Presentation on theme: "Construction Industry of Pakistan Challenges and Opportunities – Way forward Engr. Dr. Attaullah Shah."— Presentation transcript:
1 Construction Industry of Pakistan Challenges and Opportunities – Way forward Engr. Dr. Attaullah Shah
2 Bio details of the Speaker Engr.Dr. Attaullah ShahDirector ( Planning and Projects AIOU),QualificationPhD Civil Engineering ,M.Phil Eco ,MSc Structural EnggMBA, MA Eco, MSc Envir Design,BSc Civil Engg (Gold Medal), Post Grad Dip Comp (Gold Medal)25 Years Experience of Teaching research and practice in Civil Engineering and Construction Management:Research Publications in refereed journals and conferences:26 Journals publications+40 Conference publicationsAreas of interestsConstruction project ManagementStructural EngineeringSustainable built Environment
3 Built EnvironmentOf the global energy consumption, 75% occurs in cities and 80% of Green House Gas (GHG) emissions emanate from cities. Indeed, climate change and urbanization are inseparable. And if cities are part of the problem, they are therefore inevitably part of the solution.
4 Some Quotes on Project Management Trying to manage a project without project management is like trying to play a football game without a game plan - K. TatePlans are only good intentions unless they immediately degenerate into hard work - Peter DruckerWhatever we do must be in accord with human nature. We cannot drive people; we must direct their development... the general policy of the past has been to drive; but the era of force must give way to the era of knowledge, and the policy of the future will be to teach and lead, to the advantage of all concerned Henry L. GanttTrue motivation comes from achievement, personal development, job satisfaction, and recognition F. Herzberg
5 A project is complete when it starts working for you, rather than you working for it. The conventional definition of management is getting work done through people, but real management is developing people through work.”Good management is the art of making problems so interesting and their solutions so constructive that everyone wants to get to work and deal with them.”Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes.”good manager is a man who isn't worried about his own career but rather the careers of those who work for him.”
6 The tale of construction, in one way or the other, begins with the beginning of human beings. Development of infrastructure such as roads, water supply, power supply, sanitation etc have always been considered vital for leading a decent standard of life. The Express Tribune
9 Role of Construction sector in Global Economy Annual global construction output U.S $ 4.6 trillion (2005)Output is heavily concentrated (77 per cent) in the high income countries (Western Europe, North America, Japan and Australasia).The high-income countries produce 77 per cent of global construction output with 26 per cent of total employment.The rest of the world (comprising low- and middle-income countries) produces only 23 per cent of output but has 74 per cent of employment ……….The Labor productivity in the developing countries is low…… What can be the major reasons in your mind?
10 Global Construction market in 2011-12 Construction spending growth has stalled and 2011 was the fourth consecutive year with little or no growth (since 2007) .Overall, world construction spending grew by just 0.5% to $4.6 trillion and is still below the levels achieved in 2007.However, on a positive note, 2011 saw the first increases in world construction spending since the start of the recession.Asia and Latin America were the fastest growing regions in 2011 by a wide margin.For the second year running China was the largest market in 2011, and is forecast to be the fastest growing market in and onwards
11 Global Construction Market 2012-13 China-41% of Asia Pacific market twice the Japanese construction Market
12 Poland Russia and Turkey the leaders in Europe Europe-RussiaPoland Russia and Turkey the leaders in Europe
13 Global Construction Industry forecast Global Construction Industry forecast. Share of spending by region:
14 Global Construction Industry forecast-Cont’d. In the short term: Degree of stagnationMore sustained growth not expected until 2015Developing countries are expected to lead inAsian market to develop from 31% to 46%The strongest construction spending growth will again be in China, followed by India and IndonesiaReconstruction in Japan and New Zealand will provide temporary stimulusIn Americas, Brazil and Panama expected high growth rate
15 Saudi Arabia, UAE and Qatar for 2020 FIFA World Cup Middle EastSaudi Arabia, UAE and Qatar for 2020 FIFA World Cup
16 The future outlookFor developing “megacities,” construction in emerging markets is expected to double within a decade and will become a $6.7 trillion business by 2020Access to capital, for both public and private sponsors, is becoming more challenging.They will need to promote and finance infrastructure and/or building alliances with investment banks and infrastructure funds.Already, Chinese companies, leveraging huge internal demand, are becoming a force to be reckoned with in global construction markets.Construction companies based in Brazil and India may soon follow suit and join the new class of powerful emerging market multinationals
17 Construction industry segments Two very broad categories: - General building construction- Engineered construction.General Building ConstructionInclude residential, commercial, institutional and industrial buildings.Residential construction produces buildings for human habitation, including single-family dwellings, condominiums, multifamily townhouses, flats and apartments and high-rise apartment buildings.Commercial construction includes retail and wholesale stores, markets and shops, shopping centers, office buildings, warehouses and small manufacturing facilities.Institutional construction are medical clinics and hospitals, schools and universities, recreational centers and athletic stadiums, governmental buildings and houses of worship and other religious buildings.
