G.C. or owner, never ask someone for a bid unless they truly have an even chance to get the work

● Private sector work is prone sometimes to favoritism or flat-out the person making the selection decision was “bought off” with various bribes

● Private work is subject to bidding and then negotiation with the top 2 or 3 general contractors and they in turn with their subs

● Key rule in negotiation:

○ As an owner or general contractor, you want the firms that are working for you to be making money

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