Management & Development of Complex Projects Course Code - 706

Management & Development of Complex ProjectsCourse Code - 706

MS Project Management

Construction Industry of Pakistan A Case Study

Lecture # 6

In previous Lecture, we have discussed about

The need of public sector projects Approval process for public sector projects in Pakistan Generic life cycle of project management in public sector of

Pakistan Key stakeholders in Planning Commission of Pakistan Composition of approving forums & their functions Project Cycle Performa (5 number)

Summary of Previous Lecture

Construction

The way in which something is built or put together.

Major Construction Types Most people are generally interested in acquiring only a

specific type of constructed facility, however, the construction industry is a collection of quite diverse segments and products.

Some organizations and individuals may be in involved in the construction of one type only once in a long while and tend to look for short term advantages.

However, many organizations and individuals require periodic acquisition of new construction of different types of facilities and/or rehabilitation of existing facilities.

In planning for various types of construction, the methods of procuring professional services, awarding construction contracts, and financing the constructed facility can be quite different.

Residential Housing Construction

Residential housing designs are usually performed by architects and engineers, and the construction executed by builders who hire subcontractors for the structural, mechanical, electrical and other specialty work. An exception to this pattern is for single-family houses which may be designed by the builders as well.

Residential housing construction includes single-family houses, multi-family dwellings, and high-rise apartments.

Residential Housing Construction

The residential housing market is heavily affected by general economic conditions, the monetary and fiscal policies of the government & buying capacity of common man.

Often, a slight increase in total demand will cause a substantial investment in construction, since many housing projects can be started at different locations by different individuals and developers at the same time.

Because of the relative ease of entry, at least at the lower end of the market, many new builders are attracted to the residential housing construction. Hence, this market is highly competitive, with potentially high risks as well as high rewards.

Institutional & Commercial Building Construction

The owners of such buildings may or may not be familiar with construction industry practices, but they usually are able to select competent professional consultants and arrange the financing of the constructed facilities themselves.

Institutional and commercial building construction encompasses a great variety of project types and sizes, such as schools and universities, medical clinics and hospitals, recreational facilities and sports stadiums, retail chain stores and large shopping centers, warehouses and light manufacturing plants, and skyscrapers for offices and hotels.

Institutional & Commercial Building Construction Specialty architects and

engineers are often engaged for designing a specific type of building, while the builders or general contractors undertaking such projects may also be specialized in only that type of building.

Because of the higher costs and greater sophistication of institutional and commercial buildings in comparison with residential housing, this market segment is shared by fewer competitors.

Specialized Industrial Construction

Specialized industrial construction usually involves very large scale projects with a high degree of technological complexity, such as oil refineries, steel mills, chemical processing plants and coal-fired or nuclear power plants.

The owners usually are deeply involved in the development of a project, and prefer to work with designers-builders such that the total time for the completion of the project can be shortened. They also want to pick a team of designers and builders with whom the owner has developed good working relations over the years.

Infrastructure & Heavy Construction Infrastructure and heavy construction includes projects such as

dams, highways, mass transit systems, tunnels, bridges, pipelines, housing societies, drainage systems and sewage treatment plants. Most of these projects are publicly

owned and therefore financed either through bonds or taxes. This category of construction is characterized by a high degree of mechanization, which has gradually replaced some labor intensive operations.

The engineers and builders engaged in infrastructure construction are usually highly specialized since each segment of the market requires different types of skills.

Structure of Construction Industry in Pakistan

The construction industry in Pakistan is heterogeneous and enormously complex. There are several major classifications of construction that differ distinctly from one another: e.g.

HousingNonresidential / Commercial BuildingHighways UtilitiesIndustrialDams & CanalsPorts & Harbors etc.


Construction work is accomplished by contractors who vary widely in size and specialty.

Some contractors choose to concentrate on a particular task or aspect of the construction project and are therefore referred to as specialty contractors.

Others assume broader responsibility for a comprehensive work package and are referred to as prime contractors.

Commonly, prime contractors will subcontract specific aspects of a project to the specialty contractors, forming a contractual web of prime contractors and specialty contractors.


Construction work is designed and supervised by Consulting firms / individual consultant.

The Consultant may be (an) engineer (s) or (an) architecture (s).

The PEC bylaws are considered binding legal framework for the construction works whereas international standards like ACI, ASTM, AASHTO etc. are used for construction activities.

The construction work is carried out in the presence of “The Engineer” who has good authority over all the parties of the contract.


Usually following are the prime stakeholders of the construction project.

The Client (The Employer, Customer, Buyer etc.)The ContractorThe EngineerThe Consultant (Designer etc.)The Supervision ConsultantThe Management Consultant (only on large projects)The Sub-ContractorThe Suppliers

National Economy and Construction in Pakistan

Construction accounts for more than 2.5 percent of the gross domestic product (GDP) of Pakistan. (2011)

Construction has seen a growth of as high as 28.4 % in financial year 2009-10 in Pakistan, averaging 6 % growth in 2000’s only.

Construction has produced 6.7 % (making about 3.68 Million ) of total Jobs (54.92 Million) in Financial Year 2009-10.

Construction had produced about 6.6 % of total jobs in year 2008-09 showing a consistent trend.

National Economy and Construction in Pakistan

Source: Economic Survey of Pakistan

WORK HUNT

The construction industry is full of opportunities. The construction organizations has to identify, analyze and exploit these opportunities. The first step is to HUNT the work.Following are few sources to be checked for construction work opportunities.