18 Construction industry segments Industrial construction is a special segment of the industry that develops large-scale projects with a high degree of technical complexity.Such endeavours result in facilities that manufacture and process products; examples include steel mills, electric power-generating plants, petroleum refineries, petrochemicalprocessing plants
19 Engineered construction This broad category of construction, sometimes called engineering construction, is characterized by designs prepared by engineers rather than architects, the provision of facilities usually related to the public infrastructure and thus owned by public-sector entities and funded through bonds, rates or taxes and a high degree of mechanization and the use of much heavy equipment and plant in the construction process.Examples: PSDP mega projects in PakistanTwo common subcategories of engineered construction are:-Highway construction and- Heavy construction.
21 THE CONSTRUCTION INDUSTRY Construction ContractorsCompanies and individuals engaged in the business of construction are commonly referred to as construction contractors because they operate under a contract arrangement with the owner.
23 THE CONSTRUCTION INDUSTRY Construction Industry DivisionsThe major divisions of the construction industry consist of building construction (also called “vertical construction”) and heavy construction (also called “horizontal construction”).FIGURE 1-2. Distribution of U.S. new construction volume. (Source: Bureau of the Census)
24 THE CONSTRUCTION INDUSTRY FIGURE 1-3. Modern building construction project.
25 THE CONSTRUCTION INDUSTRY FIGURE 1-4. Heavy construction project—Kennedy Space Center launch complex. (U.S. Air Force photograph)
26 THE CONSTRUCTION PROCESS Project Development and Contract ProceduresThe major steps in the construction contracting process include bid solicitation, bid preparation, bid submission, contract award, and contract administration.
28 Construction Project Lifecycle. Pre-Project Phase:An idea or perceived need or desire to improveProject delivery system to be usedType of contract to be used with the contractor.The owner may engage a professional engineer, an architect or a project manager during this pre-project phase to advise on these important decisions.Planning and design phaseIt is convenient to divide this phase into three stages.Stage-I: The goal of the first stage is to define the project’s objectives, consider alternative ways to attain those objectivesStage-II: Develop schematic diagrams showing the relationships among the various project components,Stage-III: Detailed design of the structural, electrical and other systems
29 Contractor selection phase Client: Procurement and tendering methods to beContractor:Study of various methods and techniques/equipment by the to workout the schedule of the project and all activities andSecond, a priced proposal will be prepared, including the direct costs of labour, materials, plant and subcontractors, various overhead charges and a sufficient added amount for profit.The last step in this phase is the submittal, opening and evaluation of tenders, the selection of the successful contractor and the finalization of the construction contract.
30 Project mobilization phase Various bonds, licenses and insurances must be secured ( Can you name some)A detailed programme for the construction activities must be prepared.The cost estimate must be converted to a project budget and the system for tracking actual project costs must be established.The worksite must be organized, with provisions for temporary buildings and services, access and delivery, storage areas and site security.The process of obtaining materials and equipment to be incorporated into the project must be initiated and arrangements for labor, the other essential resource, must be organized.With the completion of this phase, it is finally time to begin the actual field construction.
31 Project operations phase Three majors areas are looked into by the contractorsMonitoring and control ( Five aspects )Time ManagementCost managementQuality ManagementWork safety andEnvironmental issuesResource ManagementDocumentation and CommunicationProject closeout and termination phase:Finally, as the project nears completion, a number of special activities must take place before the contractor’s responsibilities can be considered complete.Tastings, final verification and acceptance etcclosing the construction office and terminating the staff’s employment.
32 THE CONSTRUCTION PROCESS For major projects, steps in the project development process include the following:Recognizing the need for the project.Determining the technical and financial feasibility of the project.Preparing detailed plans, specifications, and cost estimates for the project.Obtaining approval from regulatory agencies.
33 THE CONSTRUCTION PROCESS How Construction Is AccomplishedConstruction employing an owner construction force.Owner management of construction.Construction by a general contractor.Construction using a design/build (turnkey) contract.Construction utilizing a construction management contract.
