1. CE 366 PROJECT MANAGEMENT AND ECONOMICS Robert G. Batson, Ph.D., P.E. Professor of Construction Engineering The University of Alabama Rbatson@eng.ua.edu

2. Chapter 2: The Management System 2

3. Construction Project Management Projects are a one-time, unique effort of limited time duration involving work of a non-standardized and variable nature Project condition include -Technical complexity, bid amount, schedule promises -Field conditions that are unpredictable -Cost and time requirements constantly changing Planning and re-planning (as part of managerial control) assume a monumental role A system of project management is needed -different than general management of a single company -more coordinating the work of different companies 3.1

4. Functions of management: Planning, Organizing, Directing, Controlling The project plan includes -activities, and which organization is responsible -a detailed time schedule for the activities -resources needed to complete each activity on time -a budget based on resource utilization and costs Field progress is monitored and compared to plan, such as -percent completion of an activity & overall project -time and resources consumed by an activity & overall Management -by-exception ensures -deviations from plan are detected -“work-arounds” are conceived and implemented -the plan is altered and time/cost forecasts are updated Resource Management and financial controls support field management 2.2

5. Time and Cost Management The project end-item is described, and its quality and performance levels specified, in the form of specifications Time and cost schedules are established A system of recording field data and summarizing it in an information system is implemented for informed decision-making Both time and cost management eventually impact actual costs, hence profits Time and cost control are achieved by a combination of –procedures of time/cost tracking at a reasonable level –the hierarchy of managerial control down to individual delivery, activity, worker, and so on 2.3

6. Planning and Scheduling Planning is a prerequisite for project time control, establishing: -What is to be done -How it is to be done -Order, or precedence sequence, for activities Plans are documented in various ways, such as: -Gantt charts (bar charts for schedule activities) -Precedence charts -Arrow charts Studies of the plan (conceptual schedule) are made to determine: -How to meet project completion date -Resource requirements for individual activities; overall project -Adjustments to resolve unbalanced or conflicting demands -Ultimately, a calendar-date schedule of each activity 2.4

7. The Critical Path Method (CPM) Uses a network model of the project activities -A graphical job plan -Precedence relationships and other constraints -Time to complete each activity (using assumed labor) Uses a network-based algorithm to determine: -The project critical path (longest path from start to finish) -The critical activities (those on the critical path  zero slack) -Total time to complete the project, and reach critical milestones -Proposed start and finish dates for each activity, and extent of flexibility in preliminary schedule, leading to finalized schedules often communicated (and monitored) as Gantt charts Many other uses (Items 5-11 on p.22) once project begins 2.5

8. Project Cost Controls Need a complete and detailed cost estimate -Based on a detailed quantity “take off” applied to labor, construction equipment, and materials; may use estimating relationships based on past -Augmented by subcontract amounts and taxes, overhead, and surety bonds Next, a project control budget (a schedule of costs) is created, and used for cost control during field construction Production rates and costs incurred are recorded, at least weekly Summary reports then pinpoint where costs exceed budget, leading to investigations and correction action Data on production rates and unit costs are stored in corporate databases (data banks), by cost code (work type), for future cost estimating 2.6

9. Project Cost Accounting The process of obtaining actual production rates and unit costs from ongoing projects For project cost control, especially labor and equipment costs, capture: -labor and equipment work hours -hourly expense rates for labor and equipment -quantity of work accomplished in specified time Periodic cost reports are produced: -for each work type -compare budgeted with actual cost -for immediate action, and forecasted final costs Also supports estimating for new work (bids) 2.7

10. Computerized vs. Manual Methods Once field construction begins, large volumes of data must be captured and converted to information, leading to action -data capture (some automatic, some manual) -data manipulation (standardized, but some “special” requests) -information summarized (tables, graphs) -interpret and propose/test/implement actions (if necessary) Computers and either commercial software (MS Project, Primavera, etc.) or internally-developed systems are used Staff support of PM is critical Project managers apply their experience and intuition to the output of computerized systems, but also may use manual calculations to assure the software “got it right” or on problems the software was not designed to handle. 2.8

11. Example Project (Figure 2.1) Earth dam to be owned by a public agency -across a river -undeveloped, unpopulated area -with related project segments (appurtenant structures) Design complete: drawing and specifications Successful prime contractor -from among several prequalified bidders -will manage entire project -to meet a fixed date of completion (else, penalties) Two segments will be used to illustrate construction management in this text: -highway bridge -pipeline relocation 2.9

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