Media (both print as well as electronic media)ConsultantsPeer Architects & EngineersNGOsGovernment Agencies and their information desksPakistan Procurement Regulator Authority (PPRA)’ websiteWorld wide webWords of mouthContractors

REGISTRATIONS

The first step is to prepare organization profile and to get it registered with authorities concerned. Some of these registrations needed to be renewed every year.

Following may be the few authorities with which the organization are needed to get registered for construction works

Pakistan Engineering Council (PEC)Federal Bureau of Revenue (FBR)Line Departments (NHA, CDA, RDA etc)Chamber of CommerceSecurities & Exchange Commission of Pakistan (SECP) etc

CONSTRUCTION WORKS PROCUREMENT FLOW CHART

Prequalification of Contractors as required

Invitation of Bids (ITBs)

Review of Bidding Documents

Submitting Bids

Bids EvaluationMajor evaluation criteria:

Cost

Contract Award

Contract Administration

Contract Close

DECISION TO BID

The Construction organization decides whether to go for bidding or not basing on the following but limited toThe Project is aligned with the Mission, Objective and goals of the OrganizationThe Organization has all the resources or has the ability to acquire the needed resourcesThe Financials are available to carry out the jobThe Organization has the construction processes assets to take up the jobThe site is accessible and the Client will ensure the access.The Client is reputed and pays on time.The workability and constructability analysis shows that the project may be taken up.The organization employees are ready to work at construction siteThe location is provided with all the amenities for project team deployed thereThe Project is profitable or the project will add value to organizationThe future dimension of business acquiring & retaining is thereThe competition asks for it to get introduced to new investor in the market

SITE ANALYSIS

Even before the award of work, preliminary study of site is very helpful in

Preparation of realistic BidPreparation of BudgetsPreparation of SchedulePreparation of project risk planPreparation of stakeholder management planUnderstanding the need of extra ordinary resources well before time on that specific projectPreparation of utilities need list well before the execution

Construction Project OrganizationThe Constructing Project organization is the one which actually take up the construction works. The project team under the leadership of project manager carries out following taks

Estimate and prepare bid proposals Handle requisitioning, scheduling, and expediting

Plan and schedule Document all work performed

Stay alert to future work prospects Prepare and check payment estimates

Maintain preconstruction liaison with joint venture partners

Document costs and extra work

Review subcontract proposals Document subcontract performance and payment estimates

Prepare budget control estimates Prepare reports of costs and construction activities

Develop construction methods Issue progress reports: daily, weekly, monthly

Maintain contract relations Draft contract modifications, change orders, and claims

Lay out the work Provide assistance in contract settlements

ENGAGING SUPPLIER & SUB- CONTRACTOR

Before actually start of construction, placing of orders for sub-contractors and suppliers and their contracts are made.Following few requirements are assessed for scheduling

schedule of labor requirement schedule of materials requirement schedule of plant and equipment sub-contractors and suppliers schedule

ESTABLISHEMENT OF SITE CAMP

After complete Planning at office, the project team establishes the site camp which facilitates the

The Project Team & Project ManagerThe Project PersonnelThe Project LaborThe storage and handling of construction materialsThe storage and operations of equipment and machinery

Preliminary Site Survey

As the site office is being established, the preliminary site survey is started to understand the locality and construction site.

The importance of such surveys increase manifold when it comes to road construction projects or large infrastructure development projects.

It is necessary at times to calculate the work to be done. E.g. the preliminary land survey in road construction projects will set a baseline for measurement of bulk of work in later stages

Problems of Construction Industry in Pakistan

following are the few problems of the construction industry in Pakistan.

Executive support / political will for projectImproper & insufficient planningIncomplete & copy-paste design Poor design detailing for executionersDelayed mobilization of Project Manager on projectNon delegation of powers to PM officeUncertainty due to regime changePolitical involvement in procurement processProblems in Land Acquisition


Poor Estimation & management Non observation of quality standards Non adherence and ignorance of to prevailing

laws, rules and regulations Absence of Law & order situations handling

mechanism Non cooperating Governmental agencies Influential locals Lack in stakeholders management Uncertainty in construction market prices Scarcity of construction materials (bitumen, steel,

cement etc.) Load shedding (affecting crushers, refineries,

rolling mills etc.)


Unforeseeable increase in fuel costs n power prices

Increase in import materials & equipment by inflating FC

Munshi culture Nearly non existent professionally trained project

management teams Contractors on public sector projects getting

political favors instead of behaving professionally Bribery in Construction field Delayed payments to Contractors resulting slow

progress & increased costs in lieu of escalations

Absence of timely payments to employees, sub contractors etc. resulting in demotivation and encouraging them for going for wrong means

Ignorance of user in actual construction work and only product oriented mind set

Lack of sense of ownership Poor construction supervision Poor Communication among stakeholders Poor Record Keeping Project management is thought as of only a

schedule Poor requirement collection and poor

understanding of deliverables.


Absence of proper risk management No standard formulation mechanism Mostly project people are JUST KILLING time on

site Absence of lesson learned mechanism AND …………


In this Lecture, we have discussed about

Construction projects types Structure of Construction Industry of Pakistan National economy and construction Work hunt in construction Registrations, decision to bid, construction project

organization Engaging supplier/ sub contractors, establishment of site

camp, site surveys Issues in construction industry

Summary of This Lecture

End Note

The road to success is always under construction

THANK YOU!