34 THE CONSTRUCTION PROCESS FIGURE 1-5. Construction employing owner construction forces.FIGURE 1-6. Owner-managed construction. [Either (a) or (b) or both may be employed.]Many large industrial organizations, as well as a number of governmental agencies, possess their own construction forces. Although these forces are utilized primarily for repair, maintenance, and alteration work, they are often capable of undertaking new construction projectsMore frequently, owners utilize their construction staffs to manage their new construction.
35 THE CONSTRUCTION PROCESS FIGURE 1-7. Construction by a general contractor.- Construction by a general contractor operating under a prime contract is probably the most common method of having a facility constructed
36 THE CONSTRUCTION PROCESS Design and Build:Under the design/build or turnkey construction concept (Figure 1-8), an owner contracts with a firm to both design and build a facility meeting certain specified (usually, performance oriented) requirements.Such contracts are frequently utilized by construction firms that specialize in a particular type of construction and possess standard designs which they modify to suit the owner's needs.Since the same organization is both designing and building the facility, coordination problems are minimized and construction can begin before completion of final design. In this case, the construction contract is normally on a cost-reimbursement basis. This type of construction is referred to as fast-track.The major disadvantages of the design/build concept are difficulty in obtaining competitionFIGURE 1-8. Construction employing a design/build firm.
37 THE CONSTRUCTION PROCESS FIGURE 1-9. Construction utilizing a construction management contract.Construction Management contracts:A professional construction manager (CM) acts as the owner's agent to direct both the design and construction of a facility.Three separate contracts are awarded by the owner for design, construction, and construction management of the project.
38 Methods of Construction Procurement Methods of construction project procurement (Mastermann,1996).
39 Design Bid Build vs Design & Build Advantages of Design and Build:Single point of ResponsibilityPrice certaintySpeed and high progressEffective Cost controlBuild ability/Constructability.Less claimsDisadvantages:Poor quality of designAdditional fee for design revision and improvements.Lack of flexibility in the contract
40 Classification Design & Build projects in China
41 CODES AND REGULATIONSProjects constructed in most areas of the world must comply with a number of governmental regulations.Building CodesThese include building codes, zoning regulations, environmental regulations, and contractor licensing laws, among others.International Building CodePakistan Building Code ( Seismic provisions 2007)Pakistan Energy CodeZoning, Environmental, and Other RegulationsCDA Zoning CodeEnvironmental regulations (EIA)Safety and health Regulations (OSHA)
42 Trends in Construction industry Green BuildingLEED, an internationally recognized green building certification system sponsored by the United States Green Building Council (USGBC).Alternative/Renewable EnergySolar farms, wind turbine facilities, and nuclear-based electrical generation facilities.Information TechnologyVirtual design and construction (VDC)- Building Information Modeling (BIM)Integration of various phases increases speed, reduces costs and eliminates typical errors caused by manual replication of data.GlobalizationGlobally-distributed design and project management teamsChanging competition from local to global levels.
43 Integrated Project Delivery/Lean Construction Innovative contracting and project management approaches build upon partnership:Design collaboration integral to design-build project deliveryRisk sharing, pull-based project scheduling, inventory minimization, value stream mapping and waste reductionPublic-Private Partnerships (PPP)PPPs are offered as a financing solution for governmental entities with strapped cash resources and/or limited borrowing abilitiesTo leverage private capital and private financing mechanisms to fund public infrastructure projects.Infrastructure Re-buildingCritical infrastructure improvements ……………….International CertificationISO 9000, ISO14000 ISO…….
44 Construction Industry of Pakistan GDP contribution only 2.1% as compared to Employment contribution 6.1%- Low productivity.Growth 17.2 % ( ) as against 5.7 percent ( )Construction Sector has shown 5.2 percent growth in as compared to growth of 3.2 percent in last year ( ).Provides linkage to 40 building material industries.It provides jobs to about 6.1 per cent of the total employed labor force or to 2.43 million persons.Per capita consumption of cement in Pakistan is one of the lowest among the developing countries i.e. 72 kgs as compared to 603 Kgs in Japan, 600 Kgs in Thailand, 450 Kgs in China, 261Kg in USA and 99 kgs in India.
45 Future demand in Construction industry Housing SectorExisting house stock: Million39 % Kucha houses40 per cent semi-Pucca houses.21 per cent Pucca houses6.5 Million houses backlog.25,000 houses for public servants in five years.Annual Requirement ,000 HousesAnnual Production /Supply: 350,000Annual short fall: ,000Workers Welfare Fund was established for providing low cost housing
46 Transport Sector:The current road network in the country is about 263,415 kmsNHA road network is around 12,131 kms, 33 highways and strategic roads.79 projects of 12,131 kms are ongoing at a cost Rs.557 billion.Annual growth rate of 7.0 per cent for passenger traffic and 6.0 per cent for freight trafficGo Punjab has started a Metro Bus service in February 2013 in Lahore from Gajjumata to Shahdara.Karachi Circular Railway comprising of 50 kms track approved at PKR 247 Bn in Aug,2012Feasibility Study on Mass Transit System for Peshawar under Technical Assistance (TA) of Asian Development Bank (ADB)Pakistan Railway has started three trains from Lahore to Karachi on public private partnership
47 Benazir Bhutto International Airport (BBIA) in Islamabad spread over 3,200-acre Passenger handling capacity of 9mn in 2014 expected to increase to 15mn passengers by 2019 and 25mn passengers by 2024The airport, which will be Pakistan's first Greenfield airport, entails an investment of more than PKR 60bn (US$653.92mn)The 1,800km pipeline project Turkmenistan-Afghanistan-Pakistan-India (TAPI) is estimated to cost US$7.6bn, with the supply of gas through the pipeline to fulfill the increasing energy demand in India and PakistanIndustry value of US$5.5bn is expected for 2013
48 Future demand of Construction industry-Cont’d Construction demand is increasing due to:Increased Government Spending on Infrastructure Development forHousing SectorImprovement of Water ResourcesDevelopment of Roads NetworkDevelopment of PortsDevelopment in AviationIncreased World Bank and Asian Development Bank Loans for Infrastructure DevelopmentReconstruction of Earth Quake/flood effected Areas with the help of World AidAccording to an estimate, $47.85 Billion will be spent on infrastructure development and construction in Pakistan in the next five years
49 Construction Industry Challenges Ten major causes of cost and time overrunsFluctuation in prices of raw materials and Unstable cost of manufactured materialsHigh cost of machineries3. Lowest bidding procurement method4. Business and Regulatory Environment5. Poor project (site) management/ Poor cost control6. Long period between design and time of bidding/tendering7. Wrong method of cost estimation8. Additional work9. Improper planning10. Inappropriate government policies
50 ISSUES AND PROBLEMS Incorrect Project Estimates Not based on prevailing market rates.Current data about input prices not available.Non Responsive bids.Incorrect estimates leads to releases of funds.Lack of qualified quantity surveyors.Estimates are based on preliminary designs and at detailed design stage, many parameters change.Estimates are tended to be on lower side.
51 ISSUES AND PROBLEMS Financial Issues Lack of financial facilities restrict growth of construction industry.Disbursement and payments procedures cumbersome and lengthy, lead to delays.Cost of doing business is high.Payment procedures hamper progress.Management Deficiencies and Capacity BuildingSome Contractors and Consultants lack professional managementInadequate Research and Development.Lack of capacity in the project managers.
52 ISSUES AND PROBLEMS Management Deficiencies and Capacity Building Inadequate capacity of contractors to ensure value addition in construction sector.Limited use of IT in Construction IndustryTrade Policy and Regulatory FrameworkImport policy regarding construction equipment is not rationalized.Trade Policy does not facilitate constructors.Regulatory Framework discourages international contractors / consultants.Audit should play a positive role.
53 ISSUES AND PROBLEMSUnprecedented Increase in Construction Material CostPrice variation due to Govt. policies.No insurance cover providedRapid escalation and instability of market prices is causing serious problems in managing cash flows.Lack of data on materials availability affects project planning and execution.Government controlling agencies are not in a position to control cartels and monopolies.Shortage of major construction materials---Bitumen, steel etc.
54 ISSUES AND PROBLEMS Size of Projects and Quantum of work Current practice in some sectors of splitting major projects into a number of smaller projects discourages foreign investors / contractors.Human Resource and ManagementShortage of qualified and skilled manpower at all levels.Lack of vocational training facilities for the developmentof required human resources.Quality of human resources available with clients, contractors and consultants needs improvement.
55 ISSUES AND PROBLEMS Escalation of Material Costs Prevailing bidding documents do not cater for due escalation.Statistical bulletin---Not reflective of real market rates.All major material inputs should be covered in permissible escalation.Integrated Construction Contract and Project DesignDeficient and non-comprehensiveLiable to abrupt changes which adversely affect cash flow, budget and time frame.
56 Recommendations for revival of construction industry Implementation of National Housing Policy-2001The presumptive tax on construction companies should not be more than 1% on yearly receiptsReduction in Stamp DutyCredit facilities for Housing IndustryState Bank: to ensure a certain portion say minimum 5% of annual investment in housing mortgageHouse Building Finance Co. LtdMinimum Rs. 10 Billion to be invested by HBFC on annual basis in small housing and low cost housingImport of Machinery for Construction industry-Zero duty
57 Recommendations-Cont’d Public Private Partnership (PPP) must be encouraged in the mega projects particularly hosing and transport sectorsStrategic Board for promotion of construction industryIndustry Academic linkages must be improvedAbolition of Sales Tax on ConstructionMany more recommendation would come from the conference ……………………….
60 Grade Distribution On Campus DL Mid Term Exam 20 Percent 20 Percent Final Exam Percent PercentClass Assignments 10 Percent percentQuizzes 10 PercentProject Presentation 10 Percent presentGroup project Percent percentSummaries (Special Assignments) percentTotal: % %
61 Assignments and quizzes (10%+10%) 4 Home assignments-2 before mid semester and 2 after mid semester4 Class QuizzesAfter every two classes, there will be a class quiz of 30 minutes to cover the previous lectures.For DL students special activity based assignment will be given
62 Individual Project (10%) The student will take the projects from the following list as per last digit of their Roll No:Corporate and Project ManagementEffective and Efficient Site ManagementPlanning and ProgrammesOperation, Cost Planning and Monitoring ExpenditureSite Establishment.Plant and MaterialsProgress and ControlQuality AssuranceHealth and Safety0. EnvironmentThe project presentation will be comprised of the following three partsLiterature reviewCase StudyFinal report
63 Format of Project report Title PageAcknowledgments (if any)Table of ContentsExecutive Summary (total 1000 words or less, 3 paragraphs)Brief introduction of the chosen topicAdvantages and disadvantagesPossible ApplicationsMain Body of the Report (10-15 pages including tables and pictures)Introduction (1-2 pages)History (if any)Possible applications in construction with special reference to Pakistan (1-2 pages)Case StudyThe actual application of the proposed topic in the construction site for ,medium or large projects and check the compliance and deviations in real cases.ReferencesAt least 5 for undergraduate studentsAt least 10 for graduate studentsAll references must be properly cited in the report using numbers or last name of the authors with year of publication. (  or (Shah, 2005) ). Use APA referencing style.
64 Group Project 10%This activity is aimed at developing better coordination and integration amongst the students.The class will be divided into 3-4 groups and they will select the group leader.The group will select a project, where they can visit in group, study the site etc, collect some first hand data and present their group study to the class. The evaluation of the group project will be done on the basis of the following parametersResearch Activity: 35%Group Reprt: 35%Final group presentation: 30%After formation of the group and selection of the group leader, the group will give the selected project/site for approval on or before the 3rd class of the session.
65 EMERGING ICT TRENDS IN CONSTRUCTION PROJECT TEAMS: A DELPHI SURVEY Assignments No.1EMERGING ICT TRENDS IN CONSTRUCTION PROJECT TEAMS: A DELPHI SURVEYBy Dr Graham Brewem and Thayaparan GajendranJournal of Information Technology in Construction - ISSNSummary:This paper describes the design, implementation and findings of a project funded by the CharteredInstitute of Building(CIOB) in Australasia to investigate the evolving use of Information and Communication Technology (ICT) in construction projects. It describes the context provided by literature relating to ICT enabled project team performance and proposes an on-line, modified Delphi methodology based on the Blackboard educational delivery platform to facilitate the asynchronous participation of a panel of experienced practitioners in the generation of data. The paper closes by reporting the study findings and their implications for professional practice, concluding that clear leadership in the fields of ICT standardization and ICT-mediated project procurement could foster supply chain integration. Such leadership has the potential to optimize project outcomes, but only if a clear potential for all stakeholders to increase their levels of profitability is demonstrated.- What is Delphi technique- How it is used to address the problem stated in the paper - What are the major findings and recommendations - What suggestions would you recommend?-
66 Essence of Survival “Every morning in Africa, a Gazelle ( small dear) wakes up, it knows it must run faster than the fastest Lion or it will be killed. Every morning a Lion wakes up, it knows it must outrun the slowest Gazelle or it will starve to death. It does not matter whether you are a Lion or a Gazelle – when the sun comes up; You’d better be running